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TMI Blog2021 (8) TMI 194X X X X Extracts X X X X X X X X Extracts X X X X ..... ty under Chapter XVII of the Act shall be binding only (a) . On the applicant who had sought it in respect of any matter referred to in subsection (2) of Section 97 for advance ruling; (b) . On the concerned officer or the jurisdictional officer in respect of the applicant. 3. Under Section 103 (2) of the Act, this advance ruling shall be binding unless the law, facts or circumstances supporting the said advance ruling have changed. 4. Under Section 104(1) of the Act, where the Appellate Authority finds that advance ruling pronounced by it under sub-section (1) of Section 101 has been obtained by the appellant by fraud or suppression of material facts or misrepresentation of facts, it may, by order, declare such ruling to be void sb-initio and thereupon all the provisions of this Act or the rules made thereunder shall apply to the appellant as if such advance ruling has never been made. At the outset, we would like to make it clear that the provisions of both the Central Goods and Service Tax Act and the Tamil Nadu Goods and Service Tax Act are the same except for certain provisions. Therefore, unless a mention is specifically made to such dissimilar provisions, a reference ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vided to Customer on New Connection works-Concept of No Loss No Gain, New Connection Shifting and other works 4. The AAR pronounced the following rulings: a. The applicant not being the class of persons specified in Notification No. 14/2017-C.T.(Rate) dated 28.06.2017 as amended, they are not eligible for the said Notification as discussed in Para 10.2. b. The activity of Sewage offtake and treatment extended to Tirupur Municipal Corporation as per the CA is exempt under SI.No.3 of Notification No. 12/2017- C.T.(Rate) dated 28.06.2017 for the reasons discussed in Para 11.3. c. The Consultancy Services rendered by the applicant to Tiruppur City Municipal Corporation in respect of the Project- Construction Management and Supervision Consulting Service to assist Project ULBs - Tiruppur City Municipal Corporation exempt under SI.No.3 of Notification No. 12/2017-C.T.(Rate) dated 28.06.2017 for the reasons discussed in Para 11.4 . d. In respect of the activities incidental to main business activities, it is ruled as under : i. Interest on receivable on delayed payments being charges received for 'Agreeing to tolerate an act' classifiable under SAC 999794 is taxable @ 9% CGST a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ertaken by the Appellant are either 'supply of goods' or 'supply of services', which when supplied on an intra-state basis will be subject to a levy of CGST + SGST. 3. The Appellant also under takes the following activities and levy charges as follows:-: (i) Charge 1: In the event of there being a shortfall in the quantity of water consumed when compared with the agreed quantity by any industrial customer in any month, the Appellant levies a 'water capacity charge' or a ' take or pay charge'. This is like monthly minimum billing for a pre-agreed amount of water. This charge is calculated on the quantum of shortfall when compared with the quantity to be taken. (ii) Charge 2: The Appellant levies a re-connection charge in the event of non -payment of bills within due period and if the cheque is dishonoured. Apart from the above, the Appellant levies dishonour charges as levied by the Bank. (iii) Charge 3: In the event of any delay in payment, beyond contracted dates, the Appellant also levies interest on delayed payment at rates prescribed in the service agreement 6. Charges 2 and 3, are in the nature of 'interest or late fee or penalty for delayed payment of any consideratio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 17. However, in terms of Notification no. 12/2017- Central Tax (rate) dated 28th June, 2017, pure services (excluding works contract service or other composite supplies involving supply of any goods) provided to the Central Government, State Government or Union territory or local authority or a Governmental authority by way of any activity in relation to any function entrusted to a Panchayat under article 243G of the Constitution or in relation to any function entrusted to a Municipality under article 243W of the Constitution are exempt from the levy of CGST. 11. The AAR failed to appreciate that the services rendered by the Appellant are in relation to a function entrusted to the Municipality under Article 243W of the Constitution and are provided to a local authority. Therefore, on such sewage and waste collection services, the effective rate of CGST will be 'nil' as the same are exempt from the levy of GST. 12. The learned AAR erred in not appreciating that the SGST related provisions/rates are modelled on the CGST related provisions, similar exemption provisions have been provided for under notifications issued under the TNGST Act, 2017, and, consequently the effective SGST r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... said supply of goods or services or both where the supplier and the recipient of the supply are not related and the price is the sole consideration for the supply and shall include the interest or late fee or penalty for delayed payment of any consideration for any supply; and also include subsidies directly linked to the price excluding subsidies provided by the Central Government and State Governments. 19. Hence, the exemption under Notification no. 12/2017- Central Tax (rate) dated 28th June, 2017 and G.O. Ms. Nos.64 and 74, Commercial Taxes and Registration (Bl), 29th June 2017, Aani-15, Hevilambi, Thiruvalluvar Aandu-2048 will also apply to the interest component and the late fee or penalty as it forms a part of the value of supply. 20. It is further submitted that it would be absurd to exempt the main supply of goods or service from the ambit of the tax and levy the tax only on the interest / penalty / late fee component. In such a case, the basis of charge to tax of the interest / penalty / late fee component on a different basis would be unknown as it would have to be treated as a stand alone transaction rather than a composite one. Hence, it is submitted that Charges 2 a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... List II." 23. Considering the business model of the Appellant (as explained above) and the decision of the Hon'ble Supreme Court in Govt, of NCT of Delhi Vs. Union of India (UOI) supra, it is respectfully submitted that the supply of potable water needs in the Tirupur Local Planning Area, is an act falling clearly within the domain of Tirupur Municipality. 24. In a very recent decision of the Madras High Court in Cuddalore Muncipalty vs Joint Commissioner of GST & Central Excise and Others decided on March 2021, the Hon hie Court discussed in length and detail on negative list of services, mega notification and services provided by government and local authority, the relevant paras are discussed below: "50. Para 4.1 of Guidance Note 4- Negative List of Services is reproduced below Guidance Note 4 - Negative List of Services In terms of Section 66B of the Act, service tax will be leviable on all services provided in the taxable territory by a person to 18 another for a consideration other than the services specified in the negative list. The services specified in the negative list therefore go out of the ambit of chargeability of service tax. The negative list of service is sp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... td. Vs. CCE, Jaipur -II, Service Tax Appeals Nos. 590, 2425, 2436, 3198, 3204 of 2012, order dated 12.05.2017, wherein in para 22 it was held that the term 'governmental authority' to include any authority or any other body established by Government, with 90% or more participation by way of equity or control, to carry out any function interested to municipality under Article 243W of the Constitution, and also further held that the said Article empowers legislature of a state by law endow the municipalities with such powers and authority as has been necessary to enable them to function as institution of self- government. It was further considered that the Appellant in the subject case were carrying out municipal function in their industrial areas as laid down in the Municipal Act, 2009 and the municipal body of the concerned area does not undertake such work in the Industrial Areas falling under the jurisdiction of the Appellant. 26. That the Learned Adjudicating Authority failed to consider that the Appellant is the only body engaged in supply of potable water and treatment of sewerage waste in the Tirupur Local Planning Area, and the Tirupur Municipality does not engage in the sa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 17, Aani-15, Hevilambi, Thiruvalluvar Aandu-2048 and pass such further or other orders and thus render justice. 6. PERSONAL HEARING: The Appellant was granted personal hearing through Virtual Personal Hearing as required under law before this Appellate Authority on 15th June 2021. The Authorized representatives of the Appellant Tvl.P.Giridharan , Advocate of the appellant company appeared for hearing. They reiterated the written submissions and emphasized that (1) the functions entrusted to a Municipality under Article 243 W of the Constitution has been entrusted to them through the concession agreement [Article 3.1] and therefore the services are exempted as per Notification 12/2017 entry no.3 or 4.The supply of water by them is supply of service as per Schedule II of the Act and the exemption under Si.No.3 of Notification 12/2017 as applicable. (2) If sale of water is even treated as goods it is exempted as per entry 99 of Notification 2/2017 and the water supplied by them is potable water and not purified water. (3) Interest, Cheque bounce charges, Miscellaneous charges are exempted as the main services are exempted. To the specific query as to how the ratio of decisio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for activities essential to supply of water (Article 17, pg 73 of the CA). Thus from the scope, language and the terms and conditions of the agreement, it is clearly seen that the appellant has been awarded a contract for the sole purpose of supply of potable water to the purchasers, among others, after treating the raw water from the river bed. The activity of the appellant is thus only a supply of potable water to its purchasers. In other words, supply of goods and not of services. 7.4 Having determined that the activities of the appellant are nothing but supply of goods (potable water), we proceed to examine the liability or otherwise of GST on the same. We find from the submissions made and from the concession agreement that it is clearly mentioned throughout the agreement that potable water is only supplied to all the purchasers of the appellant irrespective of whether they are villages, industrial units or the municipality or whether the use is domestic or non-domestic. The only differential treatment based on end use and end-users (purchasers) is only with respect to the price of the potable water charged by the appellant. There is no differentiation with respect to the nat ..... X X X X Extracts X X X X X X X X Extracts X X X X
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