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TMI Blog2022 (12) TMI 1288X X X X Extracts X X X X X X X X Extracts X X X X ..... e Apex court in the UNION OF INDIA ORS. VERSUS RC. JAIN ORS. [ 1981 (2) TMI 200 - SUPREME COURT] has held that that the authority should be elected by the inhabitants of the area. As per Section 4 of the UPWSS Act, the UPJN shall consist of Chairman and members appointed by the state government. As such, the UPJN is not elected by the inhabitants of the area but the same is established by the state. Therefore, the said is not satisfied in the case of UPJN - Apex court in the RC Jain case has held that that the authority must enjoy a certain degree of autonomy, with freedom to decide for themselves questions of policy affecting the area administered by them. The autonomy may not be complete and the degree of the dependence may vary considerably but, an appreciable measure of autonomy there must be. Perusal of the UPWSS Act reveals that the UPJN is not enjoying appreciable nature of autonomy. Whether the UPJN is Governmental Authority? - HELD THAT:- The UPJN is a body corporate formed by the State legislature under UPWSS Act enacted by the UP State Legislature. As such, the first requirement of a governmental authority stands fulfilled in the present case. Further, as per S ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uction design of prestressed concrete cylinder pipelines (PCCP) and pumping plant for the purpose of supplying water to the Khurja Sewerage Treatment Plant Project from the Mundakhera Reservoir to the pond of Khurja STPP along with all ancillary works such as development of roads/paths, drain septic Tanks, sewer line, water supply system, external electrification, service connection to building, etc would be covered under Entry 3(iii) of the Notification No. 11/2017-Central Tax (Rate) dated 28.06.2017. 4. As per the declaration given by the applicant in Form ARA-01, the issue raised by the applicant is neither pending in any proceedings nor decided in any proceedings in the applicant's case under any of the provisions of the CGST Act, 2017/UPGST Act, 2017. 5. The applicant has submitted that- (1) The Applicant is engaged in execution of projects involving laying of cement concrete pipes. (2) The Applicant has been sanctioned a tender by Uttar Pradesh Jal Nigam (for short 'UPJN') vide letter dated 7.10.2021 for execution of works involving construction design of pumping plant containing prestressed concrete cylinder pipelines (PCCP). (3) The work ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... th as a part of one single network for water supply from the reservoir to the specified pond of Khurja STPP. This infrastructure would, therefore, attain the nature of an immovable property. (11) In this regard, reference is made to the decisions of the Hon'ble Supreme Court in the cases of Municipal Corporation of Greater Bombay Ors. Vs. Indian Oil Corporation Ltd AIR 1991 SC 686 and Triveni Engineering Industries Limited vs CCE, 2000 (120) E.L.T. 273 (S.C.), which hold that any infrastructure which is permanently attached to the earth, and which cannot be removed without disrupting or causing damage to the system would be treated as an immovable property. A similar finding has been given by the CESTAT, Mumbai in the case of Alfa Laval (India) Ltd. Vs. CCE, Pune, 1998 (99) E.L.T. 649 (Tribunal) wherein it was held that a contract for supply, installation and commissioning of Neutralisation-Washing-cum-Degumming Equipment for Vanaspati Plant would result in existence of an immovable property as it would be permanently attached to earth and the activity did not bring into existence any marketable, movable or excisable goods. On the basis of these judgments and the c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the CGST Act read with Clause 6(a) of Schedule II of the CGST Act, such composite supplies qualify as a supply of service. (5) Notification No. 11/2017-CT (Rate) provides for the applicable rate of CGST that shall be levied on intra-State supply of services, the description of which is specified in the corresponding entry in column (3) of the Table under the Notification, falling under the Chapter, Section or Heading of the scheme of classification of services as specified in the corresponding entry in column (2) of the said Table. (6) The relevant entry under the Notification No. 11/2017-CT (Rate) reads as under: SL.No. Chapter, Section or Heading Description of Service Rate (%) 3 Heading 9954 (Construction services) Composite supply of works contract as defined in clause (119) of section 2 of the Central Goods and Services Tax Act, 2017, supplied to the Central Government, State Government, Union territory or a local authority by way of construction, erection, commissioning, installation, completion, fitting out, repair, maintenance ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a municipal or local fund; (d) a Cantonment Board as defined in section 3 of the Cantonments Act, 2006 (41 of2006); (e) a Regional Council or a District Council constituted under the Sixth Schedule to the Constitution; (f) a Development Board constituted under article 371 and article 371J of the Constitution; or (g) a Regional Council constituted under article 371A of the Constitution; (13) From the above, there is no dispute that UPJN would not be covered under SL No. (a); (b); (d); (e); (f) and (g). However, it is submitted that UPJN qualifies as a local authority as it is an 'authority which is legally entitled to the control or management of a local fund', thereby falling under SI. No. (c) mentioned above. (14) It is submitted that on 18.6.1975, Uttar Pradesh State legislature passed the UP-Water Supply and Sewerage Act, 1975 (for short 'UPWS Act') for the establishment of a corporation, authorities and organisations for the development and regulation of water supply and sewerage services and for matters connected therewith. (15) The term 'Nigam' has been defined under Section 2 (15) of the UPWS Act as the 'Uttar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... its own funds (18) Thus, from combined reading of Section 2(15); Section 3(3); Section 40 and Section 15 (2) (ix) of the UPWS Act, it can be concluded that UPJN is a local authority which has been entrusted by the UP State Government with a local fund and control of the said funs is also with UPJN. (19) Hence, it is submitted that UPJN would qualify as a local authority in terms of Section 2(69) (c) of the CGST Act. (20) Reliance in this regard is placed on the decision IN RE: GDCL-EMIT JV 2021 (2) TMI 1249 - Authority for Advance Ruling, Uttarakhand, wherein UPJN was held to be a local Authority. (21) Reliance is also paced on the decision in the case of UP. Jal Nigam Vs. CIT 2011 (1) TMI 1038 - Allahabad High Court. In the said case, Section 3(31) of the General Clauses Act, which defines 'local authority, was discussed. It may be noted that Section 3(31) of the General Clauses Act carries an identical definition of a local authority as given under Section 2(69) of the CGST Act. While interpreting the definition and applying the decision in the case of Union of India Vs. R. C. Jain 1981 (2) TMI 200- SC, the Hon'ble High Court held that UPJN was ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e above, it is submitted that the composite supply of works contract services to UPJN would be covered under Entry 3(iii) of Notification No. 11/2017-CT (Rate) and would suffer GST @ 12% (CGST 6% and SGST 6%). 7. The application for advance ruling was forwarded to the Jurisdictional GST Officer to offer his comments/views/verification report on the matter. The Joint Commissioner, CGST Central Excise Division Jhansi vide his letter C.No. V930)41-Tech/Misc/JHS/18/pt 11/670 dated 10.06.2022 submitted his report as under- (1) the services provided by the applicant are covered in SI. No. 3(3) of the Notification No. 11/2017-CT(Rate) dated 28.06.2017 and attract tax rate of 12% (6% CGST 6% SGST). (2) as per Section 3 of the UP Water Supply and Sewerage Act, 1975. UPJN deemed to be a local authority. (3) no proceedings on the question raised in application is pending or decided under any provisions of the Act. 8. The opportunity of personal hearing was granted on 27.07.2022 which was attended by Shri Kunal Aggarwal,. During personal hearing, the applicant reiterated the submissions made in the application of advance ruling. DISCUSSION AND FINDING 9. At t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n 3(3) of the UPWSS Act provides that the assessee corporation shall for all purposes be deemed to be a local authority and Section 4 of the UPWSS Act relates to its constitution, according to which it shall consist of a Chairman, to be appointed by the State Government. It also provides that the Members other than the Chairman shall be a Managing Director, a Finance Director, both to be appointed by the Government, and the Secretary to the State Government in the Finance Department (Ex-officio), Secretary to the State Government in the Local Self Government Department (Ex-officio), the Director of Local Bodies, Uttar Pradesh (Ex-officio), the Director of Medical and Health Services U.P. (Ex-officio) and three elected Heads of Local Bodies in the State, to be nominated by the State Government. (iii) Section 40(1) of the UPWSS Act provides that the corporation shall have its own fund to be called the Nigam Fund which shall be deemed to be a local fund and to which shall be credited all moneys received otherwise than by way of loans by or on behalf of the corporation. 13. The applicant has submitted that the UPJN is covered in the definition of 'Local Authority'. We ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Let us, therefore, concentrate and confine our attention and enquiry to the definition of 'Local Authority' in Sec. 3 (3) of the General Clauses Act. A proper and careful scrutiny of the language of Sec.3(31) suggests that an authority in order to be a local Authority, must be of like nature and character as a Municipal Committee, District Board or Body of Port Commissioners, possessing, therefore, many, if not all, of the distinctive attributes and characteristics of a Municipal Committee, District Board, or Body of Port Commissioners, but, possessing one essential feature, namely, that it is legally entitled to or entrusted by the Government with, the control and management of a municipal or local fund. What then are the distinctive attributes and characteristics, all or many of which a Municipal Committee, District Board or Body of Port Commissioners shares with any other local authority? First, the authorities must have separate legal existence as Corporate bodies. They must not be mere Governmental agencies but must be legally independent entities. Next, they must function in a defined area and must ordinarily, wholly or partly, directly or indirectly, be elected by t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n such authority. 19. The UPJN is not satisfying some of the above conditions for qualifying as 'local authority' as discussed below- 19.1 The Apex court in the RC Jain case (supra) has held that that the authority should be elected by the inhabitants of the area. As per Section 4 of the UPWSS Act, the UPJN shall consist of Chairman and members appointed by the state government. As such, the UPJN is not elected by the inhabitants of the area but the same is established by the state. Therefore, the said is not satisfied in the case of UPJN. 19.2 The Apex court in the RC Jain case (supra) has held that that the authority must enjoy a certain degree of autonomy, with freedom to decide for themselves questions of policy affecting the area administered by them. The autonomy may not be complete and the degree of the dependence may vary considerably but, an appreciable measure of autonomy there must be. Perusal of the UPWSS Act reveals that the UPJN is not enjoying appreciable nature of autonomy as discussed below- (1) As per Section 4(1) of the UPWSS Act, the Chairman shall be appointed by the State Government. (2) As per Section 6(3) of the UPWSS Act, the Mana ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the UPJN shall be guided by such directions on questions of policy as may be given to it by the State Govt. (8) As per Section 90 of the UPWSS Act, the UPJN shall submit to the State Govt, an annual report giving an account of its activities during the previous financial year and the State Govt, shall cause every such report to be laid before the State Legislature. Above provisions are clear indicators to the fact that UPJN does not enjoy autonomy of work and has little freedom to decide for themselves questions of policy affecting the area administered by them. 19.3 The Apex court in the RC Jain case (supra) has held that the main requirement to qualify as a local authority is that the authority must be legally entitled to or entrusted by the Government with, the control and management of a Municipal or local fund. In case of UPJN, there is no local fund entrusted by the Government with UPJN. A perusal of the UPWSS Act would reveal that no municipal or local fund has been entrusted by the Government. The fund of UPJN is its own fund and cannot be equated with a fund entrusted by the Government. So for as local fund is concerned as it is not a sound rule of interpretat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cultural Produce Market Committee, Narela, Delhi (supra), read with Part IX and IXA of the Constitution and Section 3 (31) of General Clauses Act, the U.P. Jal Nigam does not seem to be the 'local authority' under Section 10 (20) of the Income Tax Act, 1961 even prior to Finance Act, 2002. The word, local authority has been defined in the Section 3 (31) of the General Clauses Act, 1897, an old Central Act, which has been interpreted by the Hon'ble Supreme court by catena of judgments (supra). Order dated 22.09.2011 delivered by Hon'ble Justice Satish Chandra Further, Hon'ble Apex Court held that the U.P. Forest Corporation is not an authority, though, under section 3(3) of the U.P. Forest Corporation Act, 1974 it is provided that for all purposes, it shall be the 'local authority'. Hence, on the similar analogy, provisions of Section 3 (3) of U.P. Act no. 1975 is of no use to the assessee. Thus, to hold statutory body as an authority , it shall be necessary that the authority must have 'local fund' which shall be spent for providing civic amenities and also shall have right to generate fund by imposing taxes within the statutory ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... #39;local authority' contained in General Clauses Act. It has already been discussed that the term 'local authority' has been similarly worded in CGST Act, 2017 as well as General Clauses Act, 1897. 22. Further, the relevant clarification contained in Service Tax Educational Guide published in erstwhile tax regime is reproduced below- 2.4.9 Are all local bodies constituted by a State or Central Law local authorities? No. The definition of 'local authority' is very specific as explained in point no 2.4.8 above and only those bodies which fall in the definition comprise 'local authorities '. It would not include other bodies which are merely described as a local body by virtue of a local law. 23. Thus, we are of the view that the UPJN is not a 'local authority'. 24. Now we proceed to examine as to whether the UPJN is 'Governmental Authority'. It is relevant to note that the term Governmental Authority is not defined in the CGST Act. However, Notification No. 31/2017-Central Tax (Rate) dated October 13, 2017, which amended the Notification No 11/2017 - Central Tax (Rate) dated June 28, 2017, defined Governmental Authori ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Description of Service Rate (percent) (iii) Composite supply of works contract as defined in clause (119) of section 2 of the Central Goods and Services Tax Act, 2017, supplied to the Central Government, State Government, Union territory or a local authority, by way of construction, erection, commissioning, installation, completion, fitting out, repair, maintenance, renovation, or alteration of, - (a) a historical monument, archaeological site or remains of national importance, archaeological excavation, or antiquity specified under the Ancient Monuments and Archaeological Sites and Remains Act, 1958 (24 of 1958); (b) canal, dam or other irrigation works; (c) pipeline, conduit or plant for (i) water supply (ii) water treatment, or (iii) sewerage treatment or disposal. 6 28. As such, by way of Notification No. 15/2021-Central Tax (Rate) dated November 18, 2021, the lower rate of tax of 12% provided by Entry 3(iii) of Notification No.11/2017- Central Tax (Rate) dated June 28, 2017, was restricted to works contract supplied to Cent ..... X X X X Extracts X X X X X X X X Extracts X X X X
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