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TMI Blog2024 (7) TMI 358X X X X Extracts X X X X X X X X Extracts X X X X ..... is the case, the proposed mode of purchase of raw effluent, treat it on own account and supply of output, can be treated as 'sale of goods' and consequently the first question is answered in the affirmative. Classification of Treated Water - HELD THAT:- It is well known that as a universal solvent, Water is capable of dissolving huge number of substances than any other solvent and hence, prone to contamination and thereby gets mineralized easily. This unique property of the Water necessitated evolving techniques for removal of minerals to make it fit for drinking, Laboratory and Industrial uses. There are different techniques for de-mineralisation viz, distillation, ion-exchange and Reverse osmosis to remove the dissolved minerals, salts and to obtain de-mineralised water. Whether the R.O. permeate is to be treated on par with the treated sewage water and qualify for the Nil rate of tax? - HELD THAT:- The total dissolved salts or constituent chemicals/ minerals which was originally present in the raw effluent water have been substantially reduced to meagre quantity or non-detectable limit. In other words, the effluent water is demineralized to certain extent by three step R ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... late Authority for Advance Ruling, Chennai under Sub-Section (1) of Section 100 of CGST Act 2017/ TN GST Act 2017, within 30 days from the date on the ruling sought to be appealed, is communicated. 2. In terms of Section 103 (1) of the Act, Advance Ruling pronounced by the Authority 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 sub-section (2) of Section 97 for advance ruling. (b) on the concerned officer or the jurisdictional officer in respect of the applicant. 3. In terms of Section 103 (2) of the Act, this advance ruling shall be binding unless the law, facts or circumstances supporting the original advance ruling have changed. 4. Advance Ruling obtained by the applicant by fraud or suppression of material facts or misrepresentation of facts, shall render such ruling to be void ab initio in accordance with Section 104 of the Act. 5. The provisions of both the Central Goods and Services Tax Act and the Tamil Nadu Goods and Services Tax Act (herein referred to as an Act) are the same except for certain provisions. Therefore, unless a mention is specifically made to such dissimilar provisions, a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ider that the minerals and hardness are removed in the processing to make the output fit for reuse. 5.2. The learned AAR erred in equating the plant run by the applicant to process effluents with sewage water treatment plants and relying on the circular issued for the purpose of sewage plants when there are inherent differences in the processing as well as output which is characterized as Trade permeate, MEE condensate in Tamil Nadu Pollution Control Board consent order. 5.3. The learned AAR failed provide an opportunity to the applicant to make submissions to the materials relied on by the AAR in arriving at the decision and erred in not considering the materials submitted by the applicant. 5.4. The learned AAR erred in not considering the decisions of M/s Hojwala Infrastructure Limited (AAR Gujarat GUJ/GAAR/R/2002/48) and M/s Kasipalayam Common Effluent Treatment Plant Private Limited (AAR Tamil Nadu 23/AAR/2021) wherein it has been held that demineralized water for industrial use is classifiable as water taxed at 18%. 6. Further, the applicant furnished the following documents before the AAAR, which were not earlier available to the AAR while deciding the matter, viz.,- (i) Test ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e is treated as water, it would fall under the Demineralised water' category only. 9. In the additional submissions made by the AR on behalf of the applicant, documents viz., Test Report No. V2300446A dated 12.10.2023 of M/s. South India Textile Research Association (SITRA), Process Explanation, Additional Written submissions, Consent Order dated 24.03.2023 of Tamil Nadu Pollution Control Board, relevant case laws, CBIC Circular No. 179/11/2022-GST dated 03.08.2022, etc., have been famished by the applicant. Further, in the additional written submissions, the applicant highlighted the following points; 9.1. The input in the treatment processing done by their plant is the effluent discharged from the textile dyeing industries. The effluent contains dyes, chemicals, salts etc., and the total dissolved solids is 7932 mg/1. 9.2. The effluent is subject to extensive processing at the treatment plant which includes equalization, biological aeration, nitrification, de-nitrification, biological degradation, secondary clarifier, oxidation reduction, filtration and evaporation. 9.3. The intention of the processing is to achieve zero liquid discharge as mandated by the Hon'ble Madras ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nly specified use permitted is reuse by the dyeing units. Hence the RO permeate is prohibited from being used for any other purpose such as drinking, irrigation, river discharge, and therefore cannot be termed as water falling under heading 2201. c) Applicant's RO Permeate cannot be equated with Sewage treatment The Advanced Ruling authority has equated sewage treatment plant with the effluent treatment plant run by the applicant. The authority has failed to appreciate the fact that the characteristics of the dyeing effluent and sewage are entirely different. Further the norms for sewage plants are different, as the treated sewage water is allowed to be permitted to be used for irrigation, discharged into water bodies. But the RO Permeate can only be discharged for reuse in dyeing units and cannot be used for irrigation or discharged into water bodies. Hence the exemption given to treated sewage water under the heading 2201 is not applicable to the RO permeate. This has been upheld by Gujarat AAR in case of Palsano Enviro while holding, This clearly shows the intention of the legislature that any type of water which are being sold in terms of commercial purpose have been kept o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n through pipelines and salt through vehicles. 10.3. The Applicant has stated that they are facing operational bottlenecks in the above said method. That at times the customer units are not having capacity to receive the products sent by them, resulting in shortage of storage in the plant thereby affecting the processing operations. Hence, they are planning to buy the effluents and sell the products to any of the units based on their requirement to do their operations without any backlog. With the above factual matrix the Applicant is before us seeking for Advance Ruling on the following:- 1. Whether the classification of supply of outputs as sale of goods is correct? 2. Whether classification of water sold as Water including natural or artificial mineral waters and aerated waters, not containing added sugar or sweetening matter, not flavored (other than drinking water packed in 20 litre bottles) under heading 2201, is correct? 11. Discussion on Classification as to whether Supply of Outputs as sale of Goods is Correct? 11.1. In the statement of relevant facts filed by the Applicant, they have stated that they purchase the effluents from the member units and the Applicant becomes t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... act between the parties, express or implied, there is no sale. So also if the consideration for the transfer was not money but other valuable consideration, it may then be exchange or barter but not a sale. And if under the contract of sale, title to the goods has not passed, then there is an agreement to sell and not a completed sale, (emphasis applied). 11.4. From the conjoined reading of Section 4 of The Sale of Goods Act, 1930 and the Hon'ble Supreme Court judgement cited supra, it is clear that the modus of operation as purchase of effluent and sale of output is applicable only if all the elements cited in the Section and judgement cited are present. If that is the case, then the classification of supply of treated water, salt and other products, as sale of goods is correct. However, it is emphasized that the mode of operation intended by the applicant i.e. purchase of raw effluent, treating the same and selling the resultant products, can be classified as sale of goods, if and only if, the applicant follows the procedures envisaged in the Sale of Goods Act and rationale of the observations of Hon'ble Supreme Court. If such is the case, the proposed mode of purchase of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... wing headings, viz., 2853 00 99 - Other Inorganic Compounds Since, the RO permeate which is not fit for human consumption does not have the characteristic of water covered under 2201, it is classifiable under this residuary head. Comparable products like distilled water, conductivity water are grouped here. 12.4. The applicant has stated that without prejudice to the above contention that tire RO permeate/ treated water is classifiable under 2853 00 99 -i.e., under Other Inorganic Compounds, it is classifiable as water under 2201, as Demineralised water' since most of the minerals and chemical elements including Phosphate, Fluoride, Nitrate, Iron, Silica are reduced to non-deductible or very negligible levels. This view has been followed in Hojwala Infrastructure Limited (AAR Gujarat), Palsano Enviro Protection Limited (AAR Gujarat) and Kasipalayam Common Effluent Treatment Private Limited (AAR TamilNadu), by which the product in question falls under SI.No 24 of Schedule-III of Notification No 1/2017-CT(Rate) dated 28.06.2017. 12.5. In view of the above contentions of the applicant, it is imperative to examine the case, as to whether the R.O permeate is to be treated on par wit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and thereby yield demineralised water. Reverse Osmosis (RO) system is a type of water purification system that pushes pre-filtered water through a membrane with very tiny pores. Because those pores are so small, almost all contaminants-both organic and inorganic impurities are gets removed or trapped and cannot pass through. In this process significant portion of mineral ions that are too large to pass through the membrane are removed and very tiny particles of the impurities can pass through the membrane, which results in the retention of certain quantity of minerals depending upon the specifications of R.O unit adopted and the quality of input water to be purified. 13. Whether the R.O. permeate is to be treated on par with the treated sewage water and qualify for the Nil rate of tax? 13.1 As per Circular No. 179/11/2022, dated 03.08.2022, issued by Ministry of Finance, regarding applicability of GST on various goods and services, it has been clarified that treated sewage water attracts Nil rate of tax. The relevant portion of the Circular stated supra, is as under:- 5. Treated sewage water attracts Nil rate of GST: 5.1. Representations have been received seeking clarification reg ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 4 It is seen that under the 'Agenda for 47th GST Council Meeting', Volume IT, in SI.No. 7 of the 'Recommendations made by the Fitment Committee for making changes in GST rates or for issuance of clarification in relations to goods - Annexure I', the very same issue involving Treated Sewage Water', has been dealt with and the extract of the same is reproduced below for appreciation, i.e., Sl. No. Description / HSN Present GST rate Requested GST rate Comments 7 Sewage Treated Water [2201] 18% Nil 1. The description at S. No. 99 of notification 2/2017-CT(Rate) providing Nil GST rate reads as - Water [other than aerated, mineral, purified, distilled, medicinal, ionic, battery, demineralized and water sold in sealed container] . 2. Advance Ruling Authority, Maharashtra, in two separate instances has ruled that these goods are covered under S. No. 24 of Schedule III, attracting 18% GST. 3. As per these Rulings, the issue is whether the word 'purified' in S. No. 99 covers 'treated sewage water' as well, as a result of which the said goods will be excluded from exemption and covered under 18% GST. 4. It is clear from these entries that premium; commercia ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on that three stage RO system is designed to get overall recovery of 80-85% of product water by removal of dissolved inorganic salts. From the South India textile Research Association (SITRA) Laboratory Analytical report No. V2300446A, dated 12-10-2023, furnished by the applicant, it is observed that TDS (Total Dissolved salts) present in the Raw effluent is 7932 mg/L, which has been reduced to 148 mg/L, after processing at their CETP. Further, detailed analysis of the aforesaid report also reveals the removal of major constituent dissolved salts, suspended solids and turbidity, colour from the effluent water, as follows: Sl.No. Parameter Quantity present in Raw Effluent Quantity present in Treated water 1 Colour as Hazen 176 1 2 Total Suspended solids 168 mg/L 4 mg/L 3 pH 7.42 5.88 4 Phenolphthalein alkalinity 30 mg/L 0 mg/L 5 Turbidity 181 1 6 Phosphate as PO4 15.1 mg/L 0.1 mg/L 7 Fluoride as F- 0.62 mg/L ND (Lo D:0.01) 8 Nitrate-N 3.1 mg/L 0.4 mg/L 9 Iron as Fe 0.86 mg/L 0.02 mg/L 10 Silica as Si 02 28 mg/L ND(LoD) 11 Total Dissolved salts 7932 mg/L 148 mg/L 13.7 From the above analysis of the test report issued by SITRA Laboratory, it is observed that the total dissolved salts ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... letely free of impurities and the mineral content present in the purified water depends on the source water and the process specifications. That is to say, most of the minerals have been removed but not all. In general, if an application required highly purified water, then distilled water or most purified conductivity water should be used depending upon the application. But, the intention of the CETP, in the case of the applicant is to achieve zero liquid discharge as mandated by the Handle Madras High Court and to make the resulting products fully reusable in the dyeing industries whereby the dissolved solids are reduced from 7932 mg/L to 148 mg/L. 14.2. We are the view that if the technique/process employed in the CETP of the Applicant is meant to yield the output water comprising of Total dissolved solids of zero mg/L or minuscule quantity of dissolved salts, then the resultant treated water would be equated with distilled water or conductivity water and water of similar purity and would be classified under the heading 2853 90 10. 14.3. But, as observed from the analytical test report issued by the SITRA laboratory, dated 12.10.2023, with reference to the samples submitted by t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... avoured and also Drinking water packed in 20 litres bottles from the said entry. 15.3 From the foregoing we are of the view that the R.O permeate is not falling under any of the exclusion clause. Though the R.O permeate / Treated water, for which the advance ruling sought is not explicitly reflected in the entry, the phrase Waters, including.... enables the entry to hold R.O permeates under its ambit. The word including used in the entry reveals that the legislature doesn't intend to restrict the entry. It makes the entry enumerative but not exhaustive and the term water retains its ordinary meaning and its scope will be extended to bring the de-mineralized water of the applicant's case, within its ambit. 15.4 We further observe that the following rulings that dwell on similar cases involving treated water obtained from CETP, supports the above stand, i.e., 1. In the case of M/s Hojiwla Infrastructure Limited (AAR Gujarat-GUJ/GAAR/R/2002/48), it was ruled that 'Treated Water' obtained from CETP (classifiable under Chapter 2201) is taxable at 18% by virtue of SI. No. 24 of schedule-III of Notification No. 01/2017-CT(Rate) dated 28.06.2022 (as amended). 2. In the case ..... X X X X Extracts X X X X X X X X Extracts X X X X
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