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TMI Blog2025 (1) TMI 887X X X X Extracts X X X X X X X X Extracts X X X X ..... hed under any law. The fact that an electricity regulatory commission acts as a tribunal cannot perhaps be disputed bearing in mind the judgment rendered by the Supreme Court in PTC India Ltd. v. Central Electricity Regulatory Commission [ 2010 (3) TMI 1209 - SUPREME COURT] and where it was held that ' the Central Commission is the decision-making authority. Such decision-making under Section 79(1) is not dependent upon making of regulations under Section 178 by the Central Commission. Therefore, functions of the Central Commission enumerated in Section 79 are separate and distinct from functions of the Central Commission under Section 178. The former are administrative/adjudicatory functions whereas the latter are legislative. '. The respondents, however, seek to discern a distinction between the adjudicatory function performed by a regulatory commission as distinguishable from what they assert to be the exercise of a power to regulate. According to the respondents, any income or receipts derived by those Commissions in the course of discharge of their regulatory function would be exigible to tax under the CGST Act - It becomes pertinent to note that the CGST Act not only ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... consideration , in our considered opinion, would necessarily have to draw colour and meaning from Section 2(31) and which speaks of payment made in respect of, in response to or for the inducement of a supply of goods. Suffice it to note that it was not even remotely sought to be contended by the respondents that the payments in the form of fee as received by Commissions were an outcome of an inducement to supply goods or services. More importantly we find that by virtue of Section 7, a supply would necessarily have to be of goods or services not only for consideration but more importantly in the course or furtherance of business. We have in the preceding parts of this decision clearly found that the regulatory function discharged by Commissions would clearly not fall within the scope of the word business as defined by Section 2 (17). Thus, even if the fee so received by such Commissions were to be assumed as being consideration received, it was clearly not one obtained in the course or furtherance of business. We are thus of the considered opinion that the view as expressed by the respondents in the SCNs impugned before us are rendered wholly arbitrary and unsustainable. Role and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 24 respectively pursuant to which the respondents have sought to call upon them to discharge liabilities emanating from the Central Goods and Services Tax Act, 2017 [CGST Act] and the Integrated Goods and Services Tax Act, 2017 [IGST Act] in respect of the fee received by them in the course of discharge of their regulatory functions under the Electricity Act, 2003 [Electricity Act] . The respondents have sought to draw a dichotomy between the adjudicatory and regulatory functions which these two statutory bodies discharge to essentially hold that the revenue earned from the latter would be subject to tax under the CGST and IGST Acts. In order to appreciate the stand which has been taken by the respondents, it would be apposite to take note of the assertions made in the SCNs which are impugned before us. However, and for the sake of brevity and since both SCNs proceed on identical lines, we propose to notice the allegations as levelled in the SCN issued to the CERC. 2. The respondents assert that based on intelligence which was gathered, it was found that CERC was not discharging its Goods and Services Tax [GST] liabilities on amounts received by it as tariff and license fee from va ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ome from Fee has been taken as declared under Schedule of Income from Fee or Schedule of CERC Fund-Direct Income forming part of Balance Sheet of each Financial Year and is as tabulated below (RUD-6)- Table-I (Amount in Lakh) Financial year Filing Fee/ Tariff Fee Licence Fee Annual Registration Fee Miscellaneous Fee Total Fee 2019-20 9,793.96 5,981.09 58 99.64 15,932.69 2020-21 8,708.44 5,240.57 58 82.55 14,089.56 2021-22 9,988.06 5,984.61 77.69 77.92 16128.28 2022-23 10,180.51 6241.86 94.31 17.32 16534.00 Total 38,670.97 23,448.13 288.00 277.43 62,684.53 5. The CERC appears to have taken the stand that it essentially discharges statutory functions and is thus and fundamentally not engaged in any trade or commerce. It further questioned the bifurcation that the respondents sought to make between its adjudicatory and regulatory roles. In view of the above, it took the position that absent any commercial consideration or business objective, the discharge of such statutory activities in public interest cannot be subjected to a levy under either the CGST or the IGST. 6. The details of the amounts received by CERC under the aforenoted heads is then again taken into consideration in Para ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... urities will also include the activities of regulating the tariff of generating companies owned or controlled by the Central Government, regulating the inter-State transmission of electricity, to issue licenses to persons to function as transmission licensee and electricity trader with respect to their inter-State operations; to levy fees for the purposes of this Act falls under the scope of Supply of Services . 6.2 Whereas, Section 2 (31) (a) of the CGST Act, 2017 (as amended) read with Section 2 (24) of the IGST Act, 2017 (as amended) states that consideration in relation to the supply of goods or services or both includes - any payment made or to be made, whether in money or otherwise, in respect of, in response to, or for the inducement of, the supply of goods or services or both, whether by the recipient or by any other person but shall not include any subsidy given by the Central Government or a State Government. 8. They have thus proceeded to hold that the supply of services by CERC would fall within the ambit of the word consideration as defined by Section 2 (31) (a) of the CGST Act read along with Section 2 (24) of the IGST Act. 9. Proceeding further and bearing in mind th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a State Government or any local authority are covered under the said definition of business and are not out of its ambit. Thus, the activities undertaken by CERC which is a statutory body will be considered as business . 10. They also appear to rest and found their opinion of the two regulatory bodies being exigible to tax on a set of FAQs issued by the CBIC to essentially hold that they cannot be viewed as being Government or local authority as contemplated in those statutes. This becomes apparent from a reading of Paras 6.4.1 and 6.4.2 and which are reproduced hereinbelow: - 6.4.1 CBIC has compiled and released a booklet containing 31 FAQs on GST in Government Services Sector, for assistance and guidance of the stakeholders in getting acquainted with the GST Law wherein it has been clarified that a statutory body or a regulatory body created by the Parliament or a State Legislature is neither covered under the definition of Government nor of a local authority . The relevant FAQ are as reproduced below- Question 6 : Would a statutory body, corporation or an authority constituted under an Act passed by the Parliament or any of the State Legislatures be regarded as Government or lo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s entity. Since, there is no blanket exemption from CGST/SGST/IGST for statutory body or a regulatory body in CGST Act, 2017 (as amended) or IGST Act, 2017 (as amended). Hence, CERC is liable to be registered under Section 22 of CGST Act, 2017 (as amended) read with Section 20 of IGST Act, 2017 as the money (Fee) received by CERC for implementing the activities is Rs. 6,26,84,51,254/- (Rupees Six Hundred Twenty Six Crore Eighty Four Lakh Fifty One Thousand Two Hundred and Fifty Four Only) as discussed above under Para 4.3 (Table-2) which is well over and above the prescribed limit for GST registration in Section 22 of CGST Act, 2017 ( as amended) read with Section 20 of GST Act, 2017 ( as amended). 12. The perceived distinction on the basis of which the respondents have proceeded and the bifurcation which according to them must be acknowledged to exist between the adjudicatory and regulatory roles of the two statutory authorities also stands highlighted in the following paragraphs of the SCN:- 6.5.2. From the functions performed by CERC, it appears that all the functions are regulatory in nature except the adjudicatory function provided in sub-clause (f) whereupon the Commission ha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tory functions. The same has also been agreed by GST Council in its 47th Meeting dated 28th 29th June, 2022. Thus, in view of Office Memorandum dated 30.05.2018 issued by the Tax Research Unit, Department of Revenue, Ministry of Finance to CERC and also GST Council s affirmation to the Fitment Committee recommendation as already discussed above, it is amply clear that the fees collected by CERC is in lieu of the regulatory functions performed by them such as regulation determination of tariff of generating companies for inter-State transmission of electricity and also for issuing licenses to persons to function as transmission licensee and electricity trader with respect to their inter-State operations is taxable under CGST/IGST. 14. While it appears to have been urged for the consideration of the respondents that both CERC as well as DERC had all the trappings of a court and thus liable to be viewed as a tribunal and consequently being exempt from taxation, those contentions have also come to be negated as would be apparent from a reading of Paras 8.1, 8.2 and 8.3 which are extracted hereunder: - 8.1 However, it appears that CERC has selectively picked up a portion of the judgment ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ff of generating companies owned or controlled by the Central Government; to regulate the tariff of generating companies other than those owned or controlled by the Central Government, if such generating companies enter into or otherwise have a composite scheme for generation and sale of electricity in more than one State; to regulate the inter-State transmission of electricity; to determine tariff for inter-State transmission of electricity; to issue licenses to persons to function as transmission licensee and electricity trader with respect to their inter-State operations are regulatory in character rather than adjudicatory and the real adjudicatory function is only provided in Section 79(1)(f). 15. The respondents have ultimately come to hold: - 8.6. From the above, it transpires that the amount received by CERC towards fees collected is as a regulator in its ordinary course of functions and not as a quasi-judicial body which adjudicates upon disputes involving power generating companies and transmission licensees in terms of Section 79 (1) (f) of the Electricity Act, 2003. As such, the functions performed by CERC as a regulator does not appear to have the trappings of a Court a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... failed to discharge its IGST liability amounting to Rs. 112,83,21,226/( Rupees One Hundred Twelve Crore Eighty Three Lakh Twenty One Thousand Two Hundred and Twenty Six only) as ascertained in para 13 (refer Table-5) above for the period from April, 2019 to March, 2023 leading to non-payment of IGST on the amount received from the power generation, transmission distribution utilities towards Tariff Petition Fees License Fees which constitute a taxable supply of service under SAC 998631 with the description support services to electricity transmission distribution services as per SI. No. 466 of Annexure to Notification No. 11/2017-Central Tax (Rate) dated 28.06.2017 amended) and further read with CBIC Explanatory Notes to the Scheme of Classification of Services and as such, the same appears to be taxable as per sl. no. 24(ii) of Notification No. 8/2017-Integrated Tax (Rate) dated 28.06.2017 (as amended) with the description Support services to mining, electricity, gas and water distribution . xxxx xxxx xxxx 16.1 Therefore, in view of above paras, it appears that CERC has not paid the amount of tax on the consideration received from various power utilities/ licensees and therefore f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... quor, for human consumption, on the value determined under Section 15 and at such rates, not exceeding twenty per cent, as may be notified by the Government on the recommendations of the Council and collected in such manner as may be prescribed and shall be paid by the taxable person. (2) The central tax on the supply of petroleum crude, high speed diesel, motor spirit (commonly known as petrol), natural gas and aviation turbine fuel shall be levied with effect from such date as may be notified by the Government on the recommendations of the Council. (3) The Government may, on the recommendations of the Council, by notification, specify categories of supply of goods or services or both, the tax on which shall be paid on reverse charge basis by the recipient of such goods or services or both and all the provisions of this Act shall apply to such recipient as if he is the person liable for paying the tax in relation to the supply of such goods or services or both. (4) The Government may, on the recommendations of the Council, by notification, specify a class of registered persons who shall, in respect of supply of specified categories of goods or services or both received from an unr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l be deemed to take place from one such person to another; (b) import of services for a consideration whether or not in the course or furtherance of business; and (c) the activities specified in Schedule I, made or agreed to be made without a consideration;[* * *] [* * *] (1-A) where certain activities or transactions constitute a supply in accordance with the provisions of sub-section (1), they shall be treated either as supply of goods or supply of services as referred to in Schedule II. (2) Notwithstanding anything contained in sub-section (1), (a) activities or transactions specified in Schedule III; or (b) such activities or transactions undertaken by the Central Government, a State Government or any local authority in which they are engaged as public authorities , as may be notified by the Government on the recommendations of the Council, shall be treated neither as a supply of goods nor a supply of services. (3) Subject to the provisions of sub-sections (1), (1-A) and (2), the Government may, on the recommendations of the Council, specify, by notification, the transactions that are to be treated as (a) a supply of goods and not as a supply of services; or (b) a supply of ser ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... goods forming part of the assets of a business are transferred or disposed of by or under the directions of the person carrying on the business so as no longer to form part of those assets, such transfer or disposal is a supply of goods by the person; (b) where, by or under the direction of a person carrying on a business, goods held or used for the purposes of the business are put to any private use or are used, or made available to any person for use, for any purpose other than a purpose of the business, the usage or making available of such goods is a supply of services; (c) where any person ceases to be a taxable person, any goods forming part of the assets of any business carried on by him shall be deemed to be supplied by him in the course or furtherance of his business immediately before he ceases to be a taxable person, unless (i) the business is transferred as a going concern to another person; or (ii) the business is carried on by a personal representative who is deemed to be a taxable person. 5. Supply of services The following shall be treated as supply of services, namely: (a) renting of immovable property; (b) construction of a complex, building, civil structure or a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y the Members of Parliament, Members of State Legislature, Members of Panchayats, Members of Municipalities and Members of other local authorities; (b) the duties performed by any person who holds any post in pursuance of the provisions of the Constitution in that capacity; or (c) the duties performed by any person as a Chairperson or a Member or a Director in a body established by the Central Government or a State Government or local authority and who is not deemed as an employee before the commencement of this clause. 4. Services of funeral, burial, crematorium or mortuary including transportation of the deceased. 5. Sale of land and, subject to clause (b) of paragraph 5 of Schedule II, sale of building. 6. Actionable claims, other than [specified actionable claims]. [7. Supply of goods from a place in the non-taxable territory to another place in the non-taxable territory without such goods entering into India. 8. (a) Supply of warehoused goods to any person before clearance for home consumption; (b) Supply of goods by the consignee to any other person, by endorsement of documents of title to the goods, after the goods have been dispatched from the port of origin located outside ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... islature whereas a quasi-judicial order comes from adjudication which is also a part of administrative process resembling a judicial decision by a court of law. (Se e Shri Sitaram Sugar Co. Ltd. v. Union of India [(1990) 3 SCC 223].) 50. Applying the above test, price fixation exercise is really legislative in character, unless by the terms of a particular statute it is made quasi-judicial as in the case of tariff fixation under Section 62 made appealable under Section 111 of the 2003 Act, though Section 61 is an enabling provision for the framing of regulations by CERC. If one takes tariff as a subject-matter, one finds that under Part VII of the 2003 Act actual determination/fixation of tariff is done by the appropriate Commission under Section 62 whereas Section 61 is the enabling provision for framing of regulations containing generic propositions in accordance with which the appropriate Commission has to fix the tariff. This basic scheme equally applies to the subject-matter trading margin in a different statutory context as will be demonstrated by discussion hereinbelow. 51. In Narinder Chand Hem Raj v. Lt. Governor, H.P. [(1971) 2 SCC 747] this Court has held that power to t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2003 Act, we find that under the Act, the Central Commission is a decision-making as well as regulation-making authority, simultaneously . Section 79 delineates the functions of the Central Commission broadly into two categories-mandatory functions and advisory functions. Tariff regulation, licensing (including inter-State trading licensing), adjudication upon disputes involving generating companies or transmission licensees fall under the head mandatory functions whereas advising the Central Government on formulation of National Electricity Policy and tariff policy would fall under the head advisory functions . In this sense, the Central Commission is the decision-making authority. Such decision-making under Section 79(1) is not dependent upon making of regulations under Section 178 by the Central Commission. Therefore, functions of the Central Commission enumerated in Section 79 are separate and distinct from functions of the Central Commission under Section 178. The former are administrative/adjudicatory functions whereas the latter are legislative. 23. The respondents, however, seek to discern a distinction between the adjudicatory function performed by a regulatory commission ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... trade, profession or vocation; (h) activities of a race club including by way of totalisator or a license to book maker or activities of a licensed book maker in such club; and; (i) any activity or transaction undertaken by the Central Government, a State Government or any local authority in which they are engaged as public authorities; 26. The expression consideration is found in Section 2(31) which reads thus: - 2. Definitions. In this Act, unless the context otherwise requires, xxxx xxxx xxxx (31) consideration in relation to the supply of goods or services or both includes (a) any payment made or to be made, whether in money or otherwise, in respect of, in response to, or for the inducement of, the supply of goods or services or both, whether by the recipient or by any other person but shall not include any subsidy given by the Central Government or a State Government; (b) the monetary value of any act or forbearance, in respect of, in response to, or for the inducement of, the supply of goods or services or both, whether by the recipient or by any other person but shall not include any subsidy given by the Central Government or a State Government: Provided that a deposit given ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t of, in response to or for the inducement of a supply of goods. Suffice it to note that it was not even remotely sought to be contended by the respondents that the payments in the form of fee as received by Commissions were an outcome of an inducement to supply goods or services. 30. More importantly we find that by virtue of Section 7, a supply would necessarily have to be of goods or services not only for consideration but more importantly in the course or furtherance of business. We have in the preceding parts of this decision clearly found that the regulatory function discharged by Commissions would clearly not fall within the scope of the word business as defined by Section 2 (17). Thus, even if the fee so received by such Commissions were to be assumed as being consideration received, it was clearly not one obtained in the course or furtherance of business. We are thus of the considered opinion that the view as expressed by the respondents in the SCNs impugned before us are rendered wholly arbitrary and unsustainable. 31. As was noted hereinbefore, Schedule III in express and unambiguous words excludes services rendered by a court or tribunal. Once that exclusion had come to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f a tax under the CGST. 35. The Electricity Act makes no distinction between the regulatory and adjudicatory functions which it vests in and confers upon a Commission. Those functions are placed in the hands of a quasi-judicial body enjoined to regulate and administer the subject of electricity distribution. Electricity, undoubtedly, is a natural resource which vests in the State. We have thus no hesitation in observing that the SCNs infringe the borders of the incredible and inconceivable. 36. That only leaves us to examine the correctness of the stand of the respondent based on the Notification dated 28 June 2017 and their assertion that the functions discharged by these Commissions would be liable to be classified under the heading Support services to electricity, gas and water distribution which is placed under Group Heading 99863. Suffice it to note that the notification dated 28 June 2017 notifies the rates of integrated tax of various services as falling under various chapters, sections or headings of the scheme of classification of as specified in Column 2 thereof. The scheme of classification which is alluded to would necessarily compel us to revert to the Schedules of the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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