TMI Blog2023 (8) TMI 1349X X X X Extracts X X X X X X X X Extracts X X X X ..... ing 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. Whether the classification of water sold as water including natural or artificial mineral waters and aerated waters, not containing added sugar or sweetening matter, not flavoured (other than drinking water packed in 20 litre bottles) under heading 2201 is correct? - HELD THAT:- The water grouped under the heading 22.01 is ordinary water whether or not clarified or purified. And this heading specifically excludes distilled or conductivity water and water of similar purity which arc classified in heading 28.53. Therefore, it is amply clear that, water recovered out of the effluent treatment process nothing but an ordinary water which is suitable for reuse by the dyeing and bleaching units as a solvent and as a washing, rinsing medium. Thus, it aptly fits into SI. No. 99 of Notification No. 02/2017, CT (Rate), dt. 28.06.2017 under the heading 2201 rather than SI.No. 24 of Notification No. 01/2017-Central Tax (Rate) dated 28.06.2017 under the same he ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Central Goods and Service Tax Act would also mean a reference to the same provisions under the Tamil Nadu Goods and Service Tax Act. M/s Karaipudur Common Effluent Treatment Plant Private Limited, S.F.No.10/1, Karaipudur, Arulpuram post, Tiruppur (hereinafter called as the Applicant ) is registered under the GST Acts with GSTIN: 33AACCK7832M1ZA. 2.0 In their application for Advance Ruling, the Applicant has stated, inter-alia, the following as their nature of activity proposed:- (i) the Applicant is an effluent treatment plant promoted by dyeing units; (ii) the Applicant is planning to buy the effluents from dyeing units and that the effluents will be delivered from the dyeing units to the Applicant through pipelines; (iii) the effluent will be processed at the plant and the resultant products, water, Sulphate solution and brine solution will be sold at market rates; (iv) the delivery will be made either through pipelines/Lorry. As per the norms of pollution control board, the resulting product can be sold to any member unit. 2.1 The Applicant has sought for advance ruling on the following questions;- 1. Whether the classification of supply ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... icants were offered personal hearing and it was held in digital platform on 19.05.2022, wherein Shri. S. Harishankar, Auditor (Authorised Representative-AR) appeared for the Applicant and reiterated the submissions made in the application. The Applicant has also submitted the details of effluent treatment process earned out by them which were received on 06.10.2022. 3.1 Another Personal Hearing was held on 18.11.2022, as there was a change in constitution of Members. In this Personal Hearing which was conducted virtually, the AR reiterated the submissions already made and explained the process briefly. 3.2. Subsequently, the Applicant has requested another personal hearing to make additional submissions and they were provided with an opportunity of being heard in person on 16.03.2023 and their Authorised Representative Thiru. N. Sivachalam, Charted Accountant attended hearing in person and, inter-alia, made the following submissions: The applicant is engaged in the process of effluent treatment for their member dyeing units under Zero Liquid Discharge Mechanism and have obtained the necessary consent from Pollution control board. So far, they have been doing as a service ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2). Hence the classification of the supply of output as sale of goods is not correct. Rate of GST on Services by way of treatment of effluent is 12% (CGST 6%) but Salt (HSN 2501) and water. (HSN 2201) are NIL rated. The classification as sale of goods may affect the revenue to the Government Exchequer. Water discharged by the assessee is partly de-mineralized in nature. Hence the classification of Water including natural or artificial mineral waters and aerated waters, not containing added sugar or other sweetening matter not flavoured [other than drinking water packed in 20 liter bottles] under 2201 is not correct. She has also submitted that, on verification of monthly returns of the taxpayer for the period from July 2017 to February 2018, it reflects that taxpayer have paid tax dues of Rs. 45,41,058/-(CGST+SGST) on 01.02.2022 for the difference in rate of tax at 18% from June 2017 to February 2018 and 12% from March 2018 belatedly beyond the due dates which attract interest as per section 50(1) of the TNGST Act, 2017. The taxpayer is requested to pay the interest dues to the tune of Rs. 33,66,126/- due to be paid DRAC-01A notice to the taxpayer on 04.07.2022. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... reatment and disposal services, by treating the effluent water and supplying treated water and other recovered products for reuse by the member units. Now, they have proposed to purchase effluent water from the member unit and after treating the same they propose to supply the resultant products to their member units so as to classify their activities as supply of goods. 4.6 From the various submissions of the Applicant both during the personal hearing and written submissions, it is clear that the applicant seeks to purchase the raw effluent and proposes to treat the same. The applicant proposes to sell the resultant products at market rates. 4.7 In terms of section 4 of The Sale of Goods Act, 1930,- 4. Sale and agreement to sell.- (1) A contract of sale of goods is a contract whereby the seller transfers or agrees to transfer the property in goods to the buyer for a price. There may be a contract of sale between one part-owner and another. (2) A contract of sale may be absolute or conditional. (3) Where under a contract of sale the property in the goods is transferred from the seller to the buyer, the contract is called a sale, but where the transfer of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion to be examined is whether the classification of water sold as water including natural or artificial mineral waters and aerated waters, not containing added sugar or sweetening matter, not flavoured (other than drinking water packed in 20 litre bottles) under heading 2201 is correct. 4.11 In this context, the Applicant has referred the advance rulings pronounced in the identical issue in the following cases.- 1. M/s. Hojiwala Infrastructure Limited (AAR Gujarat - GUJ/GAAR/R/2002/48) 2. M/s. PalsanoEnviro Protection Limited (AAR Gujarat - GUJ/GAAR/R/2002/47). 3. M/s. Kasipalayam Common Effluent Treatment Plant Private Limited (AAR Tamilnadu -23/AAR/2021) 4.12. In all the above referred advance rulings, it was pronounced that, Water recovered out of effluent treatment process, which is de-mineralized water for Industrial use is classifiable under Heading No. 2201 as Waters described under SI. No. 24 of Annexure-III of Notification No. 01/2017 - Central Tax (Rate), dated 28-6-2017 taxable at the rate of 18 per cent GST. 4.13. To decide upon the taxability of effluent treated water, it is required to analyze the aforesaid classification. Water reco ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d snow, this heading covers; (A) Ordinary natural water of all kinds (other than sea water - see heading 25.01). Such waters remain in the heading, whether or not clarified or purified, except that distilled or conductivity water and water of similar purity are classified in heading 28.53. The heading excludes sweetened or flavoured water (heading 22.02) (B) Mineral Waters, whether natural or artificial Natural mineral waters contain mineral salts or gases. The composition of these waters varies considerably and they are generally classified according to the chemical characteristics or their salts, e.g.:- (1) Alkaline waters (2) Sulphated waters (3) Halide waters (4) Sulphuretted waters (5) Ferruginous waters Such natural mineral waters may also contain natural or added carbon dioxide. Artificial mineral waters are prepared from ordinary potable water by adding the active principles (mineral salts or gases) present in the corresponding natural waters so as to produce waters of the same properties. (C) Aerated Waters (carbonated waters), i.e. ordinary potable waters charged with carbon dioxide gas ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 99 2201 Water [other than aerated, mineral, distilled, medicinal, ionic, battery, de-mineralized and water sold in sealed container] Nil 4.22. In this connection, it is observed that, all the other categories of water as mentioned in the exclusion clause have some special characteristics and specialized uses such as they are used in aerated drinks, medicinal/ health uses, automotive cooling system, sterilization, laboratory application, car battery etc. 4.23. In a similar issue, the AAAR / Maharashtra in it its ruling MAH/AAAR/AN-RM/02/2022-23, dated 01.04.2022 in the case of M/s. Rashtriya Chemicals Fertilizers Ltd. has held that as the water coming out from Sewage Treatment Plant still contains organic and inorganic substances, such as suspended particles, grit, clays, pollutants like nitrogen, phosphorus, etc. is not pure due to presence of the said impurities and foreign elements and therefore will be eligible for exemption in terms of entry at SI. No. 99 of Notification No. 02/2017, CT (Rate), dt. 28.06.2017. 4.24. In this regard, it is observed that the process carried out by the Ap ..... X X X X Extracts X X X X X X X X Extracts X X X X
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