2024 (11) TMI 36 - HC - GST

Exemption claim - composite service offered to the consumers - whether the exemption granted to transmission or distribution of electricity by an electricity transmission or distribution utility company would take in the ancillary services offered to its consumers? - stay on penalty proceedings - HELD THAT - The writ petitions stand closed leaving the parties to abide by the Hon ble Supreme Court judgment and status quo be maintained with respect to the payments and also the penalty proceedings till judgment is delivered by the Hon ble Supreme Court in C.A. No. C.A. No. 006278 of 2019. The penalty proceedings will stand stayed till the final decision of the Hon ble Supreme Court in the matter of exemption regarding ancillary services and if the issue is held against the assessee then necessarily penalty will have to be independently considered on the basis of principles governing imposition of penalties. Petition disposed off.

Summary

Issues:
1. Interpretation of exemption granted to transmission or distribution of electricity by an electricity transmission or distribution utility company.
2. Whether ancillary services offered to consumers fall within the exemption.
3. Impact of High Court of Gujarat judgment on clarifications related to exemption.
4. Stay on penalty proceedings pending final judgment by the Supreme Court.

Analysis:
The judgment by the High Court dealt with the interpretation of an exemption granted to electricity transmission or distribution utility companies and whether ancillary services provided to consumers are covered under the exemption. The petitioners argued that the exemption includes services listed in Annexure-1 for levy of tax. The distribution companies relied on Sections 7 and 8 of the CGST Act, stating that the services provided are composite and exempt. The High Court noted the Gujarat High Court's judgment in Torrent Power Ltd. v. Union of India, which struck down certain clarifications related to the exemption.

Regarding penalty proceedings, it was mentioned that the petitioners had paid the liability subject to the pending Supreme Court decision. The Court decided to dispose of the writ petitions but allowed the petitioners to continue paying under protest until the Supreme Court's final judgment. The penalty proceedings were stayed pending the Supreme Court's decision, ensuring no further action until the final judgment on the exemption of ancillary services.

The judgment emphasized that the penalty proceedings would remain stayed until the Supreme Court's final decision on the exemption issue. It was clarified that if the Supreme Court rules against the assessee, penalties would be considered independently based on penalty imposition principles. The writ petitions were closed with observations and reservations, directing the parties to abide by the Supreme Court's judgment and maintain the status quo on payments and penalty proceedings until the final decision in the Supreme Court case.

In conclusion, the High Court's judgment addressed the interpretation of exemption for electricity transmission or distribution companies, the inclusion of ancillary services, the impact of a previous Gujarat High Court judgment, and the stay on penalty proceedings pending the Supreme Court's final decision on the exemption issue.