TMI Blog2018 (5) TMI 647X X X X Extracts X X X X X X X X Extracts X X X X ..... itution. However, we find that the arguments fail to make a point. There is no other entry in the Schedule contained in the N/N. 12/2017-Central/State Tax (Rate) for services exempted from GST which would cover the impugned transaction. Neither is a specific entry for the impugned transaction in the N/N. 11/2017-CentraI/State Tax (Rate) for services taxable to GST at various rates. In view thereof, the residuary entry no.35 of the N/N. 11/2017-Central/State Tax (Rate) covering “ services nowhere else classified” and attracting GST @18% [9% each of CGST and MGST] would be applicable. Levy of GST - whether access charges paid to Municipal Authorities would be liable to GST? - Held that: - The reinstatement charges apply towards restoration of excavation work on the roads carried out by the various business entities providing services such as gas, telephone, electricity, etc. The Guidelines for Trenching activity-2015 [No:AMC/ES/7725/11 Dated 18.12.2014 - policy guidelines for granting trench excavation permissions to underground service provider Utility agencies and Municipal agencies & the reinstatement of trenches] as provided by the applicant state that in addition to the re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eneration, transmission and distribution of electricity and is registered under Goods and Service Tax Act ( GST ) bearing Registration No. 27AACCR7446Q1ZM. 3. The Applicant has obtained a license under Section 14 of the Central Electricity Act, 2003 ( Electricity Act ) to distribute electricity as a distribution licensee. Accordingly, the Applicant is operating and maintaining a robust distribution system for supplying electricity to the consumers in the authorized areas ( area of supply ), in terms of his license to supply electricity. The distribution system made up of wires and associated facilities between the delivery points on the transmission lines, generating station connection and the point of connection to the installation of its consumers in Suburban Mumbai. 4. The Applicant s distribution network is spread across its North Division (Borivali to Bhayender), East Division (Chunabhatti to Vikhroli and Mankhurd) Central Division (Goregaon to Kandivali), South Central Division (Andheri, MIDC, Marol and SEEPZ, Jogeshwari) and South Division (Bandra to Vile Parle). 5. In terms of Section 42 of the Electricity Act, every distribution licensee is entrusted with the resp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tement to the authority etc. The key provisions laid down in this connection are summarized hereunder: *Rule 11 of the Electricity Work Rules provides that licensee shall be liable to deposit an amount for restoration and maintenance of the affected areas. * Rule 12 of the Electricity Work Rules provides that the distribution licensee shall carry out the restoration and maintenance of the property affected by the works carried out by the distribution licensee. * Proviso to the Rule 12 of the Electricity Work Rules provides that where the restoration work is carried out by the concerned local authority, payment may be recovered by the local authority from the distribution licensees. * Rule 13 of the Electricity Work Rules provides that any amount of compensation payable by the license under these rules shall be deposited by means of demand draft. 9. In the instant case, in respect of the area of supply, Municipal Corporation of Greater Mumbai ( Municipal Authority ) is the concerned authority set up under the Mumbai Municipal Corporation Act, 1988 ( MMC Act ). Further, Municipal Authority has issued the Policy Guidelines No. AMC/ES/7725/II dated 18.12.2014 (hereinafte ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... so liable to pay access charges to the Municipal Authorities for giving right of way to the distribution licensee to carry out the excavation work for laying of underground electric supply lines. The relevant extract of the MCGM Trenching Policy have been provided below: 6A. Access Charges (Right ofway charges) : In addition to the regular RI charges; access charges for right of way will be recovered by MCGM from all utilities which lay underground services below MCGM roads. Presently these charges will be recovered at the rate of ₹ 100/- Per Meter length of the cable s/conduits/ducts Per Year. The Access charges will be enhanced as and when it is felt expedient to MCGM, on demand from MCGM or rather proactively; the access charges shall be deposited year by year by the Utility agencies. The access charges will be applicable to all types of trenching works i.e. open cut trenching, HDD Micro trenching. Applicable access charges in individual case shall be Informed to the applicant utility agency through demand note along with the reinstatement Charges. 10. Therefore, every distribution licensee would be required to make payment of reinstatement charges and ac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ate Government, Union territory, local authority or governmental authority by way of any activity in relation to any function entrusted to a municipality under article 243 W of the Constitution are exempt from le of GST. The relevant extract of NN 12/2017 Sl. No. Chapter, Section, heading, Group or Service Code (Tarif Description of Services Rate (percent) Condition 4 Chapter 99 Services by Central Government State Government, Union territory, local authority or governmental authority by way of any activity in relation to any function entrusted to a Municipality under article 243 W of the Constitution Nil Nil 2.2 From a perusal of NN 12/2017, it is clear that the following conditions should be cumulatively fulfilled: i) There should be service ( Condition I ) ii) Service should be provided by Central Government, State Government, Union territory, local authority or governmental authority ( Condition Il ) iii) Service should be by way of any activity in relation to a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... poration would constitute Municipality . Thus, Condition II in Entry 4 to NN 12/2017 stands fulfilled as the MCGM, MMRDA and Mira Bhayandar Municipal Corporation would be treated as local authority Condition III 2.8 The Condition Ill requires that the services should be by way of any activity in relation to any function entrusted to a municipality under article 243 W of the Constitution, 2.9 It is a settled position in law that the term in relation to is a very broad expression which pre-supposes another subject matter. These are words of comprehensiveness which might both have a direct significance as well as an indirect significance depending on the context. 2.10 Further, the functions entrusted to a Municipality under Article 243 W of the Constitution is reproduced hereunder: Subject to the provisions of the Constitution, the Legislature of a State may. by law, endow (a) the Municipalities with such powers and authority as may be necessary 10 enable them to function as institutions of self-government and such law may contain provisions for the devolution of powers and responsibilities upon Municipalities, subject to such conditions as may be spec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ary course Of business, one of which is a principal supply; 2.16 Further, in terms of Section 8 of the CGST Act, the tax liability of a composite supply comprising two or more supplies, one of which is a principal supply, shall be treated as a supply of such principal supply. 2.17 In the present case, the Municipal Authorities provide services of restoration of roads and also right of way to carry out excavation work. The services of giving right of way and restoration of roads are naturally bundled and are supplied in conjunction with each other in the ordinary course of business of granting permission to the licensee for carrying out the excavation works. Thus, it can be said that it would constitute a composite supply in terms of Section 2(30) of the CGST Act wherein the service of restoration of roads would be the principal supply. 2.18 As discussed above, in terms of Section 8 of the CGST Act, the composite supply shall be treated as supply of principal supply and GST would be applicable based on such principal supply. In the instant case, principal supply is the supply of service for restoration of roads which is exempt from the levy of GST in terms of NN 12/2017. T ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cluding street lighting, parking lots, bus stops and public conveniences. 4. The activity of restoration of roads which includes activities such as construction, alteration, repair and maintenance of roads, can be related to any of the above relevant entry and more particularly the entry in respect of roads and bridges . 5. It is a settled position in law that the term in relation to is a very broad expression which pre-supposes another subject matter. These are words of comprehensiveness which might both have a direct significance as well as an indirect significance depending on the context The Applicant has placed reliance on the following judicial precedents: * Doypack Systems Pvt Ltd vs. Union of India [1988 (36) ELT 201 (SC) = 1988 (2) TMI 61 - SUPREME COURT OF INDIA * Home Solution Retail India Ltd vs. Union of India [2009 (237) ELT 209 (Del.) = 2009 (4) TMI 14 - DELHI HIGH COURT 6. The Applicant submits that no activities or functions are explicitly specified as regards the subject matters listed under the Twelfth Schedule of the Constitution of India. Further, the functions entrusted to the municipality in relation to roads and bridges hav ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... provided by the specified persons without any reference to the service recipient(Refer 1, 4, 5, etc.) (iii) Where the service is exempted from GST when received by the specified persons without any reference to the service provider (Refer 16, 40, etc.) (iv) Where the service is exempted from GST when received by the specified persons and provided by the specified persons (Refer 8, 11A, etc.) 10. Further, from a perusal of the Entries 13, 17 and 76 to NN 12/2017, it is clear that the NN 12/2017 has in these entries explicitly restricted the exemption to specified services for use by general public. However, under Entry No. 4 the specified service has not been circumscribed by any expression which denotes that exemption on such services is to be restricted to be used by general public at large. 11. Similarly, from a perusal of Entries covered by (iii) and (iv) above, it is clear that wherever the legislature wanted to exempt services provided to particular class of recipients, it has made explicit provisions to that effect. In the absence of such provisions in Entry 4, exemption cannot be denied in the instant case. 12. In view of the above, it is clear that wherever ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n is ambit trade and commerce so sometime it may be synonymous but its field stretches beyond trade and commerce, 14. In support of the above contention, reference may also be made to the following judgements wherein, in the absence of any specific definition of the term railways under the Finance Act, 1994 or any similar restriction limiting the benefit of exemption only to government railways or railways used for public carriage of goods or passengers, it was held inter alia held that benefit of exemption shall also be available to railways constructed for use by private entities: * Steadfast Corporation Ltd 2016(45) STR 583 (AAR) = 2016 (9) TMI 50 - AUTHORITY FOR ADVANCE RULINGS * SMS Infrastructure Ltd vs. CCEI cus. Nagpur 2017 (47) STR 17 (Tri-Mumbai) = 2016 (9) TMI 843 - CESTAT MUMBAI * Afcons Infrastructure Ltd. v. CCEx, Mumbai-Il 2015 (38) STR 194 (Tri-Mumbai) = 2013 (8) TMI 530 - CESTAT MUMBAI * ETA Engineering Pvt. Ltd. vs. CST, New Delhi 2016 (43) S.T.R. 547 (Tri. - Del.) = 2016 (3) TMI 104 - CESTAT NEW DELHI 15. The Applicant further submits that it is a settled law that the wordings of an exemption notification when clear, pl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fferent sets of circumstances. 18. The Applicant also relies on the case of Commissioner of Central Excise, Surat-l Versus Favourite Industries 2012 (278) E.L.T. 145 (S.C.) = 2012 (4) TMI 65 - SUPREME COURT OF INDIA , wherein the Apex Court held as under: 31. Moreover, a liberal construction requires to be given to a beneficial notification. This Court in Commissioner of Customs (Preventive) Mumbai V. M. Ambalal and Company, (2011) 2 SCC 74 2010 (260) ELT. 487 (S.C.) = 2010 (12) TMI 16 - Supreme court of India , (in which one of us was the party) has observed that the beneficial notification providing the levy of duty at a concessional rate should be given a liberal interpretation. 25 The notification requires to be interpreted in the light of the words employed byit and not on any other basis. There cannot be any addition or subtraction from the notification for the reason the exemption notification requires to be strictly construed by the Courts. The wordings of the exemption notification have to be given its natural meaning, when the wordings are simple, clear and unambiguous. 19. In view of the aforesaid, judicial precedents, it is clear ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... In the instant case, principal supply is the supply of service for restoration of roads which is exempt from the levy of GST in terms of NN 12/2017. Therefore, GST would not be applicable on the access charges collected by the Municipal Authorities. In view of the above submissions, no GST would be leviable on reinstatement charges and access charges recovered by the Municipal Authorities. 03. CONTENTION - AS PER THE CONCERNED OFFICER The submission, as reproduced verbatim, could be seen thus- It appears from the application that M/S. RIL, a private company engaged in business of generation, transmission and distribution of electricity claimed that reinstatement charges and access charges paid to Municipality for restoration work of roads damaged by excavation work undertaken by the applicant are exempted from GST in terms of entry no. 4 of the Notification No. 12/2017- Central Tax (rate) dated 28.06.2017. In support of their contention, they have argued that since such services provided by a governmental authority (Municipality) fall under the function entrusted to a municipality under article 243W of the Constitution, qualify for exemption in terms of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cts of the case. The questions raised in the application are as under - 1. Whether reinstatement charges paid to Municipal Authorities would be liable to GST? 2. Whether access charges paid to Municipal Authorities would be liable to GST? The first thing that we notice from a perusal of the questions posed as well as from the documents submitted on record shows thus - a. The questions are raised by the recipient and not by the supplier. b. The supplier has issued a receipt to the applicant showing details thus Municipal Corporation of Greater Mumbai Receipt No. : 2000009002 Date : 07.11.2017 Received From : Reliance Infrastructure Ltd MCGM GST Number 27AAALM0042L3Z4 Sr. No. SAC / Activity Code Description of Activity Amount 1 RI FOR RELIANCE ENERGY LTD 63690.00 2 997212 ACCESS CHARGES FOR POWER CABLES 1000.00 64690.00 90.00 90.00 64870.00 c. There is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... / state tax leviable under section 9 Of the said Central Goods and Services Tax Act, shall be paid On reverse charge basis by the recipient Of the such services as specified in Column (4) of the said Table: Table Si No. Category of Supply of Services Supplier of service Recipient of Service (1) (2) (3) (4) 5 Services supplied by the Central Government, State Government, Union Territory of local authority to a business entity excluding,- (1) renting of immovable property, and (2) services specified below- (i) services by the Department of posts by way of speed post, express parcel post, life insurance, and agency services provided to a person other than Central Government, State Government or Union territory or local authority; (ii) services in relation to an aircraft or a vessel, inside or outside the precincts of a port or an airport; (iii) transport of goods or passengers. Central Government, State Government, Union territory of local Aut ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... espect to- (i) the preparation of plans for economic development and social justice; (ii) the performance of functions and the implementation of schemes as may be entrusted to them including those in relation to the matters listed in the Twelfth Schedule; (b) the Committees with such powers and authority as may be necessary to enable them to carry out the responsibilities conferred upon them including those in relation to the matters listed in the Twelfth Schedule. The word Municipality is defined in the Constitution in the definitions in Article 243P(e)A As Municipality means an institution of self government constituted under article 243Q ; Article 243Q says thus- 243Q (1) there shall be constituted in every State,- (a) a Nagar Panchayat (by whatever name called) for a transitional area, that is to say, an area in transition from a rural area to an urban area; (b) a Municipal Council for a smaller urban area; and (c) a Municipal Corporation for a larger urban area, in accordance with the provisions of this Part: .. Since there is a reference to the Twelfth Schedule, we also refer to the same ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e of 10 mtrs. The function in relation to Roads as entrusted by the Constitution does not entitle the Municipality, as the one performing the function, to receive any charges from anyone for doing the said work. It is by nature a sovereign function done for the community at large. These are governmental functions which are legislated to be performed by the Municipalities. Such functions are in the nature of performing works for public. In the present case, the business entities while performing their business activities request the Municipal Authorities to be allowed to dig up trenches for works such as laying or repairing some cables or pipes. There are so many such entities such as the telephone, gas, etc, Each time each one of them digs up the road and there is restoration required to be done. This restoration work would not result in performing of the sovereign function. The sovereign has already been performed by constructing the road or undertaking maintenance works roads. The restoration work can be equated neither to construction work nor to maintenance work as suo-motu undertaken by the Municipal Authorities. The restoration charges are also not in the nature that the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ax (Rate) for services exempted from GST which would cover the impugned transaction. Neither is a specific entry for the impugned transaction in the Notification No. 11/2017-CentraI/State Tax (Rate) for services taxable to GST at various rates. In view thereof, the residuary entry no.35 of the Notification No.11/2017-Central/State Tax (Rate) covering services nowhere else classified and attracting GST @18% [9% each of CGST and MGST] would be applicable. Question 2 Whether access charges paid to Municipal Authorities would liable to GST? The reinstatement charges apply towards restoration of excavation work on the roads carried out by the various business entities providing services such as gas, telephone, electricity, etc. The Guidelines for Trenching activity-2015 [No:AMC/ES/7725/II Dated 18.12.2014 - policy guidelines for granting trench excavation permissions to underground service provider Utility agencies and Municipal agencies the reinstatement of trenches] as provided by the applicant state that in addition to the regular RI charges, access charges for right of way will be recovered by MCGM from all utilities which lay underground services below MCGM roads. ..... X X X X Extracts X X X X X X X X Extracts X X X X
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