TMI Blog2021 (4) TMI 884X X X X Extracts X X X X X X X X Extracts X X X X ..... is providing transmission services to TANTRANSCO. The appellant contends that the various services extended to TANTRANSCO constitute distribution services. However, as already been stated above, distribution service can be supplied only to consumers in the area of supply of the licensee. Therefore, the services extended by TANGEDCO to TANTRANSCO cannot constitute distribution service. Deployment of employees to TANSTRANSCO from the appellant - HELD THAT:- As a matter of fact it has been averred by the appellant that there are two modes, one in which the employees deputed from the appellant to TANTRANSCO are paid by TANTRANSCO and the expenses are debited in that company's books of accounts only. The second mode involves where salary payments are made by the appellant and the same is accounted as receivable from TANTRANSCO. This distinction was not made during the time of hearing before the AAR. In our view, the second mode where the salary payments etc., are paid by the appellant company to the employees deputed to TANTRANSCO (as they are still under the rolls of the appellant) and is booked as receivables from TANTRANSCO, there is no reason to interfere with the AAR' ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sentation of facts, it may, by order, declare such ruling to be void sb-initio and thereupon all the provisions of this Act or the rules made thereunder shall apply to the appellant as if such advance ruling has never been made. At the outset, we would like to make it clear that the provisions of both the Central Goods and Service Tax Act and the Tamil Nadu Goods and Service Tax Act are the same except for certain provisions. Therefore, unless a mention is specifically made to such dissimilar provisions, a reference to 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. The subject appeal has been filed under Section 100(1) of the Tamilnadu Goods Services Tax Act 2017/Central Goods Services Tax Act 2017 by Tvl. Tamil Nadu Generation and Distribution Corporation Limited (hereinafter referred to as Appellant'). The appellant is registered under GST vide GSTIN 33AADCT4784E1ZC.The appeal is filed against the Order No. 14/AAR/2020 dated 20.04.2020 passed by the Tamilnadu State Authority for Advance ruling on the application for advance ruling filed by the appellant. 2.1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y of Operation and maintenance materials used in the regular day to day functioning; and b. Transfer of capital Assets 2. GST is applicable on the deployment of employees to TANTRANSCO as the same is supply of Service 3. GST is not applicable on the following as the same are transaction in money: a. Transactions of physical fund flow between the companies by the way of repayment of existing loan, availment of fresh loans, etc. on actual basis without any interest component on such fund flow. b. Income such as transmission charges, Scheduling and Systems Operating charges, Reactive Energy Charges, etc. received from open access consumers by the applicant and adjusted through payable to TANTRANSCO. 4. The exemption under Sl.No. 25 of Notification No. 12/ 2017-C.T. (Rate) dated 28.06.2017 as amended is not applicable to the below stated transactions between TANGEDCO Ltd and TANTRANSCO Ltd, namely- a. Supply of Operation and maintenance materials used in the regular day to day functioning as the same is Supply of Goods'; b. Transfer of capital Assets as the same is declared as 'Supply of Goods'; c. Deployment of Employee under t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tanding the fact that the Central Government did not have powers to levy tax/duty on electricity, the historical exemption for electricity from service tax and central excise duty too validated the above position. Notification No. 45 ST dated 20.07.2010 directed that service tax payable on all taxable services relating to transmission and distribution of electricity provided by a person to any other person - upto 26.02.2010 for transmission , and up to 21.06.2010 for distribution - shall not be required to be paid. For the period after these dates, notifications 11 ST dated 27.02.2010 (for transmission), and 32 ST dated 22.06.2010 (for distribution) continued the respective exemptions. Board also issued a circular dated 07.12.2010 that such activity essential and having direct and close nexus with transmission and distribution of electricity is covered by the exemptions. The exemption to the entire value chain of transmission and distribution of electricity from GST because of the constitutional position has been stated in the minutes of the GST Council meeting cited above. During the period from 01.07.2012 to 30.06.2017, i.e. in the negative list based service tax regime ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and networks 66 KV and above substations and its ancillaries. At the time of segregation of circles, the assets relating to TANTRANSCO may be identified and transferred to the related companies i.e., TANTRANSCO and vice versa. For dealing with this activity, the impugned ruling refers to SI. No.4(a) in Schedule II. Schedule II read with section 7(1A) enables classification of an activity as supply of goods or service. This by itself does not lead to an activity being taxable supply as the transferee agents of the TNEB are functioning in a cohesive fashion putting their respective resources to the optimum use. vi. In both the above situations, all the above activities are in relation to transmission or distribution of electricity forming the value chain and which are beyond the purview of GST as pointed out supra. vii. In the above backdrop, the conclusion in paragraph 8.2 of the ruling that 8.2 On a joint reading of the above provisions it is evident that the exemption is only applicable to services involving distribution of electricity, maintenance, of electric meters by a distribution utility is incorrect. It omitted to note the value chain - by way of any s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nment. The Tripartite Agreement envisaged under the said Scheme has not yet happened. In view of this background, the impugned ruling erred in construing the deployment of the employees of erstwhile TNEB by the newly created Tangedco - the appellant herein - as supply of manpower. iv. The impugned ruling, on the other hand, concluded in paragraph 7.3.4 thereof that 'It is stated that the services of employees in the Roll of the applicant, when utilized by TANTRANSCO, the salary, related allowance and other advances payable to such staff are accounted in the books of the applicant on actual values. The applicant and TANTRANSCO are two different persons. When the applicant extends the services of their employees to TANTRANSCO, and collect the considerations payable to such employees from TANTRANSCO, the said activity is a 'Supply of Service' and GST is applicable to this supply of service'. Appellant does not render any service but that employees are transferred to Tantransco in terms of the above said Tamil Nadu Electricity (Reorganisation and Reforms) Transfer Scheme, 2010 as the Final Transfer Scheme for employees has not yet been notified by the Government of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... shall he a deemed Licensee for the activities and functions of the Board transferred to them which require licenses, under the provisions of the Act . Under Schedule A Part III Functions and duties of TANGEDCO , appellant is distribution licensee and has to undertake the electricity sub-transmission distribution and retail supply in the State of Tamil Nadu or outside. As appellant's functions, among other things, encompass sub-transmission distribution, appellant is covered by service code 99691 in general and both the sub-codes 996911 and 996912. The said Si. No.25 is for the code 9969 in general and its amplitude cannot be curtailed. It would encompass all supplies subsumed and consumed in the process of transmission and distribution of electricity. Therefore, the appellant's plea noted in paragraph 6.2 of the impugned ruling that ..any GST levy by vivisection of the comprehensive set of activities contributing to the achievement of 'transmission and distribution of electricity' in terms of the provisions of the Electricity Act 2003 would defeat the exemption was well-taken and the AAR erred in not finding merit in it, in the light of the facts and law state ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... erroneous. 5. In respect of the Ruling in paragraph 8.2.5 but not finding place in the final paragraph 12 This ruling is that 8.2.5 Activity of payment of expenses incurred by TANTRANSCO relating to vehicle hire charges, maintenance of sub-stations, salary payments, etc and paid by TANGEDCO accounted as receivable in the books of the applicant as discussed in Pam 7.3.5 supra. The said activity is not one involving services of distribution of electricity and therefore the exemption under SI. No. 25 of Notification No. 12/2017-C.T. (Rate) dated 28.06.2017 is not available for the stated transactions. It is noted position in SI. No.6 in paragraph 5.2 that TANTRANSCO's expenses like vehicle hire charges, maintenance of sub stations, salary payments are made by TANGEDCO, etc are accounted as receivable in the hooks of TANGEDCO. Contrarily, paragraphs 7.3.5 in the impugned ruling (and quoted in 8.2.5) is not related to the above. TANTRANSCO's expenses stated above which are met by appellant and shown as receivable is money transaction and is not a taxable service. It did not amount to appellant rendering service to TANTRANSCO. PERSONAL HEARING: ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Board; the Central Transmission Utility or a State Transmission Utility notified under the Electricity Act, 2003 (36 of 2003); or a distribution or transmission licensee under the said Act, or any other entity entrusted with such function by the Central Government or, as the case may be, the State Government . d) The activities of transmission and distribution are, therefore, to be understood and comprehended as envisaged in the Electricity Act. If the Electricity Act is not referred to, then, the understanding of the defined terms 'transmission utility' and 'distribution licensee' would be lost - which is not permissible. Even otherwise, Electricity Act is the statutory authority for the meaning of the terms transmission or distribution of electricity. e) Section 2(17) of the Electricity Act states that distribution licensee means a licensee authorised to operate and maintain a distribution system for supplying electricity to the consumers in his area of supply . f) Section 2(19) states that distribution system means the system of wires and associated facilities between the delivery points on the transmission lines or the generating ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ailway or tramway; (c) to alter the position of any line or works or pipes, other than a Math sewer pipe; (d) to lay down and place electric lines, electrical plant and other works; (e) to repair, alter or remove the same; (e) to do all other acts necessary for transmission or supply of electricity . m) The definition 2(z) in the notification is inter-linked to the definitions, and entrusted functions, and duties under the Electricity Act.. n) Therefore, the exemption entry Transmission or distribution of electricity by an electricity transmission or distribution utility has necessarily to be read with the provisions of the Electricity Act. o) Only an affirmative answer arises in the facts of the case for the question whether the activity is one amounting to transmission or distribution of electricity by an electricity transmission or distribution utility in terms of the Electricity Act. The fact that the entities of transmission or distribution share a storage accounting for the utilization of the materials or one entity doing the construction / erection for the other to reap the situational advantage of one over the other does not oust the appl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ricity Act, 2003 and in terms of clause 6 of the said Scheme all personnel (excluding Chairman and Director of the Board) of the erstwhile Tamil Nadu Electricity Board constituted under section 5 of the Electricity (Supply) Act, 1948 stood transferred to and absorbed in TANGEDCO (the appellant herein) on a provisional basis, subject to finalization of Employee Transfer scheme by the State Government . i) Since the Final Transfer Scheme for employees have not yet been notified by the Go TN. all the employees are under the role of TANGEDCO, but utilization is depending upon the requirement of TANGEDCO and TAN FRANSCO. The pay packages of the respective employees are similar and transactions between these two entities are also common. Based on utilization of manpower in the respective entity, the actual expenses on salary and its related allowance are also booked. While transfer of employees from one entity to another entity the advances to staff i.e., House Building Advance, Computer Advance, Vehicle Advance, Festival Advance, Education Advance which are all pending to be recovered in subsequent salary, such advances would be transferred to the respective entities, where the e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... distribution. The appellant has contended that therefore the entire value chain of electricity and transmission distribution are much beyond the purview of GST under the constitution. He has failed to note that it is only a statement of Secretary, GSTC and not the view of the council. 6.3 Electricity duty is a tax on consumption or sale of electricity and is levied under entry 53 of Part-II State list of Schedule 7 of the Constitution. Therefore, clearly the constitution leaves out only tax on consumption for sale of electricity from the purview of GST. The contention of the appellant is therefore rejected. 6.4 In respect of the contentions of the appellant against the rule in para 12(1) of the AAR order, the appellant has argued that supply of operation and maintenance materials used in regular day to day functioning and transfer of capital assets are activities in relation to transmission and distribution of electricity forming the value chain and is beyond the purview of GST. This view has already been rejected vide paragraph supra. 6.5 The appellant has sought that all the items pertaining to distribution of electricity are exempt from GST under SI.No.25 of Notificati ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at the various services extended to TANTRANSCO constitute distribution services. However, as already been stated above, distribution service can be supplied only to consumers in the area of supply of the licensee. Therefore, the services extended by TANGEDCO to TANTRANSCO cannot constitute distribution service. 6.9 With respect to deployment of employees to TANSTRANSCO from the appellant, as a matter of fact it has been averred by the appellant that there are two modes, one in which the employees deputed from the appellant to TANTRANSCO are paid by TANTRANSCO and the expenses are debited in that company's books of accounts only. The second mode involves where salary payments are made by the appellant and the same is accounted as receivable from TANTRANSCO. This distinction was not made during the time of hearing before the AAR. In our view, the second mode where the salary payments etc., are paid by the appellant company to the employees deputed to TANTRANSCO (as they are still under the rolls of the appellant) and is booked as receivables from TANTRANSCO, there is no reason to interfere with the AAR's order in para 7.3.4. However, where the employees are paid by TANTRAN ..... X X X X Extracts X X X X X X X X Extracts X X X X
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