TMI Blog2021 (8) TMI 194X X X X Extracts X X X X X X X X Extracts X X X X ..... lso seen from the agreement that potable water is the output after treatment of the raw water by the appellant, and which is the only supply made by the appellant to all the purchasers, viz., TM, wayside villages and Industrial units (definitions in pg. 15 16). The water treatment, etc., are activities done by the appellant on his own account only to achieve the quality standards of the potable water as per the agreement with one of the purchasers, Tirupur Municipality. It is clearly mentioned throughout the agreement that potable water is only supplied to all the purchasers of the appellant irrespective of whether they are villages, industrial units or the municipality or whether the use is domestic or non-domestic. The only differential treatment based on end use and end-users (purchasers) is only with respect to the price of the potable water charged by the appellant. There is no differentiation with respect to the nature of the supply made in the agreement in its entirety. In fact, the definitions of raw water , potable water purchasers Water charges in Page nos. 15,16, 17 and 21 of the concession agreement categorically pronounce that the supply to all the purchaser ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... le input tax credit shall be made, unless the appellant has been given an opportunity of being heard. 2. Under Section 103(1) of the Act, this Advance ruling pronounced by the Appellate Authority under Chapter XVII of the Act shall be binding only (a) . On the applicant who had sought it in respect of any matter referred to in subsection (2) of Section 97 for advance ruling; (b) . On the concerned officer or the jurisdictional officer in respect of the applicant. 3. Under Section 103 (2) of the Act, this advance ruling shall be binding unless the law, facts or circumstances supporting the said advance ruling have changed. 4. Under Section 104(1) of the Act, where the Appellate Authority finds that advance ruling pronounced by it under sub-section (1) of Section 101 has been obtained by the appellant by fraud or suppression of material facts or misrepresentation 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 th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... infrastructure related consultancy to TCMC / GoTN Incidental to main business activities Interest on receivable on delayed payments Disconnection Charges Reconnection charges Permanent disconnection charges Cheque Bouncing charges Non-Revenue - Service provided to Customer on New Connection works-Concept of No Loss No Gain, New Connection Shifting and other works 4. The AAR pronounced the following rulings: a. The applicant not being the class of persons specified in Notification No. 14/2017-C.T.(Rate) dated 28.06.2017 as amended, they are not eligible for the said Notification as discussed in Para 10.2. b. The activity of Sewage offtake and treatment extended to Tirupur Municipal Corporation as per the CA is exempt under SI.No.3 of Notification No. 12/2017- C.T.(Rate) dated 28.06.2017 for the reasons discussed in Para 11.3. c. The Consultancy Services rendered by the applicant to Tiruppur City Municipal Corporation in respect of the Project- Construction Management and Supervision Consulting Service to assist Project ULBs - Tiruppur City Municipal Corporation exempt under SI.No.3 of Notification No. 12/2017-C.T.(Rate) dated 2 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt dated 11.02.2000 maybe read as part hereof. It is submitted that on a perusal of the terms of the Concession Agreement dated 11.02.2000 it can be ascertained that the Appellant is performing a municipal function within the ambit of Article 243G and W, subject to the terms of the Concession Agreement. 2. The activities undertaken by the Appellant are either supply of goods or supply of services , which when supplied on an intra-state basis will be subject to a levy of CGST + SGST. 3. The Appellant also under takes the following activities and levy charges as follows:-: (i) Charge 1: In the event of there being a shortfall in the quantity of water consumed when compared with the agreed quantity by any industrial customer in any month, the Appellant levies a water capacity charge or a take or pay charge . This is like monthly minimum billing for a pre-agreed amount of water. This charge is calculated on the quantum of shortfall when compared with the quantity to be taken. (ii) Charge 2: The Appellant levies a re-connection charge in the event of non -payment of bills within due period and if the cheque is dishonoured. Apart from the above, the Appellan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion (Bl), 29th June 2017, Aani-15, Hevilambi, Thiruvalluvar Aandu-2048 have been issued, Sewage and waste collection, treatment and disposal and other environmental protection services, falling under Heading 9994 are treated as supply of services and subject to a levy of CGST at 9% in terms of Notification no. 11/2017- Central Tax (Rate) dated 28th June, 2017. However, in terms of Notification no. 12/2017- Central Tax (rate) dated 28th June, 2017, pure services (excluding works contract service or other composite supplies involving supply of any goods) provided to the Central Government, State Government or Union territory or local authority or a Governmental authority by way of any activity in relation to any function entrusted to a Panchayat under article 243G of the Constitution or in relation to any function entrusted to a Municipality under article 243W of the Constitution are exempt from the levy of CGST. 11. The AAR failed to appreciate that the services rendered by the Appellant are in relation to a function entrusted to the Municipality under Article 243W of the Constitution and are provided to a local authority. Therefore, on such sewage and waste collection service ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed therein cannot form basis for adjudication. Hence, reliance on such statements from Wikipedia ought to be eschewed and set aside. 18. The learned AAR failed to appreciate that Section 15 (1) read with Sec 15(2)(d) of the CGST Act, 2017, the value of a supply of goods or services or both shall be the transaction value, which is the price actually paid or payable for the said supply of goods or services or both where the supplier and the recipient of the supply are not related and the price is the sole consideration for the supply and shall include the interest or late fee or penalty for delayed payment of any consideration for any supply; and also include subsidies directly linked to the price excluding subsidies provided by the Central Government and State Governments. 19. Hence, the exemption under Notification no. 12/2017- Central Tax (rate) dated 28th June, 2017 and G.O. Ms. Nos.64 and 74, Commercial Taxes and Registration (Bl), 29th June 2017, Aani-15, Hevilambi, Thiruvalluvar Aandu-2048 will also apply to the interest component and the late fee or penalty as it forms a part of the value of supply. 20. It is further submitted that it would be absurd to exempt the ma ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing within the domain of the Constitution deals with functions of the municipalities in relation to matters listed in the 12th Schedule. Entry 7 of the 12th Schedule provides for Fire Services as one of the functions of the municipalities. The nature of the enactment and the provisions clearly indicate that Delhi Fire Services Act falls under Entry 5 of List II and not under Entry 41 of List II. 23. Considering the business model of the Appellant (as explained above) and the decision of the Hon ble Supreme Court in Govt, of NCT of Delhi Vs. Union of India (UOI) supra , it is respectfully submitted that the supply of potable water needs in the Tirupur Local Planning Area, is an act falling clearly within the domain of Tirupur Municipality. 24. In a very recent decision of the Madras High Court in Cuddalore Muncipalty vs Joint Commissioner of GST Central Excise and Others decided on March 2021 , the Hon hie Court discussed in length and detail on negative list of services, mega notification and services provided by government and local authority, the relevant paras are discussed below: 50. Para 4.1 of Guidance Note 4- Negative List of Services is reproduced bel ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... isement and promotion, construction or works contract, renting of movable or immovable property, security, testing and analysis. 52. Services which are provided by government in terms of their sovereign right to business entities, and which are not substitutable in any manner by any private entity, are not support services. 25. The Hon ble CESTAT, New Delhi, had held in Rajasthan State Industrial Development Investment Corpn. Ltd. Vs. CCE, Jaipur -II, Service Tax Appeals Nos. 590, 2425, 2436, 3198, 3204 of 2012, order dated 12.05.2017, wherein in para 22 it was held that the term governmental authority to include any authority or any other body established by Government, with 90% or more participation by way of equity or control, to carry out any function interested to municipality under Article 243W of the Constitution, and also further held that the said Article empowers legislature of a state by law endow the municipalities with such powers and authority as has been necessary to enable them to function as institution of self- government. It was further considered that the Appellant in the subject case were carrying out municipal function in their industrial are ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... relation to a function entrusted to the Local Authority /Municipality / Corporation under Article 243G/243W of the Constitution and are provided to a local authority and the effective rate of CGST will be nil as the same are exempt from the levy of GST, in terms of Notification no. 12/2017- Central Tax (rate) dated 28th June, 2017 and effective rate of SGST will be nil in terms of Exemption vide G.O. Ms. No.74, Commercial Taxes and Registration (Bl), 29th June 2017, Aani-15, Hevilambi, Thiruvalluvar Aandu-2048 and pass such further or other orders and thus render justice. 6. PERSONAL HEARING: The Appellant was granted personal hearing through Virtual Personal Hearing as required under law before this Appellate Authority on 15th June 2021. The Authorized representatives of the Appellant Tvl.P.Giridharan , Advocate of the appellant company appeared for hearing. They reiterated the written submissions and emphasized that (1) the functions entrusted to a Municipality under Article 243 W of the Constitution has been entrusted to them through the concession agreement [Article 3.1] and therefore the services are exempted as per Notification 12/2017 entry no.3 or 4.The supp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ppellant to all the purchasers, viz., TM, wayside villages and Industrial units (definitions in pg. 15 16). The water treatment, etc., are activities done by the appellant on his own account only to achieve the quality standards of the potable water as per the agreement with one of the purchasers, Tirupur Municipality. Further, the consideration for such supply of potable water to all the purchasers is in the form of water charges determined as per the agreement and other miscellaneous amounts for activities essential to supply of water (Article 17, pg 73 of the CA). Thus from the scope, language and the terms and conditions of the agreement, it is clearly seen that the appellant has been awarded a contract for the sole purpose of supply of potable water to the purchasers, among others, after treating the raw water from the river bed. The activity of the appellant is thus only a supply of potable water to its purchasers. In other words, supply of goods and not of services. 7.4 Having determined that the activities of the appellant are nothing but supply of goods (potable water), we proceed to examine the liability or otherwise of GST on the same. We find from the submissions m ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er is the most common form of pure water. However, potable water has only one meaning, water fit for human and animal consumption and has dissolved minerals. Infact, from the performance standards spelt out in Schedule C of the agreement, the quality of potable water would itself indicate that it does not attain the nature and quality of a purified water on any count. Therefore, it can be safely concluded that the supply of the appellant is of raw water, treated to become potable water and nothing more. Once it is distinctly clear that the supply is of water only, and NOT purified water, the same falling under the entry 99 of the notification no. 02/2017-CT (R) is qualified for the exemption. 7.6 In the light of the above discussions, the reference made by the AAR on the divergent views as well as the ruling sought by the appellant, is answered as affirmative with regard to exemption available to the supply of potable water made by the appellant under notfn. No. 2/2017-CT (R) ibid. 7.7 With regard to the other questions raised in the appeal, we concur with the reasoning and the ruling given by the AAR and therefore, the appeal by the appellant is not sustainable. In ..... X X X X Extracts X X X X X X X X Extracts X X X X
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