The Delhi High Court has quashed the GST notice issued against the Central Electricity Regulatory Commission (CERC) and Delhi Electricity Regulatory Commission which acts as ‘tribunal’.
The bench of Justice Yashwant Varma and Justice Dharmesh Sharma has observed that the provision made in Schedule III of the GST Act clearly intended to insulate and exempt the functions discharged by a court or tribunal from the levy of a tax under the CGST.
The bench opined that even though Section 2(102) of the CGST Act defines the expression ‘services’ to mean ‘anything other than goods’, the expansive reach of that definition would have to necessarily be read alongside Schedule III and which excludes services per se rendered by a court or tribunal established under any law.
The bench stated that the Electricity Act makes no distinction between the regulatory and adjudicatory functions which it vests in and confers upon a Commission. Those functions are placed in the hands of a quasi-judicial body enjoined to regulate and administer the subject of electricity distribution. Electricity, undoubtedly, is a natural resource which vests in the State. The SCNs infringe the borders of the incredible and inconceivable.
The Central Electricity Regulatory Commission and the Delhi Electricity Regulatory Commission have challenged the validity of Show Cause Notices pursuant to which the department have sought to call upon them to discharge liabilities emanating from the Central Goods and Services Tax Act, 2017 and the Integrated Goods and Services Tax Act, 2017 in respect of the fee received by them in the course of discharge of their regulatory functions under the Electricity Act, 2003.
The department have sought to draw a dichotomy between the “adjudicatory” and “regulatory” functions which these two statutory bodies discharge to essentially hold that the revenue earned from the latter would be subject to tax under the CGST and IGST Acts.
The department asserted that based on intelligence which was gathered, it was found that CERC was not discharging its Goods and Services Tax liabilities on amounts received by it as tariff and license fee from various power utilities. The functions discharged by CERC would fall under ‘support services to electricity transmission and distribution services under Service Accounting Code 998631’ as per serial no. 466 of the Annexure to Notification No. 11/2017-Central Tax (Rate) dated 28 June 2017 read along with the Explanatory Notes to the Scheme of Classification of Services as adopted by the Central Board of Indirect Taxes and Customs.
The department held that the fee received by CERC is in respect of business and the said regulatory authority itself being liable to be construed as a business entity.
The Senior Counsels, Mr. Sujit Ghosh and Mr. Vohra, on behalf of the petitioners contended that the regulatory function discharged by Commissions would clearly not fall within the scope of the word ‘business’ as defined by Section 2(17). Thus, even if the fee so received by such Commissions were to be assumed as being consideration received, it was clearly not one obtained in the course or furtherance of business. The views expressed by the department in the SCNs are wholly arbitrary and unsustainable.
The court allowed the writ petition and quashed the show cause notices issued to the Electricity Regulatory Commission.
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Case Details
Case Title: Central Electricity Regulatory Commission Versus The Additional Director Directorate General Of Gst Intelligence (DGGI)
Case No.: W.P.(C) 10680/2024 & CM APPL. 43919/2024
Date: 15/01/2025
Counsel For Petitioner: Sr. Adv. Sujit Ghosh with Ms. Mannat Waraich & Ms. Ananya Goswami, Advs. Mr. Anirudh Dusaj, ASC. Mr. Prashant Mehta, SC with Mr. Pranav Singh, Adv. for DERC
Sr. Adv. Ajay Vohra with Mr. Vishal Kumar, Adv. for CERC
Counsel For Respondent: Harpreet Singh, SSC
