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Cus - At no point of time Codes No. 29214920 and 29215940 have been excluded from schedule to MEIS Scheme - Reasons assigned for denial of benefit are contrary to Notification No. 38/2015-2020 r/w P.N no. 12/2015-2020: HCST - CENVAT - Not producing the documents, which may be necessary for substantiating a claim, does not fall in the exception of 'suppression of facts': HCCX - Even if an application is not moved, the department would be obliged to refund the amount to person concerned from whom the excess amount has been received unlawfully after the provision has been declared ultra vires: HCVAT - Merely because payment is deferred by State in terms of works contract, same is no ground for a dealer to seek exemption from taxes under MP Commercial Tax Act and MP Entry Tax Act: HCVehicle One-time Tax - Notification requires tax to be paid on or after 14.10.2022 for becoming entitled for exemption - Merely because tax was paid on 13.10.2022 and registration was done on 18.10.2022 does not guarantee benefit: HCRule 96(10) of CGST Rules, 2017 - A Historical PerspectiveI-T- Delay in filing ITR be condoned where during relevant period, the assessee, a doctor, was engaged in work on account of on-going COVID 19 pandemic & where the assessee suffered personal losses in such period: HCFTA awareness key to reach USD 2 Trillion trade goal: GoyalI-T- As is trite law, once resolution plan is approved, any claims that were not lodged before resolution professional during insolvency proceedings are extinguished: HCCoast Guard delegation meets Sri Lankan counterpart; combating maritime crime tops agendaI-T - Tax authorities are not entitled to tax entire transaction, but only income component of disputed transaction, to prevent possibility of revenue leakage: HCNew fire-resilient Dicliptera flower species discovered in Western GhatsI-T - No demand can be raised against deductee on account of failure to deposit amount of Tax Deducted at Source by deductor: HCMassive fire accident at oil refinery in Gujarat claims one lifeI-T- Exemption from Excise duty does not fall in the definition of income as envisaged under Section 2(24)(xviii) of the Act: HCUS President-elect Donald Trump choses hawk Mike Waltz as NSAI-T- Income tax cannot be levied on hypothetical income & only real income can be taxed; no tax can be charged on an amount which is not actually earned: HCED raids locations in West Bengal & Jharkhand in money laundering matter also involving illegal immigration of people from BangladeshI-T- For purpose of Section 35(2AB), once a facility is recognized, all related expenditures should be eligible for deductions, regardless of prior approvals: ITATKerala State Government mulls incorporating seaplanes to attract high-budget touristsI-T- Re-assessment proceedings are invalidated where the reasons for re-assessment are not justified: ITAT10 armed ‘militants’ killed in encounter with police & paramilitary forces in Manipur’s Jiribam district; local villagers dispute charge, claim deceased were village defence volunteersService Matter - Charge memo issued to CIT(A)-rank officer for quashing Rs 120 Crore demand - That matter was remanded by ITAT for de novo consideration dilutes charge against petition - Department's delay in issuing memo reflects the same as being an afterthought - Memo rightly quashed by CAT: HCST - Goods Transport Service - denial of 75% abatement to assessee under Notification No. 32/2004-S.T. is based solely on assumption; hence the order denying abatement is quashed: CESTATCX - Demand for reversal of Cenvat credit is sustainable where it is claimed in respect of a defunct, non-functional factory, rather than in respect of an existing, functional plant: CESTATCus - Penalties u/s 112(a), 112(b) & 114AA of Customs Act 1962 for alleged mis-declaration of goods, are not tenable, where importer acts on information from the overseas supplier, which was beyond importer's control: CESTATCus - Department's reliance on Chartered Engineer's report is not tenable, where report lacks conclusive findings, omits to consider aspects such as manufacture date & itself suggests further testing: CESTATCus - As is trite law, expert reports cannot be assumed conclusive without explicit legal backing: CESTAT
 
Thanneer Thanneer

JUNE 26, 2024

By Vijay Kumar

'THANNEER Thanneer' (water water) is a famous Tamil film of 1981 on exploitation in the name of water.

Beautiful Bengaluru was cringing under a water crisis a few weeks ago till New Delhi took over and Bengaluru was forgotten. A new kind of don has dawned on the horizon - the water mafia.

Most of our metro cities have water supply and sewerage Boards catering to quench the thirst of the city-dwellers. These Boards are fully owned and operated by the Governments but are of course not above the all-encompassing GST.

The Chennai Metropolitan Water Supply and Sewerage Board (CMWSSB) was constituted under an Act of the Tamil Nadu Legislature for the provision of water supply and sewerage in the Greater Chennai area.

Pursuant to an inspection, summons was issued to the Board in September 2021 by the GST Department. The Board replied thereto. The GST Department was not satisfied with the reply and a show cause notice was issued to the Board on 27.09.2023. Eventually, an order was passed on 22.12.2023.

Can you imagine how expensive water is? The Demand by the GST Department was CGST and SGST of Rs. 96,10,02,025/- each along with interest and penalty thereon.

The government-owned Water Board is before the High Court (2024-TIOL-1042-HC-MAD-GST) challenging the order of the GST Authorities on the grounds that:

1. Notification No. 12/2017 provides for an exemption as regards services provided by a governmental authority, including a municipality, under Article 243W of the Constitution of India.

2. Water is expressly exempted under Notification No. 2/2017 - Central Tax (Rate) dated 28.06.2017.

3. Even with regard to purified water, a clarification was issued on 09.08.2018 to the effect that providing drinking water for public purposes is exempt from GST.

4. In fact, by subsequent Notification No. 14/2017 - Central Tax (Rate), dated 28.06.2017, the Central Government, on the recommendation of the GST Council, has notified that services by way of activity in relation to functions entrusted to a panchayat under Article 243G of the Constitution are to be treated as neither supply of goods nor supply of services.

5. Therefore, the impugned order is unsustainable.

6. Without prejudice, they agreed to remit a sum of Rs. 3 Crore as a condition for remand.

The Counsel for the Revenue submitted that:

1. An alternative remedy is available to the petitioner and that this writ petition should not be entertained.

2. GST is leviable in relation to distribution services, including distribution of water.

3. The petitioner not only provides water supply and sewerage facilities through pipelines to the general public, but also supplies water including purified water, in tankers at commercial and dynamic rates to commercial establishments and large industrial units.

4. Therefore, the impugned order contains no infirmity in as much as the petitioner is engaged in a composite supply and the respondent correctly identified the principal supply from and out of such composite supply.

5. The distribution of water is subject to GST since it falls under "Heading 9969".

6. The petitioner was supplying purified water, and that such factual determination cannot be interfered with in course of these proceedings.

The High Court held:

1. It is evident that the adjudication turned on two factors. First, the adjudicatory authority concluded that the petitioner was purifying the water and that the same would not fall within the scope of exemption. The counsel for the petitioner placed on record a note with regard to the difference between potable water and purified water. The counsel points out that potable water is required to conform to norms laid down in BIS:10500-2012, whereas purified water is required to fulfil the norms laid down in BIS:14543:2016. Without taking these aspects into consideration, the impugned order proceeded on the basis that the petitioner was supplying purified water.

2. The adjudicating authority concluded that the activity of the petitioner is a composite supply and that supply through mobile units falls within the scope of "Heading 9969" (Serial No.13), which is taxable at 18%. On such basis, CGST and SGST of Rs. 96,10,02,025/- each was imposed along with interest and penalty thereon.

3. The order does not contain any details of the value of supply of water to households and other premises through pipelines; the value of supplies made through tankers on account of insufficiency of water in the relevant areas; and the value of supplies made through mobile units on account of the establishments concerned requiring higher quantities of water, which are supplied at commercial rates. Without such classification, the adjudicating authority could not have arrived at the conclusion that the principal supply is through mobile units at commercial rates. As a corollary to the above conclusion, the adjudicating authority further concluded that the supply does not fall within the scope of the exemption notification. Since such conclusion was arrived at without differentiating between the services provided by the petitioner, the matter requires re-consideration.

4. Although a remand is warranted to enable reconsideration of both the applicability of exemption notifications and the conclusion regarding principal supply, it is also necessary to balance the interest of CMWSSB and revenue interest. Upon considering all relevant factors, the petitioner should remit a sum of Rs. 3 Crore.

5. The impugned order is set aside and the matter is remanded for reconsideration subject to the condition that the petitioner remits a sum of Rs. 3 crores within six weeks from the date of receipt of a copy of this order.

It is not as if water was entering GST for the first time.

This very Chennai Metropolitan Water Supply and Sewerage Board had once taken its water problem to the GST AUTHORITY FOR ADVANCE RULING in 2020 - 2021-TIOL-106-AAR-GST seeking advance ruling on

Whether GST is applicable on supply of safe drinking water for public purpose by Chennai Water Desalination Plant Limited (CWDL) to Chennai Metro water Supply and Sewerage Board (CMWSSB).

They submitted that:

1. Water whether supplied at a price or not are exempted as per Notification 2/2017 irrespective of whether supplied to different categories like domestic, industrial, institutions and commercial.

2. Notification No. 12/2017-C.T.(Rate) dated 28.06.2017 treats CMWSSB as a Government authority.

Governmental authority is defined as:

(i) Set up by an Act of Parliament or a State Legislature; or

(ii) established by any Government, with 90 percent or more participation by way of equity or control, to carry out any function entrusted to a Municipality under article 243W of the Constitution or to a Panchayat under article 243G of the Constitution.

3. Notification No.32/2017 and AAR Tamil Nadu ruling order No. 22/AAR/2018 dated November 28, 2018 = 2019-TIOL-35-AAR-GST confirms CMWSSB as a government Authority.

The AAR observed:

(i) It is seen that the applicant seeks ruling on the applicability of GST on the water received from Chennai Water Desalination Limited through Pipeline. The admissibility of the application was examined during the hearing extended to them. The applicant stated that they had sought ruling regarding applicability of GST on receipt of the water, the activity in which they are recipient and not supplier of Water. Thus, the question is on the liability to pay tax on the supply made to them and not on the supply made by them.

(ii) An applicant can seek an Advance Ruling only in relation to supply of goods or services or both undertaken or proposed to be undertaken by them. Further, as per Section 103(1) of the GST Act, the ruling is binding only on the applicant and the concerned officer or the jurisdictional officer of the applicant. In the case at hand, the applicant is the recipient of the services and not supplier of such service. Accordingly, this question is not liable for admission and therefore rejected without going into the merits of the case.

In Vijayavahini Charitable Foundation, the Andhra Pradesh AAR in AAR No. L4 /APIGSTI2O2l dated:20.03.2021 dealt with a similar water problem.

Vijayavahini Charitable Foundation (VCF), undertakes, encourages, supports and aids charitable activities in relation to poor in the areas of medical relief, education, health, vocation, livelihood etc. VCF has proposed to undertake the activity of providing pure and safe Drinking Water at an affordable cost for the under privileged people in villages in the state of Andhra Pradesh where clean and potable drinking water is not available.

They proposed to draw water from the local water source (Open Well/Borewell/ground water) and treat the water through reverse osmosis (RO) process and provide this purified drinking water to the general public.

They wanted advance ruling on Whether supply of drinking water to general public in unpacked/unsealed manner through dispensers/mobile tankers by a charitable organisation at a concessional rate is covered under exemption of GST as per Sl. No 99 of Notification 02/2017 central tax (Rate) dated 28/06/2017?

The Advance Ruling Authority ruled:

The said supply is not covered under exemption and taxable @ 18% Vide Notification No. 1/2017-Central Tax (Rate), dated, 28th June 2017 as amended from time to time.

As per the Budget Estimate 2023-2024, the Chennai Metropolitan Water Supply and Sewerage Board has a surplus of Rs. 92.82 crores and the GST demand now is more than Rs. 200 crores. If the demand is really confirmed and they have to pay this amount, what will happen to water for Chennai citizens?

The recent GST Council meeting has clarified the serious issue of uniform rate of GST on 'milk cans' - steel, iron, aluminium, for they have a standard shape so that will determine what is a milk can and what is not. And 'milk cans' dominated the news in the last few days.

Can this water problem be solved? I don't mean the water crisis, but the problem of GST on water.

Until next week


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