Back
2025 Supreme(Del) 298
IN THE HIGH COURT OF DELHI AT NEW DELHI
YASHWANT VARMA, DHARMESH SHARMA, JJ.
Central Electricity Regulatory Commission - Petitioner
Versus
The Additional Director Directorate General Of GST Intelligence (Dggi) & Anr. - Respondents
W.P. (C) 10680 of 2024 & CM APPL. 43919 of 2024 (Stay), W.P. (C) 14723/2024 & CM APPL. 61848/2024 (Stay)
Decided on : 15-01-2025
Important Points
Subject
Taxation Law - Goods and Services Tax
Act Referred
ELECTRICITY ACT : S.79(1)(f)
INTEGRATED GOODS AND SERVICES TAX ACT : S.20
Headnote
(B) Regulatory Functions - The court held that the regulatory functions of CERC, including tariff determination and licensing, are not akin to business activities and thus do not attract GST. The distinction between adjudicatory and regulatory roles was clarified, asserting that regulatory functions do not constitute a supply of services for GST purposes. (Paras 8.1, 10, 36)
Facts of the case:
The CERC challenged Show Cause Notices issued by the respondents regarding GST liabilities on fees collected for regulatory functions, asserting that these fees are not subject to GST as they do not arise from business activities.
Findings of Court:
The court found that the fees collected by CERC for regulatory functions are not taxable under GST, as these functions are not performed in the course of business.
Issues: The main issues addressed were whether the fees collected by CERC for regulatory functions are subject to GST and the distinction between regulatory and adjudicatory functions.
Ratio Decidendi: The court ruled that regulatory functions performed by CERC do not constitute a taxable supply under GST, emphasizing the exemption provided for services rendered by a tribunal.
Result: The impugned Show Cause Notices were quashed.
For the Petitioner: Mr. Ajay Vohra, Sr. Adv. with Mr. Vishal Kumar, Adv.
For the Respondent: Mr. Harpreet Singh, SSC with Ms. Suhani Mathur, Adv. Mr. Piyush Gupta, CGSC with Mr. Prateek Gupta & Mr. Atishay Jain, Advs.
JUDGMENT :
YASHWANT VARMA, J.
CM APPL. 73286/2024 (for delay of 15 days in filing Rejoinder) inW.P. (C) 10680/2024
Bearing in mind the disclosures made in the application, the delay of 15 days in filing a rejoinder is condoned.
The application stands disposed of.
CM APPL. 73285/2024 (for delay of 07 days in filing of Counter Affidavit) in W.P. (C) 14723/2024
Bearing in mind the disclosures made in the application, the delay of 07 days in filing the counter affidavit is condoned.
The application stands disposed of.
W.P. (C) 10680/2024 & CM APPL. 43919/2024 (Stay)
W.P. (C) 14723/2024 & CM APPL. 61848/2024 (Stay)
1. The Central Electricity Regulatory Commission (CERC) as well as the Delhi Electricity Regulatory Commission (DERC) have petitioned this Court assailing the validity of Show Cause Notices (SCNs) dated 29 May 2024 and 23 July 2024 respectively pursuant to which the respondents have sought to call upon them to discharge liabilities emanating from the Central Goods and Services Tax Act, 2017 (CGST Act) and the Integrated Goods and Services Tax Act, 2017 (IGST Act) in respect of the fee received by them in the course of discharge of their regulatory functions under the Electricity Act, 2003 (Electricity Act) . The respondents 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. In order to appreciate the stand which has been taken by the respondents, it would be apposite to take note of the assertions made in the SCNs ‘which are impugned before us. However, and for the sake of brevity and since both SCNs'proceed on identical lines, we propose to notice the allegations as levelled in the SCN issued to theCERC.
2. The respondents assert that based on intelligence which was gathered, it was found that CERC was not discharging its Goods and Services Tax (GST) liabilities on amounts received by it as tariff and license fee from various power utilities. It asserts that the aforesaid functions discharged by CERC would fall under "support services to electricity transmission and distribution services under Service Accounting Code (SAC) 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. [CBIC] They take the stand that the support services so rendered would be taxable as per Serial No. 24(ii) of Notification No. 8/2017-Integrated Tax (Rate) dated 28 June 2017 and thus falling within the ambit of "Support services to mining, electricity, gas and water distribution."
3. While it is conceded that no GST is leviable on services by way of transmission or distribution of electricity by an electricity transmission or distribution utility and the same not being subject to tax by virtue of Serial No. 26 of Notification No. 9/2017-Integrated Tax (Rate) dated 28 June 2017, however, support services rendered in the context of electricity transmission and distribution services under SAC 998631 are taxable @ 18%. They thus take the view that while concededly the functions performed by the CERC are distinct and different from transmission or distribution of electricity by a utility, however, it would fall under the category of "support services" to electricity transmission and distribution service providers. They further hold that since the CERC is neither engaged in electricity transmission nor functioning as a distribution utility, it cannot claim exemption from payment of GST.
4. The SCNs ‘impugned before us appear to have been preceded by various notices which were issued by the respondents seeking to elicit the stand of the two statutory bodies. From the disclosures which were made by the CERC, the respondents had taken note of the following amounts received by
