Statutory obligations under the Electricity Act do not attract GST liability; reimbursement for road repairs is not a supply of service under the GST Act.

JUDGMENT :

BHARGAV D. KARIA, J.

1 Heard learned Senior Advocate Mr.S.N.Soparkar with learned advocate Mr.Uchit Sheth for the petitioner at length on 10.07.2025. Learned advocate Ms.Hetvi Sancheti for the respondents, sought for time to make submissions, and therefore, the matter was adjourned. Thereafter, learned advocate Ms.Hetvi Sancheti has made submissions from time to time on various dates and has completed her submissions today, and therefore, we are able to proceed with the judgement.

2 Having regard to the controversy arising in this petition in narrow compass, with the consent of the learned advocates for the respective parties, the same is taken up for hearing.

3 By this petition under Article 226 of the Constitution of India, the petitioner has prayed for quashing and setting aside the show-cause notice dated 30.11.2022 issued under Sec.74 of the Central/Gujarat Goods & Services Tax Act, 2017 (for short ‘the GST Act’) on the ground that the same was issued without jurisdiction.

3.1 During the pendency of the petition, the respondent No.3 passed an Order-in-Original dated 25.01.2025 under Sec.74 of the GST Act. The petitioner has, therefore, preferred an amendment to place the Order-in-Original on record and has also challenged the same.

4 The factual matrix giving rise to filing of this petition can be summarized as under:

4.1 The petitioner is engaged in the business of transmission / distribution of electricity in the State of Gujarat, Maharashtra and Uttar Pradesh. Petitioner has been granted the electricity distribution license under the provisions of the Electricity Act, 2003 for distribution of electricity in Ahmedabad, Surat, Gandhinagar, Dahej SEZ and Dholera. The petitioner has franchisee for electricity distribution in different parts of Maharashtra and State of Uttar Pradesh.

4.2 The petitioner is registered under the provisions of the GST Act and is regularly filing its returns under the provisions of the said Act. During the course of routine maintenance and network enhancement so as to distribute the electricity, the petitioner is required to dig out tranches on the public road which are maintained by the municipal corporation. The dug out portion of the road and pavement is then repaired/restored by the municipal corporation.

4.3 It is the case of the petitioner that, the Ahmedabad Municipal Corporation (for short ‘the AMC’), recovers reimbursement of the repairing / restoration charges from the petitioner which are fixed per meter / area based on the type of the road.

4.4 It is the case of the petitioner that the petitioner is statutorily entitled to dig out the road for laying or repairs or maintenance of distribution lines under the provisions of Secs.42 and 67 of the Electricity Act,2003. The respondent No.2 issued a notice on 27.08.2021 calling upon the petitioner to provide the details of the Road Opening Permit charges paid by the petitioner to the AMC as well as the GST paid on reverse charge basis on such services received from the AMC. The petitioner has, therefore, challenged the said notice.

4.5 Petitioner filed reply on 05.10.2021 providing the details called for contending inter alia that transactions of payment of repairing / restoration charges to the AMC did not involve any taxable service, and therefore, the petitioner was not liable to pay any tax on such charges under the GST Act on reverse charge basis. The petitioner, thereafter, received another notice dated 13.12.2021, wherein, the GST authority alleged that the petitioner was liable to pay tax on reverse charge basis since road restoration work by the AMC was not part of its sovereign function. The petitioner, by reply dated 14.03.2022 again reiterated its contention and requested to drop the proceedings.

4.6 Respondent No.2 issued the notice / intimation in Form GST DRC-01A asking the petitioner to pay tax on reverse charge basis on the payment made to the AMC for repairing / restoration of the road dug out by the petitioner for maintena