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Informist, Wednesday, Jan. 15, 2025

 

NEW DELHI – The Delhi High Court on Wednesday struck down show-cause notices issued by an additional director in the Directorate General of GST Intelligence to the Central Electricity Regulatory Commission and the Delhi Electricity Regulatory Commission proposing to tax the regulators in respect of the fees received by them in discharge of their regulatory functions.

 

"We find ourselves unable to accept, affirm, or even fathom the conclusion that regulation of tariff, inter-state transmission of electricity, or the issuance of licence would be liable to be construed as activities undertaken or functions discharged in the furtherance of business," the court said. The Goods and Services Tax Department had clearly failed to grasp the "indubitable fact" that these functions were being discharged by a quasi-judicial body which had all the trappings of a tribunal, the court added.

 

"The grant of a licence to transmit or distribute (electricity) is clearly not in furtherance of business or trade but in extension of the statutory obligation placed upon a commission to regulate those subjects," the court said. The Electricity Act, 2003, makes no distinction between the regulatory and adjudicatory functions vested in and conferred upon an electricity commission, it added. Those functions are placed in the hands of a quasi-judicial body enjoined to regulate and administer electricity distribution, it said. "Electricity, undoubtedly, is a natural resource which vests in the State. We have thus no hesitation in observing that the SCNs (show cause notices) infringe the borders of the incredible and inconceivable," it said.

 

The department had claimed to have found that the power regulators were not discharging their GST liabilities on amounts received as tariff and licence fees from various power utilities. According to the notices, these functions of the regulators fell in the category of "support services" to electricity transmission and distribution service providers. The department also said that the Central Electricity Regulatory Commission had failed to carry out a correct self-assessment of its tax liability and thus failed to discharge its integrated GST amounting to INR 1.13 billion for the period from April 2019 to March 2023. A similar notice was issued to the Delhi commission.  End

 

Reported by Surya Tripathi

Edited by Rajeev Pai

 

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