Dismissed

TN/AAAR/17 & 18 /2021(AR) of M/s New Tirupur Area Development Corporation Limited

GST AAAR30 Jun 2021TN/AAAR/17 & 18 /2021(AR)

Case brief

AI extract

What is this about?

The Appellate Authority disposed of an appeal against an Advance Ruling regarding GST liability on water supply and related charges. It ruled that supplied potable water is exempt under Notification No. 2/2017, while agreeing with the original ruling on other taxes.

What did the court decide?

The appeal was dismissed; the reference question on water supply was answered affirmatively for exemption.

TN/AAAR/17 & 18 /2021(AR) of M/s New Tirupur Area… — GST and Indirect Tax | GST AAAR (2021)

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TAMILNADU STATE APPELLATE AUTHORITY FOR ADVANCE RULING (Constituted under Section 99 of Tamilnadu Goods and Senrices Tax Act 20171

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A.R.Appeal No.06 & 07l2021lAAAR

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Date: 30.06.2021

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BEFORE THE BENCH OF

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Thiru G.V.KRISHNA RAO, MEMBER

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Thiru M. A. SIDDIQUE, MEMBER

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ORDER-in-Appeal No. AAAR I L7e,L8 | 2021 (AR)

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(Passed by Tamilnadu State Appellate Authority for Advance Ruling under Section 101(1) of the Tamilnadu Goods and Services Tax Act,2O77l

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Prearnble

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In terms of Section 98 (5) of the Central Goods & Services Tax Act 2Ol7 lTamilnadu Goods & Services Tax Act 2O17("the Act", in Short), this Order may be amended by the Appellate authority so as to rectify any error apparent on the face of the record, if such error is noticed by the Appellate authority on its own accord, or is brought to its notice by the concerned officer, the jurisdictional officer or the applicant within a period of six months from the date of the Order. Provided that no rectification which has the effect of enhancing the tax liability or reducing the amount of admissibie input tax credit shall be made, unless the appellant has been given an opportunity of being heard.

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Under Section 103(1) of the Act, this Advance ruling pronounced by the Appellate Authority under Chapter XVII of the Act shall be binding only

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(a). On the applicant who had sought it in respect of any matter referred to in subsection (2) of Section 97 for advance ruling;

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(b). On the concerned oflicer or the jurisdictional officer in respect of the applicant.

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Under Section 103 (2) of the Act, this advance ruling shall be binding unless the law, facts or circumstances supporting the said advance ruling have changed.

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Under Section 104(1) of the Act, where the Appellate Authority finds that advance ruling pronounced by it under sub-section (1) of Section 101 has been obtained by the appellant by fraud or suppression of material facts or misrepresentation of facts, it ffioy, by order, declare such ruling to be void sb-initio and thereupon all the provisions of this Act or the rules made thereunder shall apply to the appellant as if such advance ruling has never been made.

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Page 1 of 18

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Name andaddressofthe appellant	M/s.NewTirupurAreaDevelopment Corporation Limited
GSTINorUser ID	33fuCN3562HIZP
AdvanceRuling Orderagainst whichappeaiis filed	OrderNo.S/ARAl2O2l Dated:26.O2.2O2I
Dateoffilingappeal	or.o4.202r &09.o4.2021
Representedby	Thiru.P.Giridharan,Advocate
JurisdictionalAuthority-Centre	Chennai South Commissionerate
Jurisdictional Authority-State	TheAssistantCommissioner^(ST) AlandurAssessmentCircle
Whether paymentoffeesfor filingappealisdischarged.If yes,theamountandchallan details	Yes.Payment of Rs. 2OOOO/- made vide challanNo.SBIN2

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At the outset, we would like to make it clear that the provisions of both the Central Goods and Senrice Tax Act and the Tamil Nadu Goods and Senrice Tax Act are the same except for certain^provisions. Therefore, unless a mention is specifically made to such dissimilar provisions, a reference to the Central Goods and Senrice Tax Act would also mean a reference to the same provisions under the Tamil^Nadu Goods and Senrice Tax Act.

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The subject appeal has been filed under Section 98(5) of the Tamilnadu Goods & Services Tax Act,2OIT lCentral Goods & Services Tax Act 2017 by Tvl.^New Tirupur Area Development Corporation Limited (hereinafter referred to as Appellant'). The appellant is registered under GST vide GSTIN 33AAACN3562HIZP. The appeal^is filed against the Order No. 5 /ARA 12021 dated 26.02.2021 passed by the Tamilnadu State Authority for Advance ruling on the application for advance ruling filed by^the appellant.

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Page 2 of 18

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2.The Appellant is in the business of promoting infrastructure development activities in the area of water supply at New Tirupur. They had implemented an integrated water supply project for the town of Tirupur. In order to implement the integrated water supply and sewage treatment project for Tirupur City Municipal Corporation (TCMC), wayside villages and Tirupur Local Planning Area (TLPA), a Concession agreement was signed between the Government of Tamilnadu, Tirupur Municipality (now Corporation) and the applicant to implement a 185 million litre per day (MLD) water supply project expandable upto 250 MLD and a 15 MLD Sewage Treatment plant (STP) expandable up to 30 MLD at the total project cost of Rs.1023 crore.; Byvirtue of the Concession Agreement entered and the mere nature of the activity, NTADCL assumes the responsibility under Article 243 G and Article 243 W contemplated under the sixth schedule of the Constitution of India.; They had signed a water drawal agreement with TN Government for drawing raw water up to a Maximum of 185 Million Litres Per day from the river Cauvery for supply towards domestic and non-domestic purposes within the Tirupur Municipality.

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3.The Appellant had sought Advance Ruling on the following questions:

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Whether the following activities of the applicant is taxable or exempt ? Sale of water

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Sewage treatment charges

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Consultancy Services such Detailed Project Report (DPR), Project Management Consultancy (PMC) and any other infrastructure related consultancy to TCMC / GoTN

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Incidental to main business activities

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Interest on receivable on delayed payments

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Disconnection Charges

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Reconnection charges

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Permanent disconnection charges

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Cheque Bouncing charges

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Non-Revenue Service provided to Customer on New Connection works-

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Concept of No Loss No Gain, New Connection Shifting and other works

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4.The AAR pronounced the following rulings:

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a.The applicant not being the class of^{personsspecifiedin NotificationNo.} 1412O17-C.T.(Rate) dated 28.06.2017 as amended,^{they are not eligiblefor the} said Notification as discussed in^{Para IO.2.}

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b.The activity of Sewage offtake and treatment^{extended to Tirupur Municipal} Corporation as per the CA is exempt under S1.No.3 of Notification No.l2l2O17- C.T.(Rate) dated 28.06.2017^{for the reasons discussedin Para} 11.3.

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c.The Consultancy Services rendered by the^{applicant to Tiruppur City} Municipal Corporation in respect of the Project- Construction^{Management and} Supervision Consulting Service to assist^{Project ULBsTiruppurCity} Municipal Corporation exempt under S1.No.3 of^{NotificationNo.I2l2QI7-} C.T.(Rate) dated 28.06.2017 for the reasons^{discussedin Para lI.4.}

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d.In respect of the activities incidental to main business^{activities,it is ruled as} under :

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i.Interest on receivable on delayed payments being^{charges received for} Agreeing to tolerate art acl'classifiable under^{SAC 999794 is taxable} @ 9% CGST and 9o/o SGST as per Sl.No. 35 of^{NotificationNo. II/2017-} C.T.(Rate) dated 28.06.2017 readwith Sl.No. 35^{of Notification No. II} (2)lcTR/532(d-14)l2OI7 vide G.o. (Ms.)No.72 dated^{29.06.2017 as} amended for the reasons discussed in Para^13.1(a).

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ii. Cheque Bouncing Charges being charges^{receivedfor Agreeing to} tolerate an act'classifiable under SAC 999794^{is taxable} @^{9% CGSTand} 9% SGST as per Sl.No. 35 of Notilication^No. IIl2017-^{C.T.(Rate) dated} 28.06.2017 readwith Sl.No. 35 of Notification^{No. II(2)lCTRl532(d-} l4)12O17 vide G.O. (Ms.)No.72 dated 29.06.2017^{as amended for the} reasons discussed in Para 13.1(b)^.

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iii.New connection works executed as^{per CA for TCMC} ,^{the established} asset is accounted as their assets are not^{taxable being self-service for} the reasons discussed in para 13.1(c )^.

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iv.Connection I Reconnection I Disconnection I^{Permanent Disconnection} Charges are charges received for the services of^{lMater Distribution} Services' classifiable under SAC 9969 and^{is taxable} @^{9% CGSTand 9oh}

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Page 4 of 18

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SGST as per Sl.No. 13 of Notification No. l1l2o17-^{C.T.(Rate) dated} 28.06.2017 readwith Sl.No. 13 of Notification No. II {2)lCTRl532(dI4l/2017 vide G.O. (Ms.)No.72 dated 29.06.2017 as amended^{for the} reasons discussed in Para 13.1^(d) .

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But as regard to the activity of 'supply of Water-goods' by the applicant^{to the} purchasers as per the CA, we have different views on this aspect as^discussed in Para I2.2 . Since we have different views on this particular issue,^{we are} making a reference to the Appellate Authority for hearing and^{decisionon this} issue in terms of Section 9S(5) of the Act ibid which provide that where^the members of the Authority differ on any question on which the advance^{ruling is} sought, they shall state the point or points on which they differ and^makea reference to the Appellate Authority for hearing and decision on such^question.

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S.Based on the above decision, the Appellant has filed the present appeal.^The grounds of appeal are paraphrased as follows:

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1 The terms and conditions of the Concession Agreement dated^LI.O2.2OOO maybe read as part hereof. It is submitted that on a perusal of the terms of the Concession Agreement dated L1.O2.2OOO it can be ascertained that^the Appellant is performing a municipal function within the ambit of Article^243G and W, subject to the terms of the Concession Agreement.

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The activities undertaken by the Appellant are either^'supply of^{goods' or} 'supply of services', which when supplied on arr intra-state basis will be subject to a le'"y of CGST⁺ SGST.

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The Appellant also under takes the following activities and^{levy charges as} follows:-:

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(i) Charge 1: In the event of there being a shortfall in the^{quantity of water} consumed when compared with the agreed^{quantity by any industrial} customer in any month, the Appellant levies a^{'water capacity charge' or} a ' take or pay charge'. This is like monthly minimum billing^{for a pre-} agreed amount of water. This charge is calculated^{on the quantumof} shortfall when compared with the quantity to be taken.

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Page 5 of 18

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(ii) Charge 2: The Appellant levies a re-connection^charge in^{the event of} non -payment of bills within due period and if the cheque^is dishonoured. Apart from the above, the Appellant levies^dishonour charges as levied by the Bank.

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(iii) Charge 3: In the event of any delay in payment, beyond contracted dates, the Appellant also levies interest on delayed^{paymentat rates} prescribed in the service agreement

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Charges 2 and 3, are in the nature of interest or late^{fee or penaltyfor} delayed payment of any consideration for any supply'. The^{salnewill therefore,} form a part of the value of supplies made by the Querist which will be subject^to a ler,y of GST or exemption from levy of GST.

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Charge I is in the nature of 'Minimum Take or Pay Charges'^('MTOPJ.In the context of the previously existing excise law which a-lso operates on^a transaction value basis, that MTOP charges are consideration for^the commodity which is actually supplied in cases where there are^{long term} contracts. Seen from that context, the MTOP charges which the Appellant^levies is only consideration for the water supplied by the Appellant to an^industrial unit and will therefore, form a part of the value of supply which^{is subjectto a} levy of GST or exemption from ler,y of GST.

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In view of the foregoing, the activities undertaken by the Appellant^will therefore be subject to a levy of GST, subject to any exemptions.

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Without prejudice, it is further submitted that Water [other than^aerated, mineral, puified, distilled, medicinal, ionic, battery, de-mineralized^{and utater} sold in sealed containerl falling under tariff heading 22OI is unconditionally exempt from the le'uy of CGST in terms of Notification No.2/2O77-Central^Tax (Rate) dated 28th June, 2O17.The SGST related provisions/rates are modelled on the CGST related provisions, similar exemption^{provisionshave been} provided for under notifications issued under the TNGST Act, 2OI7,^and, consequently the effective SGST rate in Tamil Nadu for supply of^{water is nil}

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[other^{than aerated, mineral, purified, distilled,medicinal,ionic, battery, de-} rninerafized and water sold in sealed container] falling under tariff heading 22OI.[See Exemption uide G.O. Ms. No.64, Commercial Taxes and Registration (BI), 29th June 20 17, Aani- 1 5, Hevilambi, Thiruvalluvar Aandu-2048. ] 10. The AAR failed to appreciate that after Notification No.2/2O17-Central Tax (Rate) dated 28th June, 2017, Notification no. 12l2OI7- Central Tax (rate) dated 28th June, 2OI7 and G.O. Ms. Nos.64 and 74, Commercial Taxes and Registration (Bl), 29th June 2OI7, Aani-15, Hevilambi, Thiruvalluvar Aandu2048 have been issued, Sewage and waste collection, treatment and disposal and other environmental protection services, falling under Heading 9994 are treated as 'supply of services' and subject to a levy of CGST at 9oh in terms of Notification no. 11l2Ol7- Central Tax (Rate) dated 28th June,2OI7. However, in terms of Notification no. 12l2OI7- Central Tax (rate) dated 28th June, 2017, pure services (excluding works contract service or other composite supplies involving supply of any goods) provided to the Central Government, State Government or Union territory or local authority or a Governmental authority by way of any activity in relation to any function entrusted to a Panchayat under article 243G of the Constitution or in relation to any function entrusted to a Municipality under article 243W of the Constitution are exempt from the le'uy of CGST.

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I 1. The AAR failed to appreciate that the services rendered by the Appellant are in relation to a function entrusted to the Municipality under Article 243W of the Constitution and are provided to a local authority. Therefore, on such sewage and waste collection services, the effective rate of CGST will be 'nil' as the same a-re exempt from the ler,y of GST.

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The learned AAR erred in not appreciating that the SGST related provisions/rates are modelled on the CGST related provisions, similar exemption provisions have been provided for under notifications issued under the TNGST Act, 2OI7, and, consequently the effective SGST rate in Tamil Nadu for such services is hil.' [See Exemption uide G.O. Ms. No.74, Commercial Taxes and Registration (BI), 29th June 2077, Aani- 15, Hevilambi, Thiruvalluvar Aandu-20481.

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Page 7 of 18

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The learned AAR failed to note that^Water [other^{than aerated,mineral,} purified, distilled, medicinal, ionic, battery, de-mineralized^{and water sold in} sealed container] falling under tariff heading^{22OI is unconditionallyexempt} from the levy of CGST in terms of Notification^{No.2/2Ol7-CentralTax(Rate)} dated 28th June,2OI7.

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The learned AAR erred in not^{appreciating thatSGSTrelated} provisions/rates are modelled on the CGST related^{provisions,similar} exemption provisions have been provided for under^{notificationsissuedunder} the TNGST Act, 2017, and, consequently the^{effectiveSGST rate in TamilNadu} for supply of water is nil [other than aerated,^{mineral,purified,distilled,} medicinal, ionic, battery, de-mineralized and^{water sold in sealed containerl} falling under tariff heading 22O7.[See Exemption^{uide G.O. Ms. No.64,} Commercial Taxes and Registration (81), 29th June^{2017, Aani-15, Hevilambi,} Thiruvalluvar Aandu -2O 48 .l

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The learned AAR failed to appreciate that there^{is a tremendousdifference} between making water potable and selling it^{like the appellant doesand} purifying water like aeration, mineralisation-demineraJization,^{purification,} distillation, medication, iorrization, and selling them^{in a sealedcontainer.}

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The learned AAR failed to note that while the^{former is exempt the later is} subject to the le',y of CGST and SGST, and^{by no stretch of imaginationcan} water which is made potable by the appellant^{and sold ever classified as} aeration, mineralisation-demineraTization,^{purification, distillation,medication,} ionization, and selling them in a sealed container.

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The learned AAR erred grievously in relying^{on Wikipedia entries for the} purpose of passing the impugned order. It is well settled^{that Wikipediais open} source and can be edited by anyone and articles^{containedtherein cannot form} basis for adjudication. Hence, reliance on such^{statements from Wikipedia} ought to be eschewed and set aside.

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Page 8 of 18

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The learned AAR failed to appreciate that Section 15 (1) read with Sec 15(2)(d) of the CGST Act, 2OI7, the value of a supply of goods or services or both shall be the transaction value, which is the price actually paid or payable for the said supply of goods or services or both where the supplier and the recipient of the supply are not related and the price is the sole consideration for the supply and sha-ll include the interest or late fee or penalty for delayed payment of any consideration for any supply; and also include subsidies directly linked to the price excluding subsidies provided by the Central Government and State Governments.

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Hence, the exemption under Notification no. I2|2OI7- Central Tax (rate) dated 28th June, 2OI7 and G.O. Ms. Nos.64 and 74, Commercial Taxes and Registration (Bl), 29th June 2OI7, Aani-15, Hevilambi, Thiruvalluvar Aandu2048 will also apply to the interest component and the late fee or penalty as it forms a part of the value of supply.

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20.It is further submitted that it would be absurd to exempt the main supply of goods or service from the ambit of the tax and levy the tax only on the interest / penalty I late fee component. In such a case, the basis of charge to tax of the interest I penalty I Iate fee component on a different basis would be unknown as it would have to be treated as a stand alone transaction rather than a composite one. Hence, it is submitted that Charges 2 and 3 (as stated in the statement of facts), are in the nature of lnterest or late fee or penalty for delayed payment of any consideration for any supply'. The szune will therefore, form a part of the value of supplies made by the Appellant, which is exempted under Notification no. I2|2OI7- Central Tax (rate) dated 28th June,2OI7 and G.O. Ms. Nos.64 and74, Commercial Taxes and Registration (B1), 29th June 2OI7, Aani- 15, Hevilambi. Thiruvalluvar Aandu-2048.

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It is submitted that in respect to Charge 1 (as stated in the statement of facts) it is in the nature of 'Minimum Take or Pay Charges' ('MTOP'). In the context of excise law which also operates on a transaction value basis, that

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Page 9 of 18

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MTOP charges are consideration for the commodity which is actually^supplied in cases where there are long term contracts. Seen from that^{context,the MTOP} charges which the Appellant levies is only consideration^{for the watersupplied} by the Appellant. The same will therefore, form a^part of the^{value of supplies} made by the Appellant, which is exempted under Notification no.^I2l2Ol7- Central Tax (rate) dated 28th June, 2OI7 and G.O. Ms. Nos.64 and^74, Commercial Taxes and Registration (BI),29th June 2OI7, Aani-15,^Hevilambi, Thiruvalluvar Aandu -2048.

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As per the^judgment of the Honble Supreme Court in Govt. of^{NCT of} Delhi Vs. Union of India (UOII l2O2Ol 12 SCC 259, wherein it^{was held as to} what is a service qua a fire service under Article 243^(W) in the realm of^services provided by a Municipality, as follows:

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"212. We mag first notice that the tuord 'seruices' used in the Act has been used in a manner of prouiding seruices for fire preuention and fire safetg^measures. The uord 'seruices' has not been used in a sense of constitution^of a^{seruice. It is} to be noted that fire seruice is a municipal function^{performed bg local authoritg.} Dethi Municipal Council Act, 1957 contains uarious^prouisions dealing^uith preuention of fire etc. Further fire seruices is a municipal function falling within the domain of the Constitution deals uith functions of the municipalitiesⁱⁿ relation to matters listed in the 12th Schedule. Entry 7 of the 12th^Schedule prouides for 'Fire Seruices' as one of the functions of the municipalities.^The nature of the enactment and the prouisions clearlg indicate that^DelhiFire Seruices Act falls under Entry 5 of List II and not under Entry 41^{of List II."} 23. Considering the business model of the Appellant^(as explained^{above) and} the decision of the Honble Supreme Court in Govt. of NCT of Delhi^{Vs. Union} of India (UOII supra, it is respectfully submitted that the supply^{of potable} water needs in the Tirupur Local Planning Area, is an act falling clearly^within the domain of Tirupur Municipality.

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In a very recent decision of the Madras High Court in^Cuddalore Muncipalty vs Joint Commissioner of GST & Central Encise and^Others

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decided on March 2027, the Honble Court discussed in length and detail on negative list of services, mega notification and services provided by government and local authority, the relevant paras are discussed below:

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"50. Para 4.1 of Guidance Note 4- Negatiue List of Seruices is reproduced belou Guidance Note 4 - Negatiue List of Seruices

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In terrns of Section 668 of the Act, seruice tax u,ill be leuiable on all seruices prouided in the taxable territory bg a person to 78

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another for a consideration other than the seruices specified in the negatiue list. The seruices specified in the negatiue list therefore go out of the ambit of chargeabilitg of seruice tax. The negatiue list of seruice is specified in the Act itself in Section 66 D. For sake of ease of reference the negatiue list of seruices is giuen in Exhibit A1. In all, there a,re seuenteen heads of seruices that haue been. specified in the negatiue list. The scope and ambit of these is explained in paras below.

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4.1 Seruices prouided bg Gouernment or local authoritg

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4.1.1 Are all seruices prouided bg Gouernment or local authoritg couered in the negatiue list?

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No. Most seruices prouided bg the Central or State Gouernment or local authorities are in the negatiue list except the follotuing :

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(a) seruices prouided bg the Department of Posfs bg wag of speed post, express parcel post, life insurance, and agencg seruices carried out on pagment of commission on non gouernment business;

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(b) seruices in relation to a uessel or an aircrafi inside or outside the precincts of a port or an airport;

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(d) support seruices, other than those couered bg clauses (a) to (c) aboue, to business entities.

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4.1.2 Would the taxable seruices prouided by the Gouernment be charged to tax if they are otherwise exempt or specified elseu-there in the negatiue list? No. If the seruices prouided by the gouernment or local authorities that haue been excluded

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from^{the negatiue list entryare othenlisespecified in the negatiue list then such} seruices uould also not be taxable.

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OnIg Support seruices prouided bg the^gouel'rLment or^{local authorities that} haue been excluded from the negatiue list entry are in the^{negatiuelist.} Othertuise, all seruice of gouernment and local authorities^{are not taxable.} Support seruices tuas defined in Section 65F of the Act as 'infrastntctural, operational, administratiue, logistic marketing or anA^{other supportof ang kind} comprising functions that entities carry out in ordinary^{courseof operations} themselues but may obtain as seruices by outsourcing from^others for^{any reason} whatsoeuer and shall include aduertisement and^{promotion, construction or} taorks contract, renting of mouable or immouable property, security,^{testing and} analgsis.

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Seruices uhich are prouided bg goue/'rLment in terms^{of their souereign right to} business entities, and which are not substitutable in anA^{manner bg ang priuate} entitg, are not support seruices."

¶96

The Honble CESTAT, New Delhi, had held in Rajasthan State^Industrial Development & Investment Corpn. Ltd. Vs. CCE, Jaipur -II'^{Senrice Tax} Appeals Nos. 59O, 2425, 2436,3198' 3204 of 2OL2, order dated^12.O5.2OI7, wherein in para 22 it was held that the term 'governmental authority'^{to include} any authority or any other body established by Government,^{with 90% or more} participation by way of equity or control, to carry out any function interested to municipality under Article 243W of the Constitution, and^{also further held that} the said Article empowers legislature of a state by law endow the^{municipalities} with such powers and authority as has been necessa-ry to enable^{them to} function as institution of self- government. It was further considered^{that the} Appellant in the subject case were carrying out municipal function in^their industrial areas as laid down in the Municipal Act, 2009 and^{the municipal} body of the concerned area does not undertake such work in^{the Industrial} Areas falling under the^jurisdiction of the Appellant.

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That the Learned Adjudicating Authority failed to^{consider that the} Appellant is the only body engaged in supply of potable water and^treatmentof

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sewerage waste in the Tirupur Local Planning Area, and the Tirupur Municipality does not engage in the said activity.

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That the Honble CEGAT, South Zonal Bench, Chennai in NEPC Agro Foods Ltd., Vs. CCE, Coimbatore, order dated 1f.O5.2OO1, wherein it was held in para 4 that in case there is an addition of mineral salt, the product will have to be treated as mineral water and will be liable to duty accordingly. However, the Learned Adjudicating Authority failed to take into consideration that the water which is made potable by the Appellant and sold is not processed for aeration, mineralisation-demineraJization, purification, distillation, medication, ionization, and the Appellant is not selling them in a sealed container as well.

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Similarly, the CEGAT, New Delhi in Gujarat State Fertilizers Company Ltd. Vs. Collr. Of C. E K. 1998 {981 ELT 84O (Tri. - Delhi), had discussed in para 31 that whether there has been transformation in the water and whether the removing of the two minerals in making water more useful for the purpose for which it has put to use in the boiler, will bring into existence new goods. It is submitted that the Appellant only makes the water potable and does not treat the water under any other process nor does the Appellant mineralise or demineralise the water.

¶102

The Honble ITAT, Ahmedabad Bench, had held in Acqua Minerals (P) Ltd. Vs. Deputy Commissioner of Income Tax - (2OOS| 97 TIIJ (Ahdl 658, that any deduction would arise only when an article or thing is manufactured and produced in their industry as discussed in para 9.2 and 9.3 . The Appellant herein admittedly does not manufacture nor produce or treat the water under any process, and only supplies potable water, which is the activity of the Tirupur Municipality.

¶103

Therefore it is most respectfully prayed that this Honble Appeliate Authority may be pleased to Set aside the Impugned Advance Ruling passed by the Authority for Advance Ruling and issue a fresh Ruling clarifying that services rendered by the Querist are in relation to a function entrusted to the Local

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¶105

Authority /Municipality I Corporation under Article^{243G1243Wof the} Constitution and are provided to a local authority^{and the effective rate of CGST} will be 'nil'as the same are exempt from the^{ler,y of GST, in terms of Notification} no. 12/2OI7- Central Tax (rate) dated 28th June,^{2OI7and effectiverate of} SGST will be nil in terms of Exemption^{uide G.O. Ms. No.74, Commercial Taxes} and Registration (81), 29th June 2017,^{Aani-15, Hevilambi, Thiruva-lluvar} Aandu-2048 and pass such further or other orders^{and thus render justice.}

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6.PERSONAL HEARING:

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The Appellant was granted personal hearing through^{Virtual PersonalHearing} as required under law before this Appellate Authority^{on 15th June 2O2I. The} Authorized representatives of the Appellant Tvl.P.Giridharan ,^{Advocate of the} appellant company appeared for hearing.^{They reiterated the written} submissions and emphasized that

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(1) the functions entrusted to a Municipality under Article 243 W of^the Constitution has been entrusted to them through^{the concession agreement} [Article^{3.1] and therefore the services are exemptedas per Notification} 121201.7 entry no.3 or 4.The supply of water by^{them is supply of service as} per Schedule II of the Act and the exemption under^{S1.No.3 of Notification} 1212O17 as applicable.

¶109

(21 If sale of water is even treated as goods it is exempted as^per entry^{99 of} Notification 2l2OI7 and the water supplied by^{them is potable waterand} not purified water.

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(3) Interest, Cheque bounce charges, Miscellaneous charges^{are exemptedas} the main services are exempted.

¶111

To the specific query as to how the ratio of^{decisionof Cuddalore} Municipality relied on by them is applicable to^{them wherein they are not a} Municipality, the Authorised Representative referred to^{clause (n) of the} concession agreement and stated that they substitute^{the Municipality and} therefore the decision applies to them.

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DISCUSSION

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Page 14 of 18

¶114

7.1 We have carefully considered the various submissions made by the Appellant and the applicable statutory provisions. We observe that a reference has been made by the AAR during the course of their impugned ruling order with regard to the activity of 'supply of water-goods'. Since the main question on which ruling has been appealed by the appellant has a distinct and inseparable relationship with the point of reference made by the AAR, we wish to take up the appeal along with the reference point and a-nswer the same together during the course of this appeal.

¶115

7.2 From the submissions made by the appellant, we find that the issues pertain to a concession agreement entered into by the appellant with the Government of Tamilnadu and Tirupur Municipality on 11th Februar5z 2OOO by which the appellant, among others, undertook under contractual terms to abstract raw water from the river bed, treat it for making it fit for use and supply the same for domestic and nondomestic purposes to Tirupur Municipality (TM in short) and other purchasers (refer para G in pg 3 of the concession agreement).

¶116

7.3 Section 2.4 of the agreement provides for royalty payment by the appellant to the Government of Tamilnadu, one of the parties to the agreement, for the abstraction of such volume of raw water from time to time. Once royalty is charged and collected for the abstraction right, the raw water abstracted becomes the property of the appellant. It is also seen from the agreement that potable water is the output aJter treatment of the raw water by the appellant, and which is the only supply made by the appellant to all the purchasers, viz., TM, wayside villages and Industrial units (definitions in pg. 15 & 16). The water treatment, etc., are activities done by the appellant on his own account only to achieve the quality standards of the potable water as per the agreement with one of the purchasers, Tirupur Municipality. Further, the consideration for such supply of potable water to all the purchasers is in the form of water charges determined as per the agreement and other miscellaneous arnounts for activities essential to supply of water (Article 17, pg 73 of the CA). Thus from the scope, language and the terms and conditions of the agreement, it is clearly seen that the appellant has been awarded a contract for the sole purpose of supply of potable water to the purchasers, among others, after treating the raw water from the river bed. The activity of the appellant is thus only a supply of potable water to its purchasers. In other words, supply of goods and not of services.

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Page 15 of 18

¶118

7.4 Having determined that the activities of the appellant are nothing^{but supply of} goods (potable water), we proceed to examine the liability or otherwise of^{GST on the} same. We find from the submissions made and from the concession^{agreementthat it} is clearly mentioned throughout the agreement that potable water is only^{supplied to} all the purchasers of the appellant irrespective of whether they are villages,^industrial units or the municipality or whether the use is domestic or^{non-domestic.The only} differential treatment based on end use and end-users (purchasers) is only^with respect to the price of the potable water charged by the appellant.^{There is no} differentiation with respect to the nature of the supply made in the^{agreementin its} entirety. In fact, the definitions of 'raw water', 'potable water' 'purchasers'^kater charges'in Page nos. 15,16, 17 and 2I of the concession agreement categorically pronounce that the supply to all the purchasers including industrial units, municipality and villages and for both domestic and non-domestic use, is of raw water treated to performance standards, which is otherwise called as 'potable water'. Therefore, it is clear from the agreement that the supply of appellants is only^potable water.

¶119

7.5 There is no dispute regarding the classification of water a such under^2201. However, the main question raised by the appellant and also the^point of^reference made by the members of AAR is whether the water supplied by the appellant^is exempted under sl. No. 99 of notfn. No.O2I2O17-CT(R) and its equivalent^SGST notification published vide TamilNadu GO Ms. No. 63 dated 291612017. Since^purifred water is excluded from the exemption entry, the point of contention appears to^be that since the raw water is treated to various processes to make it^{potable, whether these} processes make the raw water as a 'purified water' or it remains as kater treated'to make it fit as potable water. As discussed supra in para 7 ,3, not only the term usedⁱⁿ the agreement for the supply denotes it is only 'potable water'which is supplied, but the treatment processes specified elsewhere in the agreement and the intent^{and the} purpose of the whole arrangement is only ensuring sustainable supply of^potable water. Potable water is never to be equated to 'purified water'. In fact, the^meaningof 'purified water' depends on what use of it people have in mind, like whether it^{is for} washing, pharma use, industrial use or even to swim. In chemical terms,^purilied water is pure H2O and only contains Hydrogen and Oxygen and no minerals.^Distilled water is the most common form of pure water. However, potable water has only^one

¶120

Page 16 of 18

¶121

meaning, water fit for human and animal consumption and has dissolved minerals. infact, from the performance standards spelt out in Schedule C of the agreement, the quality of potable water would itself indicate that it does not attain the nature and quality of a 'purified water'on any count. Therefore, it can be safely concluded that the supply of the appellant is of raw water, treated to become 'potable water'and nothing more. Once it is distinctly ciear that the supply is of tater'only, and NOT purified water, the same falling under the entry 99 of the notification no. O2/2O77-CT (R) is qualified for the exemption.

¶122

7.6 In the light of the above discussions, the reference made by the AAR on the divergent views as well as the ruling sought by the appellant, is answered as aflirmative with regard to exemption available to the supply of potable water made by the appellant under notfn. No.2/2O17-CT (R) ibid.

¶123

7.7 Witl: regard to the other questions raised in the appeal, we concur with the reasoning and the ruling given by the AAR and therefore, the appeal by the appellant is not sustainable.

¶124

In light of the above, we rule as under:

¶125

RULING

¶126

l. The reference made by the AAR and the ruling sought by the appellant in column I7(a) in the prayer in Form ARA-2 dated 914/2O2I is answered as per Para 7 .6 for the reasons discussed.

¶127

For reasons discussed above, the subject appeal is disposed of accordingly as all the questions raised by the appellant are answered as per AAR's ruling.

¶128

{', \ I t/-\ ' \ l ,'t; 1., I'ti,/^{</sup> Izl.'\t, -. '1}[,[, ,'t 1 (M.A.SIDPIQUE)?^{- I -} (G . V.K RIISFH]INI\IA \RAI"<3,RA r) .r Ll(.e,r", ) Prineipal Secretary/ Principal C,lhief Coormnrmnir issi or) n er ol^i Commissioner of Commercial Tax GST Ohir & Ce( .elntrLrz'alLl Exci sele, Tamil Nadu/Member, AAAR. Chennai Zon e tIMl tI ember ,. AAA R.

¶129

Page 17 of 18 ,, .rijl.t i,r,l {:r=tf-![),$ A, i';u S iltV!f, [i; TAX '^{. r,r:rrl.r i-i,,1} lrrriitr*SLt,

¶130

¶131

Tvl. New Tirupur Area Development Corporation^Limited, Polyhose Towers l"t Floor 86 Mount^Road Chennai Tamil Nadu.

¶132

IIBvRPAD ll

¶133

Copy to:

¶134

The Principal chief commissioner of GST &^{central Excise,} No. 2611, Uthamar Mahatma Gandhi Road,^{Nungambakkam, ch} -⁶⁰⁰ o34.

¶135

The Principal Secretary I The Commissioner^{of Commercial Taxes,} II Floor, Ezhilagam, Chepauk, Chennai-6Oo^OO5.

¶136

Joint Commissioner^(ST)/Member, Authority for Advance Ruling, Tamil Nadu,

¶137

Room N6.503 B, 5tt' Floor, Inlegrated Commercial^{Taxes Office Complex,} No.32, Elephant Gate Bridge Road, Chennai-600003

¶138

4.The Commissioner of GST & Central Excise,

¶139

Chennai South Commissionerate, MHU Complex, No.692, Anna Salai, Nandanam,^Chennai -^{600 O35.}

¶140

Assistant commissioner,

¶141

Alandur Assessment Circle, 12, Vedagiri Street,

¶142

MKN Road. Chennai 600 016.

¶143

6.Master File / spare

¶144

Page 18 of 18

TN/AAAR/17 & 18 /2021(AR) of M/s New Tirupur Area Development Corporation Limited

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TN/AAAR/17 & 18 /2021(AR) of M/s New Tirupur Area Development Corporation Limited

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