Case Law Details
In re Chhattisgarh State Power Generation Company Limited (GST AAAR Chhattisgarh)
In a significant ruling by the Appellate Authority for Advance Ruling (AAAR) in Chhattisgarh , the applicability of Goods and Services Tax (GST) on the payments made by Chhattisgarh State Power Generation Company Limited (CSPGCL) to the Forest Department for Abhivahan Shulk has been scrutinized.
Case Background
CSPGCL, a state-owned enterprise involved in power generation, appealed against an Advance Ruling Authority (AAR) order that mandated GST on Abhivahan Shulk. The company argued that these payments, made for transit permissions for coal extracted from forest areas, should be exempt from GST under certain provisions of Notification No. 12/2017-Central Tax (Rate), dated 28.06.2017.
Issues Raised
1. GST Exemption Based on Notification No. 12/2017:
- CSPGCL claimed that the Abhivahan Shulk should be exempt under Sl. Nos. 4 and 5 of the notification, as the payments are for services related to “Urban forestry, protection of the environment, and promotion of ecological aspects,” functions entrusted to municipalities and panchayats under Articles 243G and 243W of the Constitution.
2. GST Exemption for Transactions Below ₹5000:
- The company also argued that each transaction of Abhivahan Shulk, being less than ₹5000, should be exempt from GST under Sl. No. 9 of the same notification, as it does not qualify as a continuous supply of service.
AAR Ruling
The AAR rejected CSPGCL’s claims, ruling that:
- The payments made for Abhivahan Shulk do not qualify for exemptions under the mentioned notification provisions.
- The Abhivahan Shulk is subject to GST at the applicable rate under reverse charge mechanism (RCM).
Grounds of Appeal
CSPGCL appealed this decision, presenting the following points:
1. The AAR failed to appreciate that the Abhivahan Shulk payments were for services that fall under the constitutional functions related to urban forestry and environmental protection.
2. The AAR incorrectly ruled that the payments do not qualify for the exemption for transactions below ₹5000.
AAAR Findings and Discussion
The AAAR upheld the AAR’s decision, providing detailed reasons:
- Exemption Under Notification No. 12/2017:
- The AAAR examined the functions under Articles 243G and 243W, concluding that the Abhivahan Shulk does not directly relate to urban forestry or environmental protection as envisaged in the Constitution.
- The services provided by the Forest Department for transit permissions are administrative and regulatory in nature, not fitting the descriptions required for GST exemption under the cited notification.
- Exemption for Transactions Below ₹5000:
- The AAAR found that CSPGCL’s argument about individual transactions being below ₹5000 was not sufficient to claim an exemption, as the nature of the service (continuous supply) was not adequately demonstrated.
Conclusion
The AAAR’s decision clarifies that payments like Abhivahan Shulk, made for regulatory permissions related to forest produce, do not fall under the GST exemptions for environmental and urban forestry services. This ruling underscores the importance of understanding the specific conditions under which GST exemptions can be claimed.
FULL TEXT OF THE ORDER OF AUTHORITY FOR APPELLATE ADVANCE RULING, CHANDIGARH
[Under Section 101 of the Central Goods & Services. Tax Act, 2017 and Chhattisgarh Goods & Services Tax Act, 2017]
1. At the outset, we would like to make it clear that the provisions of the Central Goods & Services Tax Act, 2017 Were-in-after referred to as the “CGST Act”) & the Chhattisgarh Goods & Services *Tax Act, 2017 (here-in-after referred to as the “SGST/CGGST Act”) are mirror images of each other except for certain specific provisions. Therefore, unless a specific mention is made, a reference to the COST Act would mean a reference to the similar provisions under the CGGST Act and vice versa. Further, the expression ‘GST Act’ would be a common reference to both CGST Act and CGUST Act
2. his present appeal dated V00,2021 has been tiled under Section IN of the “GST, 2017.
No. /STC/CGO\AARJOI/2022
3. Brief Facts of the case:–
3.1 M/s Chhattisgarh State. Power Generation Co. Ltd. Raipur, Chhattisgarh (here-in-after referred to as ‘CSPGCL’ or “appellant”) is a fully owned state government undertaking engaged in the generation of electricity. They arc having power generation plants at different locations in the State of Chhattisgarh. They have filed an appeal dated 0,1.09.2021 against the order dated 22.06.2021 passed by Advance Ruling Authority (here-in-after referred to as `AAR’). The appellant is duly registered under GST holding GSTM 22AADCC5772F1ZW. The main raw material for generation of power is coal. A coal mine was allotted to company by the Ministry of Coal, GOI for extraction of coal to be used in generation of power. The production from coal mine commenced from 01.12.2019. Coal mines arc situated in a forest area. therefore, a levy of Rs. 15/- per ton is payable to the Forest Department (as per the FOrest Act and a notification issued vide F. No. F06-02/2014110-2 dated 30.06.2015 read with Chhattisgarh Abhivahan (Vanopaj) Niyam, 2001) for issuance of transit pass as clearance of the Coal which is called “Abhivahan Shulk.” The amount payable to the Forest department is on ‘per ton basis’ and transit pass was issued on ‘per vehicle basis’ A vehicle normally consists of 12 to 30 tonnes of coal, thus per vehicle charecs i c Abhivahan Shulk is normally less than Rs. 500/- per transit pass. Considering the above. M/s CSPGCL is of the opinion that no GST is payable on the “Abhivahan Shulk” collected by the Government of Chhattisgarh, under the provision of RCM.
3.2 In this backdrop, M/s CSPGCL. had applied for advance ruling on 21.01.2021 before the A_AR, Chhattisgarh on the following issues –
(i) Whether amount paid to the Forest department as Abhivahan permission shulk is liable to be taxed under GST or exempt as per the SI. No 4 and 5 of the Notification No. 12/2017-Central Tax (Rate), dated 28.06.2017 of being in the nature of pure service and same is used for specific purpose of “Urban forestry, protection of the environment and promotion of the ecological aspect” hence covered under the Article 243G and 243W of the Constitution being functions entrusted to the Municipality and Panchayat, hence not liable to tax under GST”
(ii) Whether as each transaction is separate transaction and Abhivahan Shulk charged is always less than Rs 5000/- per transactions and is not covered by the definition of continuous supply of service u/s 2(33) of the C’GST Act ‘017, hence exempt under SI. 9 of the Notification No. 12/2017-Central Tax (Rate), dated 28.06.2017?
4. AAR Ruling:-
4.1 The Authority of Advance Ruling (AAR) vide Order No. STC/AAR/2021 dated 22.06.2021 held as under :-
(i) The amount paid by M/s Chattisgrah State Power Generation Co. Ltd Raipur, Chattisgrah, the applicant to the Forest department of Chattisgrah as “Abhivadan” permission shulk” for obtaining permission for transit of cool from the Forest area, is liable for GST at the applicable rate and is not eligible to “Nil” rate of tax provided under sr. no. 4 and 5 of the Notification No. 12/2017Central Tax (Rate), dated 28.06.2017, being not covered under the functions envisaged under Article 243G and 243W of the Constitution of India.
(ii) The applicant is also not eligible for “Nil” rate of tax on the said “Abhivadan” permission shulk” provided under SL No. 9 of afore -mentioned Notification No. 12/2017-Central Tax (Rate), dated 28.06.2017, for the reasons as delineated above.
(iii) The said “Abhivadan” permission shulk” paid by the applicant to the Forest department for the permission granted by the Forest department of Chhattisgarh, merits classification under the residuary Heading 9997 for other services with the tax rate of CGST @ 9%+ CGGST @ 9% and the applicant is liable for GST on the said “Abhivadan permission Shulk” under reverse charge basis in terms of Serial No. 5 of the Notification No. 13/2017-Centarl Tax (Rate), dated 28.06. (as amended)
5. Ground of Appeal:-
5.1 Aggrieved by the rejection of the application for advance ruling, the appellant has filed this appeal dated 04.09.2021 under Section 100 of the CGGST Act, 2017, on the following grounds:-
(i) The Authority for Advance ruling erred in holding that the amount paid by them to the Forest department of Chattisgarh as “Abhivadan Shulk” for obtaining permission for transit of coal from the forest area, is liable to GST at the applicable rate and is not liable to NIL rate of tax provided under SI No. 4 and 5 of the Notification No. 12/2017-Central Tax (Rate), dated 28.06.2017, being not covered under the functions envisaged under Article 243G and 243W of the Constitution of India without appreciating the facts of the case.
(ii) The Authority for Advance ruling also erred in holding that the applicant is not eligible for NIL rate of tax on the said Abhivadan Shulk provided under SL No. 9 of Notification No. 12/2017-Central Tax (Rate), dated 28.06.2017
6. Questions raised before the AAAR
(i) Whether amount paid to the Forest Department as Abhivahan Permission Shulk is liable to be taxed under GST or exempt as per the SI. No. 4 and 5 of the Notification No. 12/2017-antral Tax (Rate), dated 28.06.2017 being in the nature of pure service and same is used for specific purpose of “Urban forestry, protection of the environment and promotion of the ecological aspect” hence covered under the Article 2430 and 243W of the Constitution being functions entrusted to the Municipality and Panchayat. hence not liable to tax under GST?
(ii) Whether as each transaction is separate transaction and Abhivahan Shulk charged is always less than Rs 5000/- per transactions and is not covered by the definition of continuous supply of service u/s 2(33) of the COST Act 2017, hence exempt under SI. No. 9 of the Notification 12/2017-Central Tax (Rate), dated 28.06.2017?
7. Personal Hearing:–
Keeping with the established principles of natural justice, a virtual personal hearing in the matter was granted to the appellant initially on 19,04.2023. Accordingly, Shri Ashutosh Shrivastava. F.C.A & Shri Lalit Kumar Agrawal, F.C.A., the authorized representative of the appellant appeared virtually and reiterated their contention as submitted in their application dated 04.09.2021. However, the order could not be issued as both the earlier members of the AAAR got transferred and new members joined the offices. Hence, a personal hearing in the matter was again granted to the appellant on 21.02.2024, in virtual mode. Accordingly, Shri Ashutosh Shrivastava, F.C.A., the authorized representative of the appellant appeared virtually and reiterated their contention as submitted in their application dated 04.09.2021 During the personal hearing, following questions were asked in order to understand the case better.
8. Discussion and Findings: –
8.1 Accordingly, after careful consideration of the case, ruling of the AAR, relevant rules, regulations and notifications there-under, various statutory guidelines having bearing on the issue in hand and raised by the appellant, we proceed to decide the case in accordance with the law.
8.2 Further, during the hearings, the appellant was asked to submit the evidences such as Abhivahan Shulk slip, invoices raised in the matter and copy of any notification, available, if any. But despite giving a reasonable time they have failed to submit Abhivahan Shulk slip and invoice raised by the forest department. Now, therefore, we have carefully gone through the submissions made by the appellant in his application as well as the submissions made at the time of personal hearing. The appellant has requested for advance ruling on two different issues which are mentioned in Sr. No. (i) Sc. (ii) of the Para No. 6 above and discussed as under.
8.3 The appellant is a power generating company for which main raw material i.e., coal is extracted from a coal mine, situated in a forest area. The appellant is required to pay Rs. 15/- per ton to the Forest Department for issue of transit pass which is called ‘Abhivahan Shulk’. The appellant contended that the amount paid to the Forest department as Abhivahan permission skulk is exempted under GST as per the Sl. No. 4 and 5 of the Notification No. 12/2017-Central Tax (Rate), dated 28.06.2017 being in the nature of pure service and same is used for specific purpose of “Urban forestry, protection of the environment and promotion of the ecological aspect” hence, covered under the Article 243G and 243W of the Constitution of India being functions entrusted to the Municipality and Panchayat.
8.4 In this regard, relevant provisions of’ the GST Act are reproduced below:
S.4.1 Notification No. 12/2017-Central Tax (Rate), dated 28.06.2017 reads as under:
G.S.R. (L).-In exercise of the powers conferred by sub-section (1) of section 11 of the Central Goods and Services Tax Act, 2017 (12 of 2017), the Central Government, on being satisfied that it is necessary in the public interest so to do, on the recommendations of the Council, hereby exempts the intra-State supply of services of description as specified in column (3) of the Table below from so much of the central tax leviable thereon under subsection (1) of section 9 of the said Act, as is in excess of the said tax calculated at the rate as specified in the corresponding entry in column (4) of the said Table, unless specified otherwise, subject to the relevant conditions as specified in the corresponding entry in column (5) of the said Table. namely:-
Table:
8.4.2 The functions entrusted to the Panchayats under Article 243G of the Constitution of India in relation to the matters listed in the Eleventh Schedule arc reproduced herein below:
6. Social forestry arid farm forestry.
7. Minor forest produce.
8. Small scale industries, including food processing industries.
……….”
8.4.3 The functions entrusted to the municipality under Article 243W of the Constitution of India in relation to the matters listed in the Twelfth Schedule are reproduced herein below:
…………..”
…………..”
7. Fire
8. Urban forestry, protection of the environment and promotion of ecological aspects.
9. Safeguarding the interests of weaker sections of society, including the handicapped and mentally
……….”
8.5 We have also gone through the provisions of Chhattisgarh Abhivahan (Vanpool) Niyam, 2001 and Indian Forest Act, 1927. As per Section 2 (4) & (6A) of the Indian Forest Act, 1927 as amended provides that all produces from the mines, if extracted from forest land or transported through forest area shall be called forest produce. As per Rule 3 of Chhattisgarh Transit (Forest Produce) Rules, 2001, a transit pass is mandatory for transportation of any forest produce from forest land and is issued by Forest Department after payment of prescribed transit fee.
8.6 We find that these rules grants the authority/power to forest department to demand transit fees or Abhivahan Shulk from individuals for removal of forest produce and from vehicles used for transporting such forest produce within reserved forests.
8.7 In view of above, we are of the opinion that Abhivahan Shulk as collected by the Chhattisgarh Forest Department from the appellant is in lieu of granting permission for movement of Forest produce viz. coal from the forest area of Chhattisgarh state. The permit charges collected by forest department is used by the forest officials keep a watch on the mining activity and also to assess the quantity and type of mineral being quarried to carry out survey and also keep constant watch on the movement of the produce, and is not related to” Urban forestry, protection of the environment and promotion of the ecological aspect” or “Social forestry or farm forestry”, Therefore, Abhivahan Shulk has neither any connection with “Urban forestry, protection of the environment and promotion of the ecological aspect” [functions entrusted and as specified under Si. No. 8 to municipalities in the Eleventh Schedule read with Article 243W of the Constitution of India] nor with “Social forestry and farm forestry” [functions entrusted and as specified under Si No. 6 to Panchayats in the Twelfth Schedule read with Article 243G of. the Constitution of India).
8.8 Therefore, the contention of the appellant that the services of permitting transit through the forests of Chhattisgarh by the Forest Department comes under the ambit of functions of “Urban forestry. protection of the environment and promotion of the ecological. aspect” covered under the Article 243G and 243W of the Constitution being functions entrusted to the Municipality and Panchayat, is misplaced and devoid of merit. Accordingly, it is held that the said “Abhivahan permission skulk” paid by the appellant is not eligible for NIL rate of GST, as provided under SI. No. 4 & 5 of Notification No. 12/2017-Central Tax (Rate), dated 28.06.2017.
8.9 Now coining to the second issue, we find that the applicant has contended that no GST is applicable upon them as each transaction is a separate transaction and Abhivahan Shulk charged is always less than Rs 5000/- per transactions and is not covered by the definition of continuous supply of service Ws 2(33) of the CGST Act 2017. hence exempt under SI. No. 9 of. the Notification No. 12/2017-Central Tax (Rate), dated 28.06.2017.
8.10 In this regard, relevant provisions of the GST Act are reproduced below:
8.10.1 Notification No. 12/2017-Central Tax (Rate), dated 28.06.2017 reads as under:
G.S.R (E).-Th exercise of the powers conferred by sub-section (1) of section II of the Central Goods and Services Tax Act, 2017 (12 Of. 2017), the Central Government, on being satisfied filer in the public interest so to it is necessary do, on the recommendations of the Council, here* exempts the intm-State supply of services of description as specified in column (3) of the Table below from so much of the central tax leviable thereon under sub-section (1) o/’section 9 of the said Act, as is in excess of the said tax calculated at the rate as specified in the corresponding entry in column (4) of the said Table, unless specified otherwise, subject to the relevant conditions as specified in the corresponding entry in column (3) of the said Table, namely:-
Table:
10.2 Further, the Section 2(33) of CGST Act, 2017 reads as under:
Section 2(33): “continuous supply of services” means a supply .of services under is provided, or agreed to be provided, continuously ent basis, a contract, for a period exceeding three months with periodic payment–obligations and includes supply of such services as the Government may, subject to such conditions, as it may, by notification, specify;
8.11 As per Section 2(33) of the CGST Act, 2017, continuous service means a service that is provided or to he provided continuously or on a recurring basis
under a contract for a period exceeding three months.
8.12 We find that the appellant is a power generating company. The main raw material for generation of power is coal. The coal mines are situated in a forest area, and the appellant is paying Transit Fees or Abhivahan Shulk throughout the year on recurring basis to the Forest Department for issuance of transit pass whenever the Coal is cleared from the sorest area. This is not a single transaction rather it’s a supply of the entire coal regularly from the said coal block located in the forest and for which permission is granted by the Forest department. It is just for administrative convenience that applicant to the Forest Department Therefore, the said service squarely falls under the category of ” Supply of continuous service” as per Section 2(33)of the CGST Act, 2017.
8.13 Thus in view of the above discussions, we come to the considered view that the applicant is not eligible for exemption as provided under SL. No. 9 of Notification No. 12/2017-Central Tax (Rate), dated 28.06.2017, as the Abhivadan Permission Shulk paid to the forest department is more than five thousand rupees in a financial year
Ruling
In View of the foregoing discussion and finding, we give the ruling as follows:-
(1) The amount paid by M/s Chhattisgarh State Power Generation CO. Ltd. Raipur, Chhattisgarh, the appellant to the Forest Department of Chhattisgarh as “Abhivahan permission shulk” for obtaining permission for transit of coal from the Forest area, is liable for GST at the applicable rate and is not eligible to “Nil” rate of tax provided under SI, No. 4 and 5 of the Notification No. 12/2017-Central Tax (Rate), dated 28.06.2017, being not covered under the functions envisaged under Article 243G and 243W of the Constitution of India.
(2) The appellant is also not eligible for “Nil” rate of tax on the said “Abhivadan permission shulk”, provided under SI. No. 9 of Notification No. 12/2017-Central Tax (Rate), dated 28.06.2017