Tata Power Renewable Energies Limited Vs Union of India (Andhra Pradesh High Court)
The Andhra Pradesh High Court examined the validity of a tax demand raised against a taxpayer engaged in supplying solar power generating systems along with associated services such as design, installation, and maintenance. The dispute centered on the applicable GST rate for such supplies. Under Notification No. 1/2017 and Notification No. 11/2017, as amended, a specific valuation mechanism was introduced through explanations providing that, in cases involving combined supply of goods and services for solar power systems, 70% of the gross consideration would be treated as the value of goods taxable at 5%, and 30% as services taxable at 18%.
The taxpayer had consistently followed this 70:30 mechanism and filed returns accordingly. However, a show cause notice was issued proposing taxation of the entire supply at 18%, alleging tax evasion under Section 74 of the CGST Act. The assessing authority justified this by stating that separate invoices were issued for goods and services, and that certain goods fell under different HSN codes attracting 18% tax. Consequently, a substantial tax demand along with penalty and interest was raised.
The taxpayer challenged this order, arguing that the supplies were executed under composite contracts and squarely covered by the notified entries and their explanations. It was further contended that the 70:30 mechanism applied irrespective of whether invoices were raised separately. The taxpayer also relied on a prior Division Bench ruling which held that supply of solar power generating systems constitutes a composite supply.
