The Tamil Nadu Appellate Authority of Advance Ruling ( AAAR ) has held that strengthening of headquarters building of TANGEDCO is not an activity in relation to generation and distribution of electricity and attracts 18% GST.
The appellant PSK Engineering Construction and Company engaged in construction activities including retro fitting, restoration etc. of civil structures predominantly for Government, Public Sector Undertakings and Government entities. The appellant provides works contract services to TANGEDCO for carrying out retrofitting works and strengthening the NPKRR Maaligai against seismic and wind effect and modification of elevation in TNEB headquarters building at Chennai
The appellant sought clarification on the applicability of the concessional rate of GST as per entry No: 3(vi) of Notification no: 11/2017CT for providing such service to TANGEDCO. The advance ruling authority found that the supply made is a composite supply and TANGEDCO is a Government entity. The supply cannot be considered as that meant predominantly for use other than commerce, industry, or any other business or professional purpose and the said works are not of Generation and Distribution of Electricity which is the entrusted work of TANGEDCO and therefore as the appellant has not satisfied all the conditions the concessional rate is not applicable to them and the services are chargeable to 18% GST.
Aggrieved appellant approached appellate authority and the submitted that the TANGEDCO being the subsidiary of TNEB, the sole Power supplier to the state of Tamil Nadu, is essentially performing the activity entrusted to it by the state. The appellant relying on the decision in the case of CCE vs. Rajasthan State Chemical Works has stated that the phrase ‘in relation to’ is to be given a wide connotation and therefore the work undertaken by them to TANGEDCO Headquarters should be considered as works in relation to the work entrusted to TANGEDCO.
The appellate authority observed that in CCE vs. Rajasthan State Chemical Works the Apex court has considered what activity amounts to process in or in relation to manufacture and has held that processin of the raw materials even though are stages prior to the commencement of manufacture, are process in relation to manufacture, since they are integral to manufacture. In the present case TANGEDCO is established with the primary object to function as Generation and Distribution Utility and the work undertaken by the appellant, i.e. retrofitting work for strengthening against seismi and wind effect and modification of elevation of NPKRR Maaligai, cannot be in any way said to be in relation to the said work entrusted to TANGEDCO by the State Government.
The Coram of Sri M. V. Choudary, Member (Centre) and Sri K. Phanindra Reddy, Member (State) has held that “in the case at hand, the condition imposed for availing the concessional rate at the said entry is unambiguous in as much as it says that the services should have been procured by the Government entity, in relation to a work entrusted to it and the strengthening of the Headquarters building of TANGEDCO is definitely not an activity in relation to Generation and Distribution of Electricity, the work entrusted to it. Therefore, the contentions of the appellant in this regard are rejected”.
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