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A circular cannot seek to clarify provisions of statutory notification, para 4(1) of the impugned Circular dated 01.03.2018 is hereby quashed.

Levy of GST on services pertaining to transmission or distribution of Electricity — Circular No.34/8/2018-GST dated 1.3.2018 – The petitioner is a Public Sector Undertaking engaged in distribution and supply of electricity in various Districts of Rajasthan. The petitioner submitted that the services of distribution and supply of electricity fall in negative list of the services vide Notification No.12/2017 dated 28.06.2017. The petitioner challenged Circular dated 01.03.2018 particularly Clause 4(1) thereof, vide which certain services provided by the DISCOMS have been held to be taxable. The counsel for the petitioner submitted that by way of statutory notification dated 28.06.2017, the Central Government has exempted services of transmission or distribution of electricity, as such, the circular impugned carving out an exception and excluding some of the services, which are essential and integral part of the main function of supply and distribution of electricity is arbitrary. Once the parent exemption Notification exempts the very supply and distribution of electricity, the Department of Revenue or even CGST Council cannot exclude certain services by way of clarificatory circular. The petitioner counsel relied upon the judgment dated 19.12.2018 of the Division Bench of Gujarat High Court in case of Torrent Power Ltd. Vs. Union of India, wherein para 4(1) of the impugned circular No.34/8/2018-GST dated 1.3.2018 was struck down. The respondent counsel submitted that against the said judgment of Gujarat High Court, a SLP has been filed and leave has been granted by Hon’ble the Supreme Court. The court observed that a simple reading of Sl.No.25 of exemption Notification dated 28.06.2017 and the corresponding notification leaves no room for ambiguity that entire package of services of transmission or distribution of electricity has been exempted. Whereas vide Circular dated 01.03.2018, particularly para No.4(1) the Council has sought to bring in tax-net five services enumerated therein, regardless of the fact that complete bundle or package of services namely transmission and distribution of electricity by an electricity transmission or distribution utility have been exempted. The Court was in total agreement with the view taken by Gujarat High Court in case of Torrent Power Ltd. (supra). Held that:- The Hon’ble High Court quashed the para 4(1) of the impugned Circular dated 01.03.2018. By way of mandatory injunction, restrained the respondents from raising any demand and/or taking any coercive measures to recover any tax on the basis of impugned circular dated 01.03.2018.
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