In a significant judgment, the Delhi High Court has ruled that the fees collected by the Central Electricity Regulatory Commission (CERC) and the Delhi Electricity Regulatory Commission (DERC) for functions such as electricity distribution licensing and tariff determination are exempt from Goods and Services Tax (GST). This ruling was delivered on January 15, 2025, while quashing the Show Cause Notices (SCNs) issued to both bodies by the Directorate General of GST Intelligence.
The Court clarified that both CERC and DERC, being quasi-judicial tribunals, discharge regulatory functions that are exempt from GST under Schedule III of the GST Acts. The Division Bench, led by Justices Yashwant Varma and Dharmesh Sharma, stated that the collection of fees by these commissions is part of their statutory duties under the Electricity Act, 2003, and not for furthering any business interests.
The Court emphasized that even though Section 2(102) of the CGST Act defines “services” as anything other than goods, this definition must be read in conjunction with Schedule III, which excludes services rendered by courts or tribunals from GST. The Court remarked, “The provision made in Schedule III is clearly intended to insulate and exempt the functions discharged by a court or tribunal from the levy of a tax under the CGST.”
The GST authorities had initially issued the SCNs, arguing that the fees collected by these commissions for regulatory activities like tariff determination and licensing should attract an 18% GST. They had contended that these activities fell under “support services to electricity transmission and distribution,” as per a 2017 IGST Act notification. However, the Court disagreed with this argument, emphasizing that there is no legal distinction between the regulatory and adjudicatory functions performed by these commissions under the Electricity Act.
The Court also rejected the GST authorities’ attempt to separate adjudicatory and regulatory functions of the commissions, stating, “We fail to appreciate how the respondents could have undertaken an exercise to bifurcate or draw a wedge between the adjudicatory and regulatory role of Commissions.” The Court further added, “The Electricity Act makes no distinction between the regulatory and adjudicatory functions which it vests in and confers upon a Commission.”
Case: CERC vs Additional Director Directorate General of GST Intelligence – Available on LAWFYI.IO
