M/S Seil Energy India Limited vs The Union Of India on 31 July, 2024

Outcome
The Writ Petitions were allowed. The orders in original and appellate orders rejecting the petitioner's refund applications were set aside. The 2nd Respondent (Deputy Commissioner of Central Tax) was directed to reconsider the refund applications, allowing the petitioner to produce the Regional Energy Account (REA) of the previous month as proof of export for refund applications made in the succeeding month, provided all other requirements are met.

2. Core Issue
The core issue was the interpretation of the term "relevant period" under Rule 89 of the Central Goods and Services Tax Rules, 2017 (CGST Rules), specifically regarding the documentation required for Input Tax Credit (ITC) refund claims related to the export of electricity (a continuous supply of goods). The question was whether the Regional Energy Account (REA) to be furnished as proof of export should pertain to the month in which the electricity was supplied or the month in which the invoice was raised (which determined the time of supply for GST purposes).

3. Key Facts
* Petitioner: M/s. SEIL Energy India Limited, engaged in generating and selling electrical power.
* Transaction: The petitioner sold/supplied electricity to M/s. Bangladesh Power Development Board from January 2022 to October 2022.
* Claim: The petitioner contended that the supply of electricity to Bangladesh amounted to an export sale, which is exempt from tax under the Integrated Goods and Services Tax Act, 2017 (IGST Act), and sought a refund of accumulated ITC for these months.
* Initial Rejection: Refund applications were initially rejected due to the non-production of a "bill of shipping."
* Previous Litigation & Rule Amendment: In prior litigation (W.P.No.11194 of 2021 and batch), the petitioner argued that electricity, being intangible, does not require a bill of shipping. Subsequently, Rule 89 of the CGST Rules was amended to allow the furnishing of the Regional Energy Account (REA) as proof of export in lieu of a bill of shipping. A previous judgment dated 26.08.2022 by the same High Court (in W.P.No.11194 of 2021 and batch) held this amendment to be retrospective.
* Subsequent Rejection: After the amendment and the High Court's ruling, the respondents asked the petitioner to produce the REA. The petitioner produced the REA for the relevant periods. However, the refund applications were again rejected.
* Reason for Second Rejection: The 2nd Respondent argued that Rule 89 requires materials for the "relevant period," which they interpreted as the month for which the refund was sought. The petitioner had filed the REA for the previous month (e.g., REA for December 2021 for a refund application for January 2022).
* Invoicing Practice: The petitioner, as per the Power Purchase Agreement with M/s. Bangladesh Power Development Board, was required to raise an invoice for the supply of electricity for a particular month by the 7th day of the succeeding month.

4. Arguments
* Taxpayer (M/s. SEIL Energy India Limited):
* The rejection by the authorities was incorrect.
* Supply of electricity falls under the definition of "continuous supply of goods" as per Section 2(32) of the CGST Act.
* As per Section 12(2) read with Section 31(4) of the CGST Act, for continuous supply of goods, the "time of supply" is determined by the date of issuing the invoice or receiving payment, whichever is earlier.
* Since invoices for the previous month's supply were raised by the 7th day of the succeeding month, the "time of supply" for tax purposes for a given month's actual supply occurred in the succeeding month.
* Therefore, furnishing the REA for the previous month (i.e., the month of actual supply) when applying for a refund in the succeeding month (when the invoice is raised, and time of supply is fixed) is in consonance with the Act and Rules.

• Revenue (Union of India & Tax Authorities):
  • The orders of the Primary Authority and Appellate Authority were correct.
  • Rule 89 of the CGST Rules is clear and unambiguous.
  • The "relevant period" for which the REA must be produced is the month for which the refund is being sought.
  • Since the petitioner did not file the REA for the exact month of the refund claim, the rejection orders were justified.

5. Court’s Reasoning
1. Continuous Supply of Goods: The Court noted that electricity generation and supply falls within the definition of "continuous supply of goods" under Section 2(32) of the CGST Act.
2. Time of Supply: The Court referred to Section 12 of the CGST Act, which determines the "time of supply" for goods. Specifically, Section 12(2) states that the time of supply is the earlier of (a) the date of issue of invoice (or the last date required for invoice under Section 31(1)) or (b) the date of payment.
3. Invoice for Continuous Supply: Section 31(4) of the CGST Act stipulates that for continuous supply of goods, invoices must be issued before or at the time each successive statement of accounts is issued or payment received.
4. Interpretation of "Relevant Period": The Court reasoned that for continuous supply of goods like electricity, the physical supply happens continuously. However, for tax purposes, the "time of supply" is legally fixed based on the invoice or payment date. In this case, the Power Purchase Agreement required the petitioner to raise invoices for a month's supply by the 7th day of the succeeding month.
5. Legal Fiction: Due to this invoicing schedule, the actual supply occurring in, say, December, would have its "time of supply" (by legal fiction) fixed in January when the invoice is raised.
6. Harmony with Act and Rules: Therefore, for a refund application filed in January (corresponding to the invoice raised in January for December's supply), furnishing the REA for December (the month of actual supply) would be in accordance with the provisions of the Act and Rules, as the "relevant period" for the transaction (which dictates the time of supply) aligns with the REA for the preceding month.

6. Statutory References
* The Integrated Goods and Services Tax Act, 2017 (IGST Act)
* The Central Goods and Services Tax Act, 2017 (CGST Act):
* Section 2(32) ("continuous supply of goods")
* Section 12 (Time of supply of goods)
* Section 12(1)
* Section 12(2)
* Section 12(3)
* Section 12(4)
* Section 12(5)
* Section 12(6)
* Section 31(1)
* Section 31(4)
* The Central Goods and Services Tax Rules, 2017 (CGST Rules):
* Rule 89 (Application for refund of tax, interest, penalty, fee or any other amount)

7. Precedents Cited
* W.P.No.11194 of 2021 and batch (Judgment dated 26.08.2022 by a Hon'ble Division Bench of the Andhra Pradesh High Court) - cited for the proposition that the amendment to Rule 89 (allowing REA as proof of export) is retrospective. This precedent addressed a preliminary issue in the dispute, not the core interpretation of "relevant period" for the REA itself.