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

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

2. Core Issue
The core issue was whether, for continuous supply of goods like electricity, the Regional Energy Account (REA) pertaining to the preceding month can be accepted as valid proof of export for refund applications filed in the succeeding month, in light of the GST provisions relating to "time of supply" and invoicing for continuous supply of goods. The revenue authorities had rejected refunds on the ground that the REA did not pertain to the exact "relevant period" (month) for which the refund was sought.

3. Key Facts
* Petitioner: M/s. Seil Energy India Limited, engaged in generating and selling electrical power.
* Transaction: Petitioner supplied electricity to M/s. Bangladesh Power Development Board from January 2022 to October 2022, claiming it as an export sale exempted from IGST.
* Claim: Sought refund of accumulated Input Tax Credits (ITC) for these months.
* Initial Rejection: Refund applications were initially rejected due to the non-production of the Bill of Shipping (BoS), as electricity is an intangible good.
* Rule Amendment & Precedent: During pendency of earlier writ petitions (W.P.No.11194 of 2021 and batch), Rule 89 of the CGST Rules was amended to allow Regional Energy Account (REA) as proof of export for electricity, even without a BoS. A Hon'ble Division Bench of this High Court, in W.P.No.11194 of 2021 and batch (Judgment dated 26.08.2022), held this amendment to be retrospective.
* Second Rejection: Despite producing the REA for the respective periods, the refund applications were again rejected by the 2nd Respondent (and upheld by the 3rd Respondent in appeals) on the grounds that the REA provided (e.g., REA of December 2021 for a refund application for January 2022) did not correspond to the "relevant period" (the month for which refund was sought).
* Invoicing Practice: As per the Power Purchase Agreement (PPA) with M/s. Bangladesh Power Development Board, the petitioner 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 vs Revenue)

• Taxpayer (M/s. SEIL Energy India Limited):

  • Contended that the authorities' view was incorrect and inconsistent with the Act and Rules.
  • Electricity supply falls under "continuous supply of goods" as defined in Section 2(32) of the CGST Act.
  • Under Section 12(2) read with Section 31(4) of the CGST Act, the "time of supply" for continuous supply of goods is linked to the earlier of the date of issue of invoice or receipt of payment.
  • Given the contractual obligation to raise invoices for a month's supply by the 7th day of the succeeding month, the "time of supply" (and thus the "relevant period" for refund) is determined by the invoice date, not the physical supply month.
  • Therefore, submitting the REA for the previous month (e.g., December REA for January refund application) is in accordance with the legal fiction of "time of supply" and the invoicing cycle.

• Revenue (Union of India, Deputy Commissioner, etc.):

  • Supported the rejection orders, arguing that Rule 89 of the CGST Rules is clear and unambiguous.
  • Maintained that only the REA for the specific month for which the refund is being sought (the "relevant period") could be considered.
  • Since the petitioner failed to submit the REA for the precise month of the refund claim, the rejections were justified.

5. Court’s Reasoning
* The Court reviewed Section 2(32) of the CGST Act, which defines "continuous supply of goods," and Section 12 of the CGST Act, which determines the "time of supply."
* Crucially, Section 12(2) stipulates 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.
* Section 31(4) provides that for continuous supply of goods involving successive statements or payments, the invoice must be issued before or at the time each statement is issued or payment is received.
* The Court acknowledged the petitioner's contractual obligation (under the PPA) to raise an invoice for a month's electricity supply by the 7th day of the succeeding month.
* Applying these provisions, the Court reasoned that, by legal fiction, even if electricity was supplied in December, the "time of supply" for tax purposes would be the date the bill was presented in January.
* Therefore, furnishing the REA for the preceding month while making an application for refund in the succeeding month is consistent with the statutory framework of the CGST Act and Rules concerning continuous supply of goods and the determination of the "time of supply."

6. Statutory References
* Integrated Goods and Services Tax Act, 2017 (IGST Act)
* 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(2)
* Section 31(1)
* Section 31(4) (Invoice for continuous supply of goods)
* Central Goods and Services Tax Rules, 2017 (CGST Rules):
* Rule 89

7. Precedents Cited
* W.P.No.11194 of 2021 and batch (Judgment dated 26.08.2022 by a Hon'ble Division Bench of this Court), which held that the amendment to Rule 89 of the CGST Rules (substituting Bill of Shipping with REA as proof of export for electricity) should be treated as retrospective.