Seil Energy India Limited vs Union Of India on 31 July, 2024

Here's a summary of the judgment in the requested format:

1. Outcome

The High Court allowed the writ petitions, setting aside the original and appellate orders of rejection. It directed the 2nd respondent (Deputy Commissioner of Central Tax) to reconsider the petitioner's refund applications by permitting the production of the Regional Energy Account (REA) of the previous month as valid proof of export for refund applications made in the succeeding month, provided other requirements are met.

2. Core Issue

The core issue was the interpretation of the "relevant period" for furnishing the Regional Energy Account (REA) as proof of export for claiming Input Tax Credit (ITC) refunds on the continuous supply of electricity deemed as export. Specifically, whether the REA for the month in which the electricity was physically supplied should be submitted, or the REA for the preceding month, considering that invoices for continuous supply are raised in the succeeding month and define the "time of supply."

3. Key Facts

• Petitioner: M/s. SEIL Energy India Limited, engaged in generating and selling electricity.
• Transaction: Petitioner supplied electricity to M/s. Bangladesh Power Development Board from January 2022 to October 2022, contending it was an export sale, exempt from tax under the IGST Act, and thus eligible for ITC refund.
• Initial Rejection: Refund applications were initially rejected due to the non-filing of the Bill of Shipping.
• Prior Ruling & Rule Amendment: A Division Bench of the High Court in W.P.No.11194 of 2021 and batch held that electricity, being an intangible good, does not require a Bill of Shipping. An amendment to Rule 89 of the CGST Rules, substituting the Bill of Shipping requirement with the furnishing of the Regional Energy Account (REA), was deemed retrospective.
• Current Rejection: Following the amendment, the petitioner submitted REA accounts for the respective periods. However, the 2nd respondent rejected the applications (and the 3rd respondent dismissed appeals) because the REA submitted for a refund application for a particular month (e.g., January 2022) was for the previous month (e.g., December 2021), contending it was not for the "relevant period."
• Invoice Practice: As per the power purchase agreement, the petitioner was required to raise invoices for the supply of electricity for a particular month by the 7th day of the succeeding month.

4. Arguments (Taxpayer vs Revenue)

• Taxpayer (Petitioner):
  • Electricity supply constitutes "continuous supply of goods" under Section 2(32) of the CGST Act.
  • Under Section 31(4) of the CGST Act, for continuous supply, invoices are to be issued before or at the time of each successive statement/payment.
  • Section 12(2) of the CGST Act stipulates that the "time of supply" is the earlier of the date of invoice issue (or the last date required for it) or the date of payment receipt.
  • Since invoices for a month's supply are raised by the 7th day of the succeeding month, the "time of supply" (a legal fiction) for goods supplied in December would fall in January when the invoice is raised.
  • Therefore, furnishing the REA for December (the month of actual supply) would be the correct "relevant period" for a refund application made for January (the month when the invoice is raised and time of supply accrues). The authorities' interpretation of "relevant period" was incorrect.
• Revenue (Respondents):
  • Supported the orders of the primary and appellate authorities.
  • Argued that Rule 89 of the CGST Rules is clear and unambiguous.
  • Contended that the "relevant period" for refund should be the month for which the refund is sought, and the REA must correspond to that exact month.
  • Since the petitioner did not submit the REA for the "relevant period" as per their interpretation, the rejection orders were valid.

5. Court’s Reasoning

• The Court reviewed the statutory provisions of the CGST Act concerning "continuous supply of goods" and "time of supply."
• It referred to Section 2(32) CGST Act, which defines "continuous supply of goods" as supply on a continuous/recurrent basis under contract, for which the supplier invoices the recipient regularly/periodically.
• It then examined Section 12(2) CGST Act, which specifies the "time of supply" as the earlier of: (a) the date of invoice issue (or the last date required under Section 31(1)), or (b) the date of payment receipt.
• Crucially, it also considered Section 31(4) CGST Act, which governs invoices for continuous supply of goods, requiring them to be issued before or at the time each successive statement or payment is involved.
• The Court noted the undisputed fact that the petitioner raised invoices for electricity supplied in a particular month by the 7th day of the succeeding month, as per the power purchase agreement.
• Based on these provisions, the Court reasoned that while electricity was physically supplied in a given month (e.g., December), the "time of supply" (by legal fiction for tax purposes) would fall in the succeeding month (e.g., January) when the invoice was raised.
• Therefore, the Court concluded that furnishing the REA for the preceding month (reflecting the actual supply) when making a refund application in the succeeding month (reflecting the "time of supply" as per invoicing) is "in accord with the said provisions of the Act and Rules." The "relevant period" for the REA should align with the actual period of supply to which the invoice relates, and subsequently, the "time of supply."

6. Statutory References

• Integrated Goods and Services Tax Act, 2017 (IGST Act): General reference to export exemption.
• Central Goods and Services Tax Act, 2017 (CGST Act):
  • Section 2(32) – "continuous supply of goods."
  • Section 12 – "time of supply."
  • Section 12(2) – Specific provisions for time of supply of goods.
  • Section 31(1) – General requirement for invoice issuance.
  • Section 31(4) – Invoice for continuous supply of goods.
• Central Goods and Services Tax Rules, 2017 (CGST Rules):
  • Rule 89 – Regarding furnishing of Regional Energy Account (REA) as proof of export for refund.

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). This case established the retrospective application of the amendment to Rule 89 of the CGST Rules, allowing REA as proof of export for intangible goods like electricity.