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

Outcome
The Writ Petitions are allowed. The impugned orders in appeal and the orders in original, which rejected the petitioner's refund applications, are set aside. The 2nd respondent (Deputy Commissioner of Central Tax) is directed to reconsider the refund applications for Input Tax Credit (ITC), by permitting the petitioner to produce the Regional Energy Account (REA) of the previous month as valid proof of export for refund applications made in the succeeding month, provided all other requirements for refund 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) refund on the continuous supply of electricity. Specifically, whether the REA to be submitted should correspond to the month of actual electricity supply or the month in which the invoice for that supply is legally deemed to occur as per the GST law, affecting the timing of the refund application.

3. Key Facts
* The petitioner, M/s. SEIL Energy India Limited, generates and exports electrical power to M/s. Bangladesh Power Development Board, which it claims as an exempted export sale (zero-rated supply) under the IGST Act, entitling it to ITC refunds.
* The petitioner filed separate refund applications for each month from January 2022 to October 2022.
* Initially, these applications were rejected for failure to produce a "bill of shipping."
* Rule 89 of the CGST Rules, 2017, was subsequently amended to allow the Regional Energy Account (REA) as proof of export for electricity, substituting the requirement for a bill of shipping.
* A Division Bench of the Andhra Pradesh High Court, in W.P.No.11194 of 2021 and batch (Judgment dated 26.08.2022), held this amendment to Rule 89 to be retrospective.
* Following this, the petitioner produced the REAs for the relevant periods. However, the refund applications were again rejected by the 2nd respondent (Deputy Commissioner) and subsequently upheld by the 3rd respondent (Appellate Authority) in some cases.
* The new ground for rejection was that the petitioner submitted the REA for the preceding month (e.g., REA for December 2021 was submitted for a refund application pertaining to January 2022), while the authorities contended that the REA for the month for which refund was sought was required.
* As per the Power Purchase Agreement, 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):
* Electricity supply constitutes "continuous supply of goods" under Section 2(32) of the CGST Act.
* Under Section 12(2)(a) read with Section 31(4) of the CGST Act, the "time of supply" for continuous supply of goods is the earlier of the date of invoice issuance or payment receipt.
* Given that invoices for a month's supply are issued by the 7th day of the succeeding month (e.g., January for December's supply), the "time of supply" for the previous month's actual supply legally falls into the succeeding month.
* Therefore, submitting the REA for the preceding month (representing actual consumption) while making a refund application in the succeeding month (representing the "time of supply" through invoicing) is consistent with the statutory provisions.
* Revenue (Union of India & Tax Authorities):
* Rule 89 of the CGST Rules requires the dealer to provide necessary materials for the "relevant period."
* The "relevant period" for a refund application refers strictly to the month for which the refund is being sought.
* Submitting an REA for a month prior to the refund application month is not compliant with the rule, and thus the rejections were justified.

5. Court’s Reasoning
* The Court undertook a detailed examination of relevant provisions of the CGST Act, particularly concerning "continuous supply of goods" and "time of supply."
* It referred to Section 2(32) defining "continuous supply of goods" and Section 12 which determines the "time of supply" for goods.
* Section 12(2)(a) stipulates that the time of supply is the earlier of the date of invoice issue or the last date required for invoice issue under Section 31(1).
* Section 31(4) specifies that for continuous supply of goods with successive statements/payments, the invoice must be issued before or at the time each statement is issued or payment is received.
* The Court reasoned that for continuous supply of goods, it is not the actual continuous supply itself that dictates the tax point, but rather the point in time when the invoice is raised or payment is made (whichever is earlier) that determines the "time of supply" and, consequently, the "relevant period" for tax purposes.
* Given that the petitioner's Power Purchase Agreement mandated invoicing for a month's supply by the 7th day of the succeeding month, the Court found that, by a legal fiction, the "time of supply" for the electricity actually provided in the previous month occurs in the succeeding month when the invoice is raised.
* Therefore, the Court concluded that furnishing the REA for the preceding month (reflecting the actual power supplied) for a refund application made in the succeeding month (reflecting the statutory "time of supply" through invoicing) is in full conformity with the provisions of the CGST Act and Rules.

6. Statutory References
* Integrated Goods and Services Tax Act, 2017 (IGST Act)
* Central Goods and Services Tax Act, 2017 (CGST Act)
* Section 2(32)
* Section 12
* Section 12(2)
* Section 12(2)(a)
* Section 31(1) (implicitly referenced)
* Section 31(4)
* Central Goods and Services Tax Rules, 2017 (CGST Rules)
* Rule 89 (as amended)

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.