GST Not Applicable on Road Restoration Reimbursement by Power Distributor | HC

Case Details: Torrent Power Ltd. vs. Union of India - [2025] 179 taxmann.com 548 (Gujarat)

Judiciary and Counsel Details

• Bhargav D. Karia & Pranav Trivedi, JJ.
• S.N. Soparkar, Sr. Counsel & Uchit N. Sheth for the Petitioner.
• Ms Hetvi H. Sancheti for the Respondent.

Facts of the Case

The petitioner, engaged in the business of transmitting and distributing electricity, submitted that it excavated roads owned by the Ahmedabad Municipal Corporation (AMC) for the purpose of laying and maintaining electricity lines and reimbursed the AMC for the restoration costs. The GST Authority alleged that these reimbursements were subject to GST under the reverse charge mechanism. It was submitted that the payments constituted statutory compensation. The matter was accordingly placed before the High Court.

High Court Held

The High Court held that the reimbursements did not constitute a supply under Schedule II of the CGST Act and the Gujarat GST Act. It was observed that the AMC recovered costs as part of its municipal function and did not agree to tolerate the excavation. It further noted that statutory provisions under Section 42, read with Section 67(3), of the Electricity Act, 2003, and Article 243W mandated full compensation without constituting consideration for supply. Consequently, the Court quashed the Show Cause Notice and Order-in-Original.

List of Cases Reviewed

• Balmer Lawrie & Co. Ltd. v. Partha Sarathi Sen Roy [2013] 31 taxmann.com 282/119 SCL 143 (SC)/(2013) 8 SCC 345 (para 7.7) distinguished

List of Cases Referred to

• Punjab Urban Planning & Development Authority v. Vidya Chetal [2019] 111 taxmann.com 106/156 SCL 598 (SC) (para 6.3)
• Balmer Lawrie & Co. Ltd. v. Partha Sarathi Sen Roy [2013] 31 taxmann.com 282/119 SCL 143 (SC) (para 6.3)
• Malladi Drugs and Pharma Limited v. Union of India 2004 taxmann.com 1287 (SC) (para 6.10).