Supplier Bears Burden to Prove Water Was Supplied via Tankers and Not as Taxable Packaged Goods

Supplier Bears Burden to Prove Water Was Supplied via Tankers and Not as Taxable Packaged Goods

Issue

Whether the supply of water through tankers or lorries qualifies for a complete GST exemption under Section 11, and whether the burden of proof rests on the assessee to establish that the water was delivered via bulk tankers rather than as taxable packaged/branded drinking water.

Facts

• The Claim: The petitioner, a water supplier, asserted that their business consisted entirely of delivering bulk water to customers through lorries and tankers, thereby claiming a complete exemption from GST.

• The Assessment Order: The Assessing Authority passed an adverse assessment order, determining that the petitioner was actually supplying taxable packaged drinking water under a specific brand name and in sealed packaging.

• Lack of Evidence: The authority noted in its order that the petitioner failed to produce any concrete documentary proof (such as logbooks, specific delivery receipts, or vehicle trip sheets) to verify that the supplies were exclusively distributed through bulk tankers and not in packages.

• Writ Challenge: The petitioner filed a writ petition in the High Court, challenging the tax demand on the ground that bulk water transport is inherently exempt.

Decision

• Held, matter remanded to the Assessing Authority: The High Court set aside the impugned assessment order and restored the matter back to the authority for a fresh, de novo decision.

• Exemption Distinction Confirmed: The court clarified the legal boundary: the bulk supply of water via tankers or lorries is completely exempt from GST, whereas packaged and branded drinking water is legally taxable.

• Burden of Proof on Assessee: Since the petitioner is the party claiming the benefit of a tax exemption notification, the legal burden to conclusively prove that the water was delivered strictly via tankers rests entirely on them.

• One Final Opportunity: In the interest of natural justice, the court granted the petitioner one final opportunity to gather and submit additional replies, transport contracts, and log documents to establish their claim without forcing them to meet pre-deposit conditions.

Key Takeaways

• Exemption Rule on Bulk vs. Packaged Water: Public utility supplies, such as bulk water transported through tankers/lorries for commercial or domestic use, are exempt from the GST net. However, once water is processed, sealed in bottles/cans, and branded, it loses its “general commodity” status and becomes taxable.

• Heavier Onus on Exemption Claimants: It is a foundational principle of tax law that anyone seeking a tax exemption must strictly prove they meet every criterion of that exemption. The Revenue is not required to prove that a transaction is taxable until the assessee fails to prove it is exempt.

• Documentary Trial Imperative: For logistical and service-based exemptions, taxpayers must maintain flawless supplementary records—such as transport logs, vehicle registration numbers, weighbridge slips, and clear bulk-delivery invoices—to successfully fend off classification disputes.