2018 (4) TMI 615 - AT - Service Tax

Tribunal rules on service tax exemption, VCES declaration, and penalties in electricity services case

Sudharshan Electricals Engineering Works Versus Commissioner of Central Excise & Service Tax, Aurangabad

Sudharshan Electricals Engineering Works Versus Commissioner of Central Excise & Service Tax, Aurangabad - TMI Issues:1. Applicability of service tax on services provided to Maharashtra State Electricity Distribution Company Ltd.2. Interpretation of exemption notifications related to distribution of electricity.3. Validity of VCES declaration and rejection.Analysis:Issue 1: Applicability of service taxThe appellant provided services of erection, installation, and commissioning to the Maharashtra State Electricity Distribution Company Ltd. The Revenue demanded service tax for the period 2007-08 to 2011-12. The appellant argued that the service in relation to the distribution of electricity is exempted as per Notification No. 45/2010-S.T. up to a certain date. The Tribunal found that the services provided by the appellant were indeed in relation to the distribution of electricity, thus covered by the exemption notification. The demand up to the specified date was set aside, while the demand from a later date was upheld.Issue 2: Interpretation of exemption notificationsThe appellant relied on various judgments to support their argument regarding the exemption notification and lack of malafide intention. The Tribunal considered the notifications and the nature of services provided by the appellant to determine the applicability of the exemption. It was established that the services were covered by the exemption up to a certain date, leading to the setting aside of the demand for that period.Issue 3: Validity of VCES declarationThe appellant's VCES declaration was rejected on the grounds of an ongoing audit inquiry. The appellant contended that no audit was pending before a certain date and thus, their case should not be affected by Section 106(2)(b) of the Service Tax Voluntary Compliance Encouragement Scheme, 2013. However, the Revenue argued that the audit issue was under consideration before the specified date, justifying the rejection of the VCES declaration. The Tribunal upheld the rejection of the VCES declaration, as the audit was ongoing, making the appellant ineligible for the scheme's immunity.In conclusion, the Tribunal set aside penalties imposed on the appellant due to confusion regarding the taxability of services related to electricity distribution. The judgments provided by the appellant were considered, but the Tribunal upheld the rejection of the VCES declaration due to the ongoing audit issue. The appeal related to the rejection of the VCES declaration was dismissed, affirming the lower authorities' decision.