High Court stays show cause notice on service tax for wheeling services

The High Court stays the show cause notice challenging the imposition of service tax on wheeling services provided to a company. The court finds that the notice is based on a report by a High Level Committee accepted by the Ministry of Finance, indicating that wheeling charges are taxable under declared services. As the issue has been accepted by the Ministry of Finance, responding to the notice is deemed futile. The court expedites the hearing process and stays the notice until the final disposal of the petition.

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Issues:
Challenge to show cause notice for service tax on wheeling services provided to a company.

Analysis:
The petition challenges a show cause notice issued by the Additional Director General, DGGI, Zonal Unit Pune, calling for an explanation on why the wheeling service provided to a specific company should not be subject to service tax under Section 66B of the Finance Act, 1994. The notice is based on the argument that the transmission or distribution of electricity (wheeling services) by an electricity distribution utility, when provided to a third party for consideration, does not fall within the negative list of services under Section 66D of the Act. The High Court usually does not interfere at the notice stage, but in this case, it finds the dispute seems concluded based on the notice content. The notice relies on a report by a High Level Committee accepted by the Ministry of Finance, indicating that wheeling charges are taxable under declared services. The impugned notice itself concludes that the charges for wheeling/transmission do not fall within the negative list provided under Section 66D of the Act, and the report of the High Level Committee has been accepted by the Finance Ministry.

The impugned notice, issued by the Additional Director General, is answerable to the Commissioner, CGST and CX, who is bound by the report of the High Level Committee accepted by the Ministry of Finance. The acceptance of the High Level Committee report by the Finance Ministry is evident from a letter dated 10th March 2017 annexed to the impugned notice. Responding to the notice is deemed an empty formality as the issue under consideration has been accepted by the Ministry of Finance. The petitioners argue that there is no efficacious alternative remedy available, as the Ministry's acceptance of the issue is not disputed in the reply affidavit filed by the Commissioner of CGST and Central Excise, Thane. Consequently, the High Court stays the impugned notice until the final disposal of the petition, expediting the hearing process. The learned counsel for the respondents waives service in this matter.

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