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of <h1>Tribunal modifies order on consultancy and damages, upholds hire charges. Commissioner's decision partially allowed.</h1> The Tribunal set aside the demand on consultancy charges and liquidated damages but upheld it for hire charges. The Commissioner's order was modified ... Levy of Service Tax - amount collected by the appellant towards liquidated damages, supervision charges and hire charges - appellant is a public sector undertaking established by the Government of Madhya Pradesh for transmission of electricity within the city of Jabalpur and is a successor company of the State Electricity Board. Consultancy Services - HELD THAT:- The issue that arises for consideration is as to whether service tax could be levied on the amount collected by the appellant towards consultancy charges. This issue was examined by a Division Bench of the Tribunal in MADHYA PRADESH POORVA KSHETRA VIDYUT VITRAN CO. LTD. VERSUS PRINCIPAL COMMISSIONER CGST AND CENTRAL EXCISE BHOPAL [2021 (2) TMI 155 - CESTAT NEW DELHI] and after placing reliance upon the decision of the Gujarat High Court in TORRENT POWER LTD. VERSUS UNION OF INDIA [2019 (1) TMI 1092 - GUJARAT HIGH COURT], the Tribunal held that It is clear from the aforesaid judgment of the Gujarat High Court that the activities that are related/ancillary to transmission and distribution of electricity would be exempt from payment of service tax since transmission and distribution of electricity is exempted. It is also clear from aforesaid decision that all services related to transmission and distribution of electricity are bundled services, as contemplated under section 66F(3) of the Finance Act, and are required to be treated as a provision of a single service of transmission and distribution of electricity, which service is exempted from payment of service tax. In the present case the amount collected towards consultation services is in connection with services which are incidental to the transmission activities carried out by the appellant - demand do not sustain. Liquidated damages - HELD THAT:- This issue was also examined by the Division Bench of the Tribunal in M/S MADHYA PRADESH POORVA KSHETRA VIDYUT VITARAN COMPANY LIMITED VERSUS COMMISSIONER OF CGST & CENTRAL EXCISE, MADHYA PRADESH [2022 (4) TMI 773 - CESTAT NEW DELHI] and after referring to the decision of the Tribunal in M/s M/S SOUTH EASTERN COALFIELDS LTD. VERSUS COMMISSIONER OF CENTRAL EXCISE AND SERVICE TAX, RAIPUR [2020 (12) TMI 912 - CESTAT NEW DELHI] which decision has been accepted by the Board, observed that no service tax can be levied on the amount collected towards liquidated damages or penalty for breach of any of the terms of the contract - demand set aside. Hire Charges - HELD THAT:- The Commissioner has confirmed the demand proposed on the amount received as ‘hire charges’ for the reason that these charges have been recovered for use of equipments and machineries rented to the vendors and contractors without giving legal right of possession and effective control. Learned counsel for the appellant has not been able to controvert the findings recorded by the Commissioner in the impugned order. The confirmation of the demand under this head is, therefore, justified - Demand upheld. The confirmation of demand on the amount collected on account of consultancy charges or liquidated damages cannot be sustained and is set aside. However, the confirmation of demand under hire charges is upheld - appeal allowed in part. Issues involved: Appeal against service tax demand on consultancy charges, liquidated damages, and hire charges.Consultancy Services: The appellant, a public sector undertaking for electricity transmission, collected amounts for consultancy services incidental to its transmission activities. The Tribunal held that service tax cannot be levied on such amounts, citing a Gujarat High Court decision exempting activities related to transmission and distribution of electricity from service tax.Liquidated Damages: The Tribunal ruled that no service tax can be levied on amounts collected as liquidated damages or penalties for breach of contract terms, based on a previous decision and Board acceptance.Hire Charges: The Commissioner confirmed the demand on hire charges for equipment rental, as the appellant failed to dispute the findings. The confirmation of demand for hire charges was upheld.Conclusion: The Tribunal set aside the demand on consultancy charges and liquidated damages but upheld it for hire charges. The Commissioner's order was modified accordingly, and the appeal was allowed in part.
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