2024 (7) TMI 1737 - AT - Service Tax

Services for transmission of electricity exempt from service tax u/s 66D; liability disallowed on appeal

Whether services in relation to transmission of electricity attract service tax: CESTAT applied its prior decision in the appellant's own case holding ... Levy of service tax - services in relation to/ for Transmission of Electricity - invocation of extended period of limitation - appellant is notified as a State Transmission Utility by the Government of Gujarat in terms of Section 2(67) read with Section 39(1) of the Electricity Act, 2003 - HELD THAT:- This Tribunal in the appellant's own case Gujarat Energy Transmission Corporation Limited [2024 (2) TMI 1401 - CESTAT AHMEDABAD] held that 'the entire period in the present appeal i.e. related to Notification No. 45/2010-ST, 11/2010-ST and also for the period when negative list under Section 66D was in force, it was held that service for transmission of electricity is not leviable to service tax. Therefore, the issue is no longer res-integra. Accordingly, in the present case also the service tax liability in respect of Erection, Commissioning and Installation Service is not sustainable.' In view of the above decision in the appellant's own case, it has been settled that any service which is in relation to transmission of electricity is not liable to service tax in notifications and by virtue of negative list under Section 66D of the Finance Act, 1994. The appellant is not liable to pay any service tax. Accordingly, the impugned order is set-aside - Appeal allowed. Issues: (i) Whether services in relation to/for transmission of electricity were liable to service tax for the period 2012-13 to 2015-16; (ii) Whether the larger period of limitation is applicable.Issue (i): Whether services in relation to/for transmission of electricity were liable to service tax for the period 2012-13 to 2015-16.Analysis: The services in question are undisputedly connected to transmission of electricity and the appellant is a notified State Transmission Utility. Exemption notifications (including Notification Nos. 45/2010-ST, 11/2010-ST and 32/2010-ST) and the negative-list entry under Section 66D(k) cover transmission and distribution of electricity. Section 66F(3) addresses bundled services and directs that services naturally bundled in the ordinary course of business are to be treated as the single service that gives the bundle its essential character. Section 8 of the CGST Act and the definition of composite supply (Section 2(30)) apply similarly in the GST regime. The statutory definitions (including provisions of the Electricity Act regarding electric line and electric plant) and the government circular clarifying that activities having a direct and close nexus with transmission/distribution fall within the exemption support treating ancillary services as naturally bundled with transmission. A GST-era circular provisionally excluding such ancillary services was held ultra vires and struck down. Precedent and application of the bundling/composite-supply principles lead to treating the composite/bundled service as the principal/essential service of transmission and distribution.Conclusion: The issue is decided in favour of the assessee; services in relation to/for transmission of electricity (including the ancillary/related services identified) were not liable to service tax for the period in question.Issue (ii): Whether the larger period of limitation is applicable.Analysis: The statutory framework for refund claims (including Section 11C and the proviso in Section 11B / Explanation B) permits harmonised application of limitation rules where notifications and the underlying issue were sub judice. Where entitlement to refund arises as a consequence of a judgment, decree or order of an appellate authority or court, the limitation for claiming refund runs from the date of that decision. Authorities and precedent support treating the limitation as commencing from the date of final appellate decision when the issue was sub judice.Conclusion: The larger limitation period (allowing refund claims from the date of the appellate/tribunal decision) is applicable in favour of the assessee.Final Conclusion: The legal effect is that services in relation to transmission and distribution of electricity, including ancillary services naturally bundled or forming a composite supply with transmission, are exempt from service tax for the relevant periods and associated limitation rules for refund claims operate from the date of final adjudication; the impugned executive circular provisionally excluding such ancillary services was declared ultra vires.Ratio Decidendi: Services that are naturally bundled with or form a composite supply whose principal supply is transmission or distribution of electricity must be treated as the principal exempt service; accordingly, such bundled or composite supplies are exempt from service tax under the exemption notifications and negative-list entry, and limitation for refund claims arising from judicial decisions runs from the date of such decisions.