Declared service tax under section 66E(e) does not apply to fixed power purchase charges absent an independent obligation to tolerate or refrain.

Fixed charges collected under a power purchase arrangement were not taxable as consideration for agreeing to refrain from, tolerate, or do an act under section 66E(e) of the Finance Act, 1994. The agreement, read as a whole, showed that the charges formed part of the sale proceeds of electricity and were not a separate payment for any independent obligation to refrain from selling power to others. The material did not establish a declared service, and the later Board clarifications were relied upon to support the view that tax is not attracted absent a distinct obligation coupled with consideration.

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Issues: Whether the fixed charges collected by the respondent from the State Electricity Board for supply of electricity were liable to Service Tax as consideration for agreeing to refrain from an act or to tolerate an act under section 66E(e) of the Finance Act, 1994.

Analysis: The fixed charges were found to form part of the sale proceeds of electricity under the power purchase arrangement and not a separate contractual payment for any independent obligation to refrain from selling power to others. The agreement had to be read as a whole, and the material did not establish that the respondent had undertaken a taxable declared service within the meaning of section 66E(e) of the Finance Act, 1994. The later Board clarifications, including Circular No. 178/10/2022-GST dated 03.08.2022 and Circular No. 214/1/23-ST dated 28.2.2023, were relied upon to support the view that such fixed charges are not exigible to tax where there is no independent agreement to tolerate or refrain from an act coupled with consideration.

Conclusion: The fixed charges were not taxable as declared services under section 66E(e) of the Finance Act, 1994, and the Revenue's challenge failed.

Ratio Decidendi: A payment is taxable as a declared service under section 66E(e) of the Finance Act, 1994 only when the agreement itself specifically contains an independent obligation to refrain from an act, tolerate an act or situation, or do an act, and there is a clear nexus between that obligation and the consideration.

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