Electricity-generation service exemption covers hydroelectric project fabrication, erection and commissioning services, eliminating service tax liability and related consequences.

Fabrication, erection, testing, painting, transportation, alignment and commissioning of pressure-shaft steel liners and tunnelling formwork for hydroelectric projects were examined as services intrinsically connected with electricity generation. Notification No. 11/2010-ST and Notification No. 45/2010-ST exempted taxable services relating to generation, transmission or distribution of electricity during the relevant period. On the stated facts, the services fell within those exemptions and were not liable to Service Tax; the related demand, interest and penalty were unsustainable.

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Issues: Whether fabrication, erection and allied services for hydroelectric power projects were exempt from Service Tax as services relating to generation of electricity.

Analysis: The work orders covered fabrication, erection, testing, painting, transportation, alignment and commissioning of pressure-shaft steel liners and tunnelling formwork for hydroelectric power projects. The undisputed nature and purpose of these activities established their intrinsic connection with electricity generation. Notification No. 11/2010-ST and Notification No. 45/2010-ST exempted taxable services relating to generation, transmission or distribution of electricity during the relevant period.

Conclusion: The services were covered by the applicable exemption notifications and were not liable to Service Tax; the demand, interest and penalty were unsustainable.

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