TaxTMI 
TaxTMI 
2022 (9) TMI 625
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....uppression of facts with intent to evade payment of service tax. 3. The details of the demands confirmed in the impugned order and the reasons, in brief, are as follows: Sl. No. Activity/Consideration Service Tax demanded (In Rs.) Reason for levy of Service Tax 1. Penalties from contractors 4,18,02,647/- Collection of penalty for late delivery is a declared services as defined under section 66E(e) of the Finance Act. 2. Wheeling Charges 14,47,746/- Collection of wheeling charges is a declared service 3. Cross subsidy surcharge 3,57,35,819/- Collection of cross subsidy charges is a declared service 4. Supervision/Incidental Charges 2,38,62,159/- Service as defined under section 65B (44) of the Finance Act. 5. Transformer & amp; Meter Testing Charges 38,55,243/- Same 6. Rental amounts collected from contractors 5,20,266/- Same Total 10,72,23,880/- 4. Shri Y. Sreenivasa Reddy, learned counsel for the appellant, mainly submitted that: (i) The issue of taxability of penalties/liquidated damages is covered by decisions of the Tribunal rendered in M.P. Poorva Kshetr....
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....transmission or distribution of electricity by an electricity transmission or distribution utility'. The issue involved in this appeal is not regarding the amount collected by the appellant for supply of electricity; the dispute is regarding the amount collected towards collection for penalties for liquidated damages, wheeling charges, cross subsidy charge, supervision/incidental charges, transformer and meter testing charges, and rental amount collected from contractors. These charges have been collected by the appellant in terms of the Electricity Act and the 2009 Regulations. 7. The Commissioner has confirmed the demand of service tax on the amount collected from the penalties under section 66E(e) of the Finance Act by holding that the same is a consideration received by the appellant 'for tolerating an act'. The Commissioner has confirmed the demand of service tax on wheeling charges and cross-subsidy charges treating them to be a declared service. The Commissioner has also confirmed the demand of service tax on supervision/incidental charges, transformer and meter testing charges and the rental amount collected from contractors by holding that the same is for a service cont....
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....ribution of electricity. 11. Thereafter, the negative list regime was introduced with effect from 01.07.2012. As noticed above, section 66D(k) includes 'transmission or distribution of electricity by an electricity transmission or distribution utility'. 12. The issue as to whether the charges collected in connection with transmission of electricity even after 01.07.2012 would be subjected to service tax, as according to the Department they would not be exempted under section 66D(k) of the Finance Act, came up for consideration before the Gujarat High Court in Torrent Power. After referring to the position prior to the introduction of the negative list and the notifications referred to above and the introduction of the negative list regime w.e.f. 01.07.2012, the Gujarat High Court observed as follows: "10. Insofar as the first phase is concerned, the respondents do not dispute that the related/ancillary services to transmission and distribution of electricity are exempt from payment of service tax. The dispute, therefore, relates to the period of the negative list regime and the CGST/SGST regime. 11. Insofar as the second phase, namely, the negative lis....
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.... the three phases, what was exempted was "transmission and distribution of electricity". However, while for the prenegative list phase, the respondents considered the services related to transmission and distribution of electricity as exempt under the exemption notifications, for the negative list regime and the GST regime, they seek to exclude such services from the ambit of transmission and distribution of electricity. ***** The respondents having themselves considered the services in question as being covered by the exemption for transmission and distribution of electricity as such services were essential activities having a direct and close nexus cannot be now permitted to take a U-turn and seek to exclude such services without pointing out any specific change in the nature of the exemptions, except that they are provided under different statutory provisions. In the opinion of this court, the meaning of "transmission and distribution of electricity" does not change either for the negative list regime or the GST regime. If that be so, the services which stood included within the ambit of transmission and distribution of electricity during the pre-negative list regime cannot now ....
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....ade to certain provisions of the Electricity Act. Sections 43 and 45 of the Electricity Act. ***** 22. Thus, any line which is used for carrying electricity for any purpose as well as any apparatus connected to any such line for the purpose of carrying electricity is mandatorily required to be provided to the consumer by the licensee. Moreover, any plant, equipment, apparatus or appliance or any part thereof used for, or connected with, the generation, transmission, distribution or supply of electricity, except for electric meter and any electrical equipment, apparatus or appliance under the control of a consumer fall within the ambit of electrical plant as defined under section 2(22) of the Electricity Act. Sub-section (2) of section 43 of the Electricity Act casts a duty upon the licensee to provide if required electric plant or electric line for giving electric supply to the premises. Therefore, providing electric line and electric plant are elements of service which are naturally bundled in the ordinary course of business, with the single service of transmission and distribution of electricity which gives the bundle its essential character. The only related se....
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....s the service which gives the bundle its essential character, namely, transmission and distribution of electricity and, would therefore, be exempt from payment of service tax." (emphasis supplied) 14. 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. 15. The aforesaid judgment of the Gujarat High Court was followed by the Rajasthan High Court in Jodhpur Vidyut Vitran Nigam Ltd. 16. A Division Bench of the Tribunal in M.P. Poorva Kshetra Vidyut Vitran Co. Ltd. also followed the aforesaid judgment of the Gujarat High Court and held that all services related to transmission and distribution of electri....
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....titute declared services, namely:- ***** (e) agreeing to the obligation to refrain from an act, or to tolerate an act or a situation, or to do an act;" 22. Liability has been fastened upon the appellant under section 65B read with section 66E(e) of the Finance Act for the period from July 2012 till June 2017 for the reason that by collecting the said amount the appellant agreed to the obligation to refrain from an act or to tolerate the nonperformance of the terms of the contract by the other party. 23. Section 65B (44) defines 'service' to mean any activity carried out by a person for another person for consideration, and includes a declared service. Under section 66E (e), a declared service shall constitute agreeing to the obligation to refrain from an act, or to tolerate an act or situation, or to do an act. Section 66 B provides that service tax shall be levied at the rate of 12 per cent on the value of all services, other than those services specified in the negative list, provided or agreed to be provided in the taxable territory by one person to another and collected in such manner as may be prescribed. Section 66D contains a negative list of services....
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....nd cross subsidy charges on the ground that they are consideration towards provision of 'declared service' as defined under section 66E(e) of the Finance Act. The appellant collects this amount as per the Regulations framed by the State Electricity Regulation Commission under the Electricity Act from time to time to cover the subsidies granted to the consumers. 28. 'Wheeling' is nothing but transmission of electricity undertaken by the appellant Discom using its infrastructure as the power producer is not permitted to transmit electricity. Transmission is not leviable to service tax. Even assuming that the 'wheeling charges' are collected as charges for permitting the power producer to transmit its electricity using the infrastructure of the appellant, since it is an activity related to transmission of electricity and also that the main activity of transmission is done by the appellant, 'wheeling charges' would not be leviable to service tax in view of the decision of the Gujarat High Court in Torrent Power. The appellant had not agreed to tolerate any act of any person by transmitting electricity through its network. Therefore, wheeling service would not be leviable to service ....
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....hat the appellant had intentionally chosen not to assess the actual service tax liability by fraudulently suppressing facts and appeared to have evaded applicable service tax on such services. It has also been stated that the appellant had willfully mis-stated that the consideration received by the appellant for providing the services was not leviable to service tax. 33. The Commissioner has merely observed that the onus of making a proper assessment of liability rests with the assessee and in the scheme of self assessment, the Department comes to know of the facts only during the scrutiny of the statutory forms. The Commissioner has also observed that the appellant failed to declare the correct turn over in the ST-3 returns and suppressed the facts of the taxable amount towards the aforesaid services and thereby they had deliberately and willfully ignored payment of service tax. Thus, by willfully suppressing these facts, the appellant had contravened the provisions of the Finance Act. 34. Section 73(1) of the Finance Act, deals with recovery of service tax not levied or paid or short levied or short paid. The extended period of limitation can be invoked under the proviso to....
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....mited vs. Commissioner of Central Excise (Adjudication) [2018 (12) GSTL 368 (Del.)] also examined at length the issue relating to the extended period of limitation under the proviso to section 73 (1) of the Finance Act and held as follows; "27. Therefore, it is evident that failure to pay tax is not a justification for imposition of penalty. Also, the word "suppression‟ in the proviso to Section 11A(1) of the Excise Act has to be read in the context of other words in the proviso, i.e. "fraud, collusion, wilful misstatement". As explained in Uniworth (supra), "misstatement or suppression of facts" does not mean any omission. It must be deliberate. In other words, there must be deliberate suppression of information for the purpose of evading of payment of duty. It connotes a positive act of the assessee to avoid excise duty. ***** Thus, invocation of the extended limitation period under the proviso to Section 73(1) does not refer to a scenario where there is a mere omission or mere failure to pay duty or take out a license without the presence of such intention. ***** The Revenue has not been able to prove an intention on the part of....