TaxTMI 
TaxTMI 
TaxTMI 
2025 (11) TMI 80
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....ivities of the appellant are regulated and controlled by the Odisha State Electricity Regulation Commissions (OERC) and Central Regulatory Commission established both at Central and State levels under the Electricity Regulation Commissions Act, 1998. All the receipts from the activities of supply of electricity whether ancillary or incidental collected from the consumers of electricity as per tariff fixed by the OERC are accounted in the books of accounts in compliance to the General Accepted Accounting Principles and provisions of Companies Act 2013 & Rules made there under. These power charges have been collected by the DISCOMs for the relevant years of dispute i.e 2014-15 to 2017-18 (up to June 2017) under Section 62 & 63 and other applied provisions of Electricity Act 2003 read with relevant provisions of OERC (Terms and Conditions for determination of Wheeling and Retail Supply Tariff) Regulations, 2014 and OERC (Conduct of Business) Regulations, 2004 and other Tariff related matters. 2. The DGGI, Bhubaneswar Zonal Unit issued show cause dated 19.09.2019 for the period 2014-15 to 2017-18 (up to June 2017) by invoking extended period of limitation as provided u/s 73 of the F....
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.... the assumed Assessable Value and quantified the Service Tax demand. However, in order to defend their case properly, the appellants have bifurcated the income, getting the same duly certified by the Chartered Accountant. The details of the receipts on which service tax demand is calculated and confirmed in the impugned orders of the DISCOMs based upon presumptions and assumptions are per the following Table: Sl. No Activity / Receipts as per P/L Account Receipts during the year 2014-15 to 2017-18 (up to June 2017) in Rs. Reason for levy of Service Tax CESU SOUTHCO Utility WESCO Utility 1 Penalties (LD) recovered from Supplier 64,212,825 declared services as defined under section 66E(e) of the Finance Act. 2 Penalties (LD) recovered from Contractor 36,910,309 3,752,414 3 Deposits from suppliers & contractors forfeited for recovery of LD 4,818,500 4 Recovery of theft power from consumers and others 28,558,611 all the services appeared to be chargeable to service tax 5 Cross subsidy transferred 8....
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....elated to distribution of power under the Electricity Act, 2003(36 of 2003), for distribution of electricity. Overall, on this ground itself no Service Tax is payable by the appellants. 7. It is submitted that Section 66F (3) of Finance Act provides for taxability of a bundled service i.e (a) if various elements of such service are naturally bundled in the ordinary course of business, it shall be treated as provision of the single service which gives such bundle its essential character; (b) if various elements of such service are not naturally bundled in the ordinary course of business, it shall be treated as provision of the single service which results in highest liability of service tax. 8. He submits the issue had come up before the Hon'ble Gujrat High Court in the case of TORRENT POWER LTD. Vs UNION OF INDIA - 2020 (34) G.S.T.L. 385 (Guj.), it has been held as under: 24. It has been contended on behalf of the respondents that sub-section (3) of Section 66F of the Finance Act would not apply where the single service which gives the bundle of services its essential character is exempt from the levy of service tax. In the opinion of this Court, th....
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....other than that of transmission and distribution of Electricity. 11. That the amount has been collected in terms of the Regulations and fixed by the OERC for the services bundled in the ordinary course of business for providing electricity. They are, therefore, required to be treated as a single service for providing services for transmission and distribution of electricity, which service is exempted under the negative list under section 66D(k) of the Finance Act. 12. Under the present GST regime, similar issues arose. The Govt of India has issued a notification vide No. 08/2024- Central Tax (Rate) dated 08.10.2024 effective from 10.10.2024 by inserting entry 25A to Notification No.12/2017 dated.28.06.2025 exempting the services that covered under circular no.34/2018 dated.1st March 2028 and abstract is given below. Sl. No. Chapter, Section, Heading, Group or Service Code (Tariff) Description of Services Rate (%) Condition 25 A Heading 9969 or Heading 9986 Supply of services by way of providing metering equipment on rent, testing for meters/transformers/capacitors etc., releasing electricity connection, shifting of meters/service lines, issuing duplica....
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....g that no Service Tax is payable for such receipts. Reliance is placed on such case laws. 17. The Appellate Authority for Advance Ruling, Uttarakhand in case of Uttarakhand Power Corporation Ltd [2022] 142 taxmann.com 421 (AAAR-Uttarakhand) ruled that charges for distribution and supply of electricity such as fixed charge, demand charge, energy charge, fuel charge, adjustment, excess load demand charge, low power factor surcharge, low voltage surcharge/high voltage rebate, wheeling charge, cross subsidy surcharge and additional surcharge, delayed payment surcharge, security deposits at time of release of new LT/HT/EHT connection and for enhancement in sanctioned load, checking and testing of meters, assessment against theft and unauthorized use of electricity, advance deposit by consumers with application for temporary LT/HT connection, service line charges and overhead line charges for release of new LT connection and for enhancement/reduction in sanctioned load, works charges for release of new HT/EHT connection and for enhancement / reduction in sanctioned load, replacement of meters (installation of meters and its subsequent removal in case of temporary connections), etc., b....
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....ny of Andhra Pradesh Ltd Vs Commissioner, Central Tax(CESTAT Hyderabad) in ST Appeal No.30388/2019, (b) Monet Ispat & Energy Ltd Vs. C.C.E. & S.T.-Raipur in Appeal No. ST/52038/2018-SMC [CESTAT, New Delhi] (c) Appellate Authority for Advance Ruling, Uttarakhand in case of Uttarakhand Power Corporation Ltd [2022] 142 taxmann.com 421 (AAAR-Uttarakhand) For Issue given at Sl No.7 of the Table : (a) Appellate Authority of Advance Ruling, Uttarkhanda in case of Uttrakhand Power Corporation Ltd, 2022 (142 taxmann.com 421 [AAAR- Uttarakhand] 2020 (33) G.S.T.L. 260 (A.A.R. - GST - UK) (b) M/s Monnet Ispat & Energy Ltd Vrs. CCE & ST, Raipur, (Appeal No. ST/52038/2018-SMC [Arising out of Order-in-Appeal No. 073-2018-19 dated 20/04/2018 (c) It is not Liquidated Damages / Sec 66(e) - Circular No. 178 / 10/2022-GST dated.3rd August 2022 as regards taxability of LD For Issue given at Sl No.8 to 15 and 17 of the Table : (a) Circular No.131/13/2010-ST dated 7.12.2010 Notification No. 08/2024- CT (Rate) dt.08.10.2024 effective from 10.10.2024, (b) CBIC vide Circular No. 234/28/2024-GST dated 11.10.2024 (c) Madhya Pradesh ....
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....nsistently clarified that no Service Tax / Tax is payable for the electricity transmission and distribution services. The relied upon case laws fortify the views taken by the appellant. This shows the bonafides of the appellant. Further the very fact that the litigation has been taken up to Tribunal / High Court levels, shows that the issue is that of interpretation. Apart from this, the entire shareholding of the DISCOMs rests with the State Government of Odissha. Therefore, these facts make it clear that there cannot be any intent to evade the Service Tax payment by the appellant DISCOMs. 21. The summary of the total demand, and the demand hit by time bar is given below : Yearwise Service Tax Demand in Dispute - WESCO, CESU AND SOUTHCO In Rs. Sl. No. Name of Utility Financial Year 2014- 15 Financial Year 2015-16 Financial Year 2016-17 Financial Year 2017- 18 (up to June 2017 Grand Total Time barred STN demand [ 2014-15 & 2015-16] 1 CESU 8,31,54,062 6,77,43,324 17,07,01,533 1,85,00,643 34,00,99,563 15,08,97,387 2 SOUTHCO 26,42,834 2,47,18,155 3,68,97,638 76,71,263 7,19,29,889 2....
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....ectricity Regulation Commissions Act, 1998. 28. The power charges have been collected by the DISCOMs for the relevant years of dispute 2014-15 to 2017-18 (up to June 2017) under Section 62 & 63 and other applicable provisions of Electricity Act 2003 read with relevant provisions of OERC (Terms and Conditions for determination of Wheeling and Retail Supply Tariff) Regulations, 2014 and OERC (Conduct of Business) Regulations, 2004 and other Tariff related matters. 29. We also observe that while issuing the SCN on 19.09.2019, the Revenue has simply gone by the income shown in the P & L accounts and Balance Sheet of the appellant and has treated the entire income during the financial years as the income of the DISCOMs. The quantification is based on the total income less the Service Tax portion [in terms of Section 67(2) of the Finance Act 1994], which has been taken as the Assessable Value based on which the Service Tax liability has been worked out. The very fact that the transmission and distribution of electricity has been enjoying full exemption right from 2010 has not been considered at all while framing the allegation and quantifying the demand. On the other hand, the DISC....
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....empt. In this regard, it may be noted that prior to the coming into force of the negative list regime, goods and services were exempted by virtue of notifications issued in exercise of powers under sub-section (1) of section 93 of the Finance Act. By virtue of Notification No. 11/2010 dated 27.2.2010, the Central Government exempted transmission of electricity from the whole of service tax leviable thereon under section 66 of the Finance Act; and by virtue of Notification No.32/2010-Service Tax dated 22.6.2010, distribution of electricity came to be exempted from the whole of service tax leviable thereon under section 66 of the Finance Act. Thus, what was exempt under those provisions was transmission and distribution of electricity, despite which, during the pre-negative list regime, the respondents have considered services related to transmission and distribution of electricity as exempted from service tax by virtue of those notifications. Insofar as electricity meters are concerned, vide circular No.131/13/2010-ST dated 7.12.2010, it was clarified that supply of electricity meters for hire to consumers being an essential activity, having direct and close nexus with transmission ....
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....der section 66D (k) of the Finance Act as well as by virtue of exemption notification issued under the CGST Act." 17. Section 66F of the Finance Act lays down the principles of interpretation of specified descriptions of services or bundled services and reads thus :- "66F. Principles of interpretation of specified descriptions of services or bundled services. - (1) Unless otherwise specified, reference to a service (herein referred to as main service) shall not include reference to a service which is used for providing main service. Illustration. - The services by the Reserve Bank of India, being the main service within the meaning of clause (b) of Section 66-D, does not include any agency service provided or agreed to be provided by any bank to the Reserved Bank of India. Such agency service, being input service, used by the Reserve Bank of India for providing to main service, for which the consideration by way of fee or commission or any other amount is received by the agent bank, does not get excluded from the levy of service tax by virtue of inclusion of the main service in clause (b) of the negative list in Section 66-D and hence, such service is lev....
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....f any premises, give supply of electricity to such premises, within one month after receipt of the application requiring such supply : Provided that where such supply requires extension of distribution mains, or commissioning of new sub-stations, the distribution licensee shall supply the electricity to such premises immediately after such extension or commissioning or within such period as may be specified by the Appropriate Commission : Provided further that in case of a village or hamlet or area wherein no provision for supply of electricity exists, the Appropriate Commission may extend the said period as it may consider necessary for electrification of such village or hamlet or area. Explanation. - For the purposes of this sub-section, "application" means the application complete in all respects in the appropriate form, as required by the distribution licensee, along with documents showing payment of necessary charges and other compliances. (2) It shall be the duty of every distribution licensee to provide, if required, electric plant or electric line forgiving electric supply to the premises specified in sub-section (1) : Provided t....
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....The term taxability means liability to taxation. Thus the term taxability would take within its sweep not being taxable also inasmuch as liability to taxation would also mean not being liable to any tax. Thus, the liability to tax of a bundled service has to be determined in the manner provided under sub-section (3) of Section 66F of the Finance Act. If the services are naturally bundled in the ordinary course of business, the bundle of services shall be treated as provision of the single service which gives the bundle its essential character and where the services are not naturally bundled in the ordinary course of business, the same is required to be treated as provision of the single service which results in highest liability of service tax. Accordingly, where the services are naturally bundled in the ordinary course of business and the single service which gives such bundle its essential character is exempt from tax, the entire bundle will have to be treated as provision of such single service. 25. Thus, insofar as the phase relating to the negative list regime is concerned, the services in question would fall within the ambit of bundled services as contemplated under ....
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....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. The term "electrical plant" takes within its sweep 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. 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 service which does not fall within the ambit of the definitions of electric line and electric plant is the meter used for ascertaining the quantity of electricity supplied to any premises. However, insofar as installation of electricity meter and....
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.... the CGST Act, the tax liability there of has to be determined by treating such composite same as a supply of the principal supply of transmission and distribution of electricity. Consequently, if the principal supply of transmission and distribution of electricity is exempt from levy of service tax, the tax liability of the related services shall be determined accordingly. 34. The Hon'ble High Court was dealing with the issue pertaining to the period from 2010 to June 2012, July 2012 to June 2017 [both under Service Tax regime] and July 2017 onwards [under GST regime], while coming to the above conclusion. 35. From this judgement, it is seen that all the ancillary activities connected the transmission and distribution have been taken as a part of the 'bundled service' in terms of Section 66 F and the exemption has been taken as eligible for all such services. Therefore, the ratio laid down by the High Court is squarely applicable to the facts of the present case. Hence, we have no hesitation to apply the same. 36. In the case of MADHYA PRADESH POORVA KSHETRA VIDYUT VITARAN CO. LTD. Vs COMMISSIONER OF CGST & CENTRAL EXCISE, JABALPUR - 2022 (67) G.S.T.L. 86 (Tri. - Del.), t....
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....mpt 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. 29. Thus, for all the reasons stated above, it is not possible to sustain the levy of service tax on the amount collected by the appellant for late payment surcharge, meter rent and supervision charges. 37. We find that this case has dealt with various issues pertaining to transmission and distribution of electricity and also the issue of Liquidated damages. On all issues, the appeal has been allowed. 38. In the case of Southern Power Distribution Vs The Commissioner of Central Tax, Tirupati, GST Commissionerate APPEAL NO. 30388 of 2019 - FINAL ORDER NO. A/30087/2022 dated 14.09.2022, the Tribunal held as under: 3. The details of the demands confirmed in the impugned order and the reasons, in brief, are as ....
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....of electricity are exempted from service tax. 25. It also needs to be noted that section 65B(44) defines 'service' to mean any activity carried out by a person for another for consideration. Explanation (a) to section 67 provides that 'consideration' includes any amount that is payable for the taxable services provided or to be provided. The recovery of liquidated damages/penalty from the other party cannot be said to be towards any service per se, since neither the appellant is carrying on any activity to receive compensation nor can there be any intention of the other party to breach or violate the contract and suffer a loss. The purpose of imposing compensation or penalty is to ensure that the defaulting act is not undertaken or repeated and the same cannot be said to be towards toleration of the defaulting party. The expectation of the appellant is that the other party complies with the terms of the contract and a penalty is imposed only if there is non-compliance. 26. Two Division Benches of the Tribunal in M.P. Poorva Kshetra Vidyut Vitran Co. Ltd. and South Eastern Coalfields have held that the amount recovered towards penalties/liquidated damages cannot be....
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....ead. 35. In Pushpam Pharmaceutical Co. vs. Commissioner of Central Excise, Bombay, the Supreme Court examined whether the Department was justified in initiating proceedings for short levy after the expiry of the normal period of six months by invoking the proviso to section 11A of the Excise Act. The proviso to section 11A of the Act carved out an exception to the provisions that permitted the Department to reopen proceedings if the levy was short within six months of the relevant date and permitted the Authority to exercise this power within five years from the relevant date under the circumstances mentioned in the proviso, one of which was 'suppression of facts'. It is in this context that Supreme Court observed that since 'suppression of fact' had been used in the company of strong words such as fraud, collusion, or willful default, suppression of facts must be deliberate and with an intent to escape payment of duty. 38. It is, therefore, clear that even when an assessee has suppressed facts, the extended period of limitation can be evoked only when 'suppression' is shown to be willful and with an intent to evade payment of service tax. 39. In the pres....
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....tification Nos.11/2010 ST dated 27.10.2010 and 32/2010 ST dated 22.06.2010 prior to 1.7.2012, full exemption has been granted for power transmission and distribution services. From 1.7.2012, the Negative List under 66D (k) provides for full exemption for Service Tax in relation to Transmission and Distribution of the electricity. This clearly shows the legislative intent not levy any Service Tax. Therefore, it can be fairly concluded that the right from 2010 till 2024, no Service Tax / GST was ever required to be paid on any direct or ancillary service related to transmission or distribution of electricity. 42. Relying on the Notifications, Circulars and amendments carried out the Section 66 and relying on the cited case laws, we set aside the confirmed demand on merits allow the appeals of the DISCOMs. 43. The appellant has also argued on the time-bar aspect of the demand on various grounds. We observe that the appellant is a Public Sector Undertaking working under the Odisha Government. They have recorded all the transactions in the books of accounts, from wherein the Revenue has gathered the data to issue the SCN. Further, the issue has been decided in favour of the appell....
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....ments carried out in the GST regime, all point out the clear legislative intent to grant full waiver of tax for the providers of service towards transmission and distribution of electricity. (d) In view of (a) to (c) above, the Appeals filed by the DISCOMs are allowed on merits (e) No case of suppression, whatsoever, has been made out by the Revenue. Hence, the confirmed demand for the extended period is set aside on account of time bar. (f) The Adjudicating authority has correctly gone through the factual details and the statutory provisions to drop part of the demand in respect of CESU-DISCOM. Hence, the appeal filed by the Revenue is dismissed. 47. The Appeals filed by the DISCOMs are allowed with consequential relief, if any, as per law. The Appeal filed by the Revenue is dismissed. (Order Pronounced in Open court on 28.10.2025) ============= Document 1 WESCO UTILITY Reconciliation of Other Operating Income with amount taken in "Demand cum Notice to Show Amount in Rs. Cause" A/c Code Particulars / Financial Year 2014-15 2015-16 2016-17 2017-18 (01.04.17 to 30.06.2017) Grand Total 62.903 Rental from Contractors 2,00,000 2,0....