TaxTMI 
TaxTMI 
2026 (2) TMI 1341
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....ulation Commissions (OERC) and Central Regulatory Commission established both at Central and State levels under the Electricity Regulation Commissions Act, 1998. 3. 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 another Tariff related matters. 4. The Directorate General of Goods and Services Tax Intelligence (DGGI), Bhubaneswar Zonal Unit issued a Show Cause dated 19.09.2019 for the period 2014-15 to 2017-18 (up to June 2017) demanding Service Tax amounting to Rs.26,59,85,498/-, along with interest and penalties....
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.... 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 DISCOMs, so as to defend their case properly, have bifurcated the ....
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....gard, 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 and distribution....
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....(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 leviable t....
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....remises, 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 subsection, "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 that no p....
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.... 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 subsecti....
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....s 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 hire cha....
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....Act, the tax liability thereof 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. - D....
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.... 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. 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....
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....aid 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 included as 'consideration' towards any service or declared service. 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. 29. Collection of cross subsidy char....
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....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 present case, the Department could not establish conclusively that the appellant had suppressed material facts with an intention to evade payment of service tax. Only a general statement has been made by the Commissioner that the appellant had willfully mis-stated that the consideration received by the appellant for providing the services was not leviable to service tax. Thus, it is not possible to sustain the demand made for the extended period of limitation. 39. We find that most of the issues like cross-subsidy charges, wheeling charges, penalties [Liquidated damages], bundled services etc., raised in the present proceedings are squarely covered by this detailed order of the Hyderabad Tribunal. 40. We also observe that in the present GST regime, Circular N....