AI Drafter 
TaxTMI 
TaxTMI 
TaxTMI 
2026 (5) TMI 1521
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....ransmission and Distribution Lines/Towers, Power Sub-Stations and Rural Electrification Projects and provision of services of Erection, Installation and Commissioning of such Power Transmission and Distribution Lines/Towers and Power Sub-Stations to its clients. The Respondent were discharging their service tax liability on the abovementioned services under the category of "Erection, Commissioning or Installation Services". 2.1 During the investigations conducted by the Directorate General of Central Excise Intelligence, Hqrs. New Delhi ('DGCEI'), it was observed that the Respondent were indulging in evasion of service tax by wrongly availing abatement @67% from the gross value of the taxable services provided by them to their clients, and paying service tax on only 33% of such gross value, by incorrectly availing the benefit of service tax exemption in terms of Notification No. 1/2006-ST dated 01.03.2006, while providing "Erection, Commissioning or Installation Service/Works Contract Service". It was revealed that the Respondent were availing CENVAT Credit of Central Excise duty paid on inputs and service tax paid on input services and utilizing such CENVAT Credit for discharge....
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....nance Act, 1994 could be invoked and demand and recovery alleged for non-levy and non-payment of service tax for five years from relevant date and they also appeared liable to penalty under Section 78 of the Act. It further appeared that the Respondent have rendered themselves liable for penal action under Sections 76 & 77 of the Act. 2.5 The Respondent filed reply to the said Show Cause Notice and contested the demands on all the fronts and also claimed exemption from levy of service tax under Notification No. 45/2010-ST dated 20.07.2010. 2.6 After following the due process, the learned Commissioner vide the impugned Order-in-Original has dropped the entire demand by squarely holding that the services provided by the Respondent are covered vide Notification No. 45/2010-ST dated 20.07.2010 which provides exemption from whole of service tax to taxable services relating to transmission & distribution of electricity. 2.7 Aggrieved by the said Order-in-Original, the Department has filed the present appeal on the following grounds: (i) From the scope of services to be provided by Respondent to their customers, as mentioned in the Letters of Award (LOA)/Contracts, it ap....
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....raps, PLCC, RTU, Installation Hardware & Insulators, Substation Structures, Battery & Battery Chargers, DG Sets, Fire Protection Systems, LT Panels, Control & Power Cables and Lightning, Testing & Maintenance equipment's etc. Thus, at the time of execution of the contracts, even the power generation plant and transmission paraphernalia were not in place, and the Respondent were given the contracts for supply of goods/equipment's for setting up the power substations and transmission towers and related services for erection of such equipment's, as there was no power/electricity generation and therefore, no transmission and distribution of electricity at the time of provision of the services by Respondent. The findings of the Adjudicating Authority that the services provided by the Respondent to their customers were in relation to transmission and distribution of electricity is beyond any stretch of imagination and is not correct. It appears that the Adjudicating Authority, while deciding the matter, has not applied his mind and has passed an order without appreciating the nature of the services provided by the Assessee to their customers. (iv) The exemption granted vide Noti....
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....ectricity. Whereas, this was not the factual position, as discussed above in foregoing paras, as the services provided under the contracts were for supply and erection of the above mentioned equipment and not for transmission and distribution of electricity. (vii) It is essential to understand that the transmission and distribution of electricity is undertaken by the electricity transmission and distribution companies, who either generate the electricity themselves or purchase the same from power generating utilities, and thereafter, transmit and distribute the same, utilizing their transmission and distribution network, for the consumption by their customers. In the case of the Respondent, the services were provided for the supply and erection of power generation/transmission system and therefore, it would not be correct to hold that the services provided by the Respondent were in relation to transmission and distribution of electricity. (viii) The Adjudicating Authority has also dropped the demand in respect of services of goods transport agency being provided by the Respondent to their customers for which they had separately recovered the consideration in the n....
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....at the issue needs to be re-examined by the Adjudicating Authority afresh, after verification of the work orders related to transmission and distribution of electricity. 3. Heard both sides and perused the material on record. 4. Ms. Amita Gupta, the learned Authorized Representative appearing on behalf of the Appellant-Revenue submits that the impugned Order-in-Original is not sustainable as the same has been passed without properly appreciating the facts & the law and binding judicial precedents. 4.1 She further submits that the Adjudicating Authority has dropped the demand without properly examining the terms and the contracts between the parties and without considering that the contracts in the present case were for supply of the equipment's for setting up the electricity sub-stations and construction of towers for transmission line including design, engineering, manufacturing, testing and supplying of specified equipment's/materials. She further submits that at the time of execution of the contracts, even the power generation plants and transmission paraphernalia were not placed and M/s SPIL was given the contracts for supply of goods/equipment's for setting up the pow....
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....otification No. 45/2010-ST dated 20.07.2010, which clarifies that "transmission and distribution of electricity by a utility" and services provided "in relation thereto" are exempt from service tax; also, the Circular No. 123/5/2010-TRU dated 24.05.2010 and Circular No. 131/13/2010-ST dated 07.12.2010 consistently recognized that all activities integrally connected to transmission and distribution networks are eligible for exemption. 5.3 He also submits that it is a matter of record that the Respondent provided services to entities such as PGCIL, NHPC and various State Electricity Boards, all of which are engaged in transmission and distribution of electricity and therefore, the Respondent's activities squarely fall within the exemption. 5.4 He further submits that the Appellant-Revenue's argument that the Respondent's work being executed prior to commencement of electricity flow cannot qualify as "services in relation to transmission & distribution of electricity", is entirely misconceived. The phrase "in relation to" has been consistently interpreted by various Courts to include preparatory, enabling and supportive activities. In this regard, he relies on the following deci....
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....in below: "31.6 Thus, it is quite clear to understand that based 'relating to' used in the said Notification is exhaustive. However, such services should be with respect to transmission and distribution of electricity. The relevance of the same has also been discussed in the recent judgment in the case of Paschimachal Vidyut Vitran Nigam Ltd. v. CCE, Meerut, 2012 (28) STR 412 (Tri. Del) in which the scope of the said Notification is amply discussed. Hence, the limited issue is whether the facts of the instant case are pari materia with the said Notification. In the instant case, it is observed that the service provider is SPIL and service receivers are various client like Power Grid Corporation of India Limited (PGCIL), National Hydroelectric Power Corporation (NHPC), various State Electricity Boards (SEBs) and Bhutan Power Corporation, Bhutan. 31.7 As already noted above by the contents, nature, purpose and scope of the said contracts, it is quite discernable vide para 9 of the impugned Show Cause Notice that the SPIL was required to supply, construct and erect sub-Station [Sub-station Package (Package-D) for Transmission System project of BSEB], and to s....