TaxTMI 
TaxTMI 
2026 (7) TMI 1673
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....eir clients; d. whether demand can be confirmed by invoking extended period of limitation. 2. The brief facts are the Appellant M/s. KPTCL a company incorporated in India engaged in the activity of transmission of electricity as State Transmission Utility from power generating companies to the power distribution companies. On the basis of audit of the records of the appellants, show cause notices were issued to the appellant alleging that Service tax has not been paid on the following activities; a. Appellant KPTCL was formed as part of re-organisation of the electricity generation, supply and distribution activity in terms of Karnataka Electricity Reforms Act, 1999. The erstwhile KEB was reconstituted to form KPTCL (which undertakes transmission activity) and ESCOMS to undertake distribution of the electricity. During reconstruction of KEB, some of the buildings transferred to KPTCL by KEB are being used by ESCOMs (all over the state), for which as policy of transfer pricing, a nominal rent is (as provided by the Government of Karnataka) charged and collected from ESCOMs, service tax was demanded on the said amount of nominal rent collected from ES....
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....ated through a statue and also undertakes the regulated functions of transmission of power. The appellant is a sole licensee to transmit power. Consequently, as clarified by the Board vide Circular No.89/7/2006-ST dated 18.12.2006, public authorities under the provision of law are not covered within the ambit of service tax net. Registration under the Companies Act, 2013 will not take away the fact that M/s. KPTCL being the State Transmission Utility as notified by the Government is undertaking statutory functions relating to the transmission of electricity. In this regard, Learned Counsel relied on the following decisions:- (i) MD HSIDC and others Vs. Hari Om Enterprise and Another AIR - 2009 SC 218 (ii) Karnataka Industrial Areas Dev. Board Vs. Commr. of Central Tax Bangalore North - 2020 (40) GSTL 33 (Tri. - Bang.) (iii) Kerala State Electricity Board (TMR Division) Vs. CCE, Cochin, 2007 (8) STR 403 (Tri. - Bang. 6. Learned Counsel further submits that entire demand in the above 8(eight) appeals are prima facie unsustainable since any service provided in relation to transmission and distribution of electricity is exempt from service tax in ter....
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....inspection regarding the transmission activity, and no service tax can be levied on such amounts. In support of this, learned counsel relied on the decision of the Hon'ble Supreme Court in the matter of UOI Vs. Intercontinental Consultants and Technocrats Pvt. Ltd. - 2018 (10) G.S.T.L 401 (SC) and Rule 5 (1) of the Service Tax (Determination of Value) Rules, 2006. 9. Learned Counsel also draws our attention to the Notification No. 45/2010-S.T. dated 20.07.2010. Relevant para of the notification is reproduced below:- "In exercise of the powers conferred by section 11C of the Central Excise Act, 1944 (1 of 1944), read with section 83 of the said Finance Act, the Central Government hereby directs that the service tax payable on said taxable services relating to transmission and distribution of electricity provided by the service provider to the service receiver, which was not being levied in accordance with the said practice, shall not be required to be paid in respect of the said taxable services relating to transmission and distribution of electricity during the aforesaid period". 9.1. In this regard, Learned Counsel submits that the issue is considered by....
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....on 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-S.T., 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 of electricity, the same is covered by the exemption for transmission and distribution of electricity extended under relevant notifications. 13. Thus, the reason for saying that supply of electricity meters for hire to consumers is covered by the exemption notification is that such service is an essential activity having direct and close nexus with transmission and distribution of electricity. This circular only provides an interpretation....
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.... of inclusion of such services in the list of negative services under Section 66D(k) of the Finance Act as well as by virtue of exemption notification issued under the CGST Act. - 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. 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 re....
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....and distribution of electricity and, would therefore, be exempt from payment of service tax. - The services provided by the petitioner are in the nature of composite supply and therefore, in view of the provisions of clause (a) of Section 8 of the CGST 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". 11. Learned Counsel further submits that the issue was also considered by the Tribunal in the matter of Tamil Nadu Generation and Distribution Corporation Ltd. Vs. Commissioner of GST & Central Excise - (2024) 18 Centax 145 (Tri. - Mad.) wherein it is held that:- "9. It would now merit to examine the individual activities sought to be taxed by the department. The description of the activity as given by the appellant is mentioned below:- (i) Registration /application /name transfer from Wind Energy Generators (WEG): ['Business Auxiliary Serv....
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.... and from the said date they figure in the negative list as per Section 66D(k) of the Finance Act 1994. Hence the appeal succeeds. 10. Since the issue has been decided on merits in favour of the appellant the question of paying duty, interest, penalties or of invoking the extended period does not arise. 11. Thus, the impugned order's No. CHN-SVTAX-001-COM-13-201415 dated 29-1-2015, No. CHN-SVTAX-001-COM-97-2016-17 dated 22-2-2017 and No. 111/2018 Ch. N. GST (Commr.) 20-11-2018 are set aside and the appeals are allowed with consequential relief, if any, as per law. The appeals are disposed off accordingly". 12. As regarding demand in Service Tax in Appeal No. ST/21219/2017, Learned Counsel draws our attention to the finding of the Hon'ble High Court of Gujarat in the matter of Torrent Power Ltd. (supra). As regards interest and penalty, Learned Counsel submits that there is no intention on the part of the appellant to evade payment of service tax. There is no liability at the hands of the appellant to pay service tax on the reimbursement amounts collected by them, hence no question of penalty arises and relied on the decision of the Hon'ble Supre....