TaxTMI 
TaxTMI 
2026 (9) TMI 1671
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....(2) of the Finance Act, 1994, came to be confirmed against the appellant. 2. The facts of the case are that the appellant/AEGCL is the State transmission utility responsible for transmission of electrical energy in the State of Assam. During the course of audit of the books of account and financial records of the appellant, including its Profit and Loss Account, the Department noticed certain receipts which, according to the Audit, represented consideration towards taxable services and had not suffered Service Tax. The receipts were broadly noticed under two heads, namely, SLDC charges recovered from Assam Power Distribution Company Ltd. (APDCL) and amounts received from various entities namely, Power Grid Corporation of India Ltd. (PGCIL), Indian Energy Exchange Ltd. (IEX) and Power System Operation Corporation Ltd. (POSOCO), towards use of the appellant's transmission network/infrastructure for wheeling of electrical energy under Short-Term Open Access (STOA) and Mid-Term Open Access (MTOA). 3. In respect of the first category, it was noticed that, during the period from October, 2013 to March, 2017, the appellant had collected amounts described as SLDC charges, aggrega....
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....frastructure for Short-Term Open Access (STOA) and Mid-Term Open Access (MTOA). The appellant explained that the said receipts arose from Open Access transactions and represented amounts received in relation to the use of its transmission network for transmission/wheeling of electrical energy. 4.1. The Department however treated the permitting of such use of the appellant's transmission network/infrastructure as a service distinct from the actual transmission or wheeling of electrical energy. It was alleged that while transmission or wheeling of electrical energy by the concerned entities was covered by the negative list, the use of AEGCL's network/infrastructure by such entities constituted a taxable service under Section 65B(51) read with Section 66B of the Finance Act, 1994. The Audit accordingly computed Service Tax liability, including cesses, of Rs.18,28,02,970/- on the amounts received from PGCIL and Rs.4,49,79,661/- on the amounts received from IEX and POSOCO during the relevant period. 5. On the basis of the aforesaid audit objections, a Demand-cum-Show Cause Notice dated 05.04.2019 was issued to the appellant proposing recovery of Service Tax totally amounti....
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....nsmitted through the state grid including the energy exchanged through Power Exchange Entities and comply with the operational guidelines of NERLDC for overall system stability and security. (iv) SLDC Charges are levied on Long-Term Open Access and Medium-Term Open Access users in terms of Rs./MW in accordance with the GERC (MYT) Regulations, 2016 and the Tariff Orders issued by the Commission. Charges from Short-Term Open Access users are recovered from Parties as per the guidelines outlined in the Open Access Regulations. As regards GST on SLDC Charges, as per the provision of Section 8 of the Central Goods and Services Tax Act, 2017 as well as Notification No.12/2017- CT (R) Serial No. 25 dated 28.06.2017, Transmission and Distribution of electricity are exempted under GST. Hence, GST is not collected on SLDC Charges. (v) Transmission or distributions of electricity by an electricity transmission or distribution utility falls under the negative list of services in terms of Section 66 D of the Finance Act, 1994 as amended. But the "Audit Team" interpreted as "Since the said specific functions of AEGCL do not constitute wheeling or transmission of electricity, it....
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....smission Charges by whatever name it may be called, Income Tax Authorities have tried to cover it under TDS obligations whether as technical services u/s 194J, rent u/s 1941 or as transport services u/s 194C. It is a contentious issue from a long time that transmission services for power should be considered under which section to deduct the TDS or these services are not liable for any TDS deduction at all. (xii) In support of their contentions, the appellant places reliance on the following: - ▪ CIT v. M/s Delhi Transco Ltd (ITA No. 323 to 325/2015, 341/2015, 384/2012, 566/2013 & 570/2013) [Delhi High Court]; ▪ M/s Southern Power Distribution Company of Andhra Pradesh Ltd. [CESTAT, Hyderabad]; ▪ M/s WESCO UTILITY Vs. Commr. CGST & Excise, Rourkela, Orissa [Final Order No. 77589-77592/2025 dated 28.10.2025 [CESTAT, Kolkata ]; ▪ CIT (TDS), Mumbai v. Maharashtra State Electricity Distribution Co. Ltd. [2015] 58 taxmann.com 339 (Bombay ▪ Bangalore Electricity Supply Co. Ltd v. ITO [2013] 33 taxmann.com 641 (Bangalore ITAT), it was held that ▪ Madhya Pradesh Poorva Kshetra Vidyut Vitran v....
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....otification No. 12/2017-C.T. (Rate) (xv) Service tax liability of Rs. 14.11 lakhs charged more in comparison to the Appellants' Calculation. (Annexure is attached). Moreover, the liability calculated is not based of Service tax liability on CUM-basis. (xvi) Time-barred considering the normal period of issuance of SCN. A detailed statement is attached herewith. (xvii) Suppression of facts does not arise at all as the Appellant is a most important wing of the State of Assam rendering essential services like 'transmission of electricity' across the State of Assam. And there cannot be any motive of suppression of facts with an intent to devoid from paying statutory taxes like Service tax. Penalty proposed to impose u/s 78 of the Finance act, does not stand tenable in the eye of law, in view of above submission of facts. 7.1. In view of the above submissions made, the appellant seeks for quashing of the demand, along with interest, and imposition of penalties, as confirmed vide the impugned order. 8. The Learned Authorized Representative of the Revenue, reiterating the findings recorded in the impugned order, submits that while the transmissi....
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.... establish a Centre to be known as the State Load Despatch Centre for the purposes of exercising the powers and discharging the functions under the Part V of the said Act which relates to Transmission of Electricity. (2) The State Load Despatch Centre shall be operated by a Government company or any authority or corporation established or constituted by or under any State Act, as may be notified by the State Government: provided that until a Government company or any authority or corporation is notified by the State Government, the State Transmission Utility shall operate the State Load Despatch Centre." 10.1.1. Further, functions of the State Load Despatch Centres are defined under Section 32 of the Electricity Act, 2003, which provides that: - "(1) The State Load Despatch Centre shall be the apex body to ensure integrated operation of the power system in a State. (2) The State Load Despatch Centre shall- (a) be responsible for optimum scheduling and despatch of electricity within a State, in accordance with the contracts entered into with the licensees or the generating companies operating in that State; (b) monitor grid operations;....
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....gh which such transmission takes place. 12. In this context, we find considerable substance in the contention that the activities impugned in the present proceedings are intrinsically connected with, and form part of, the transmission and distribution of electricity. Transmission of electrical energy through a State-wide grid cannot be perceived merely as the physical movement of electricity through transmission lines. It necessarily involves the coordinated operation and supervision of the grid, monitoring of power flows, scheduling and despatch, maintenance of accounts relating to energy transmitted, regulation of access to the transmission system and the provision and utilisation of the infrastructure through which such electrical energy is transmitted. The functions of the SLDC and the provision of access to the transmission network are thus not extraneous activities which can be severed from the principal activity of transmission and distribution and independently subjected to Service Tax. They are components of, and are intrinsically linked to, the functioning of the transmission and distribution system itself. 13. The fact that certain charges are separately identified....
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....nd extending up to 2016-17, transmission or distribution of electricity by an electricity transmission or distribution utility was specifically covered by the negative list under Section 66D(k) of the Finance Act, 1994. The legislative exclusion was intended to take the specified activity of transmission or distribution of electricity outside the levy of Service Tax. Where an activity is so integrally connected with, and constitutes an inseparable component of, the transmission and distribution of electricity, it would be incongruous to subject the ancillary or indispensable components of that very activity to Service Tax by artificially disaggregating them from the principal service. In our considered view, therefore, the impugned activities cannot be subjected to Service Tax merely by assigning them a separate description or by treating the corresponding receipts as consideration for independent services. 15. The aforesaid view also finds support from the judicial pronouncements which have considered the scope of the exemption in relation to activities related or ancillary to transmission and distribution of electricity. The Hon'ble Gujarat High Court, in the case of Torrent P....
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....Bhopal [2023 (385) E.L.T. 152 (Tri. - Del.)] wherein the Bench observed that services incidental to or in connection with transmission of electricity cannot be subjected to the levy of Service Tax. The relevant portion of the said order reads thus: - "9. The appellant provides consultancy services to contractors and power DISCOMS while laying the power or electricity transmission lines, erection of electricity poles and construction of electricity substations. The appellant collects the amount for consultation services which are incidental to the transmission activities as the appellant has the expertise in power transmission. If the poles, lines or sub-stations are not erected or constructed as per the specifications, it will not be possible to transmit electricity. 10. The issue that arises for consideration is as to whether service tax could be levied on the amount collected by the appellant towards consultancy charges. This issue was examined by a Division Bench of the Tribunal in Madhya Pradesh Poorva Kshetra Vidyut Vitran Company Ltd. decided on 141-2021 and after placing reliance upon the decision of the Gujarat High Court in Torrent Power Ltd. v. Union of ....