2008 (5) TMI 15 - AT - Service Tax

Applicability of Service Tax on services provided by private companies relating to generation, supply, distribution etc. on behalf of state power board (state governments, i.e. Madhya Pradesh Electricity Board) to the consumers - Demand was raised to the tune of Rs. 67,28,53,038/-. CESTAT has found that prima fascia the service is taxable under the category of Business Support Service and ordered to deposit Rs. 5 crore and stay granted for the balance demand from pre-deposit

Issues Involved:
1. Liability to pay Service Tax on Business Support Service.
2. Definition and applicability of 'support services of business or commerce'.
3. Nature of services provided by the appellant.
4. Applicability of the Board's Circular dated 18.12.2006.
5. Requirement of pre-deposit under Section 35-F of the Central Excise Act.

Issue-wise Detailed Analysis:

1. Liability to Pay Service Tax on Business Support Service:
The appellant was held liable to pay Service Tax on Business Support Service provided to various Vidyut Vitaran Companies in Madhya Pradesh. The Commissioner of Central Excise confirmed a demand of Rs. 67,28,53,038/- under Section 73 of the Finance Act, 1994, with interest under Section 75 of the Act. The appellant sought a waiver of the pre-deposit required under Section 35-F of the Central Excise Act.

2. Definition and Applicability of 'Support Services of Business or Commerce':
The definition of 'support services of business or commerce' under Section 65(104c) was central to the dispute. The appellant argued that their functions, being governmental and statutory under the Electricity Act, did not fall under this definition. However, the Revenue contended that the appellant's services facilitated the sale and distribution of electricity, a business activity, and thus fell within the scope of 'support services of business or commerce' under Section 65(105)(zzzq) read with Section 65(104c).

3. Nature of Services Provided by the Appellant:
The appellant's activities included managing the transmission of electricity to ensure minimal losses and suitable voltage for distribution, which were seen as integral to the business of electricity generation and sale. The Tribunal noted that these services had a close nexus with the business activities of TRANSCO and DISCOMS, and thus constituted support services in relation to business or commerce.

4. Applicability of the Board's Circular Dated 18.12.2006:
The appellant cited a Board Circular that exempted certain statutory authorities from Service Tax, arguing that their functions were similar. However, the Tribunal found this circular inapplicable, as the appellant and similar entities were engaged in business activities and the charges collected were not deposited into the government treasury but maintained in company accounts.

5. Requirement of Pre-deposit Under Section 35-F of the Central Excise Act:
Given the public nature of the appellant's functions and the potential impact on consumers, the Tribunal deemed it inappropriate to require the full pre-deposit of the tax amount. Instead, a deposit of Rs. 5 crores was considered sufficient compliance with Section 35-F, pending final resolution of the issue.

Conclusion:
The appellant was directed to deposit Rs. 5 crores within ten weeks and report compliance. The Tribunal clarified that the observations made were limited to the disposal of the application under Section 35-F and did not constitute a final opinion on the matter.

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