2012 (8) TMI 688 - AT - Service Tax

Demand of service tax - services provided in respect installation of meters at the premises of electricity consumers - claim of exemption benefit provided by Notification No. 45/2010-ST dated 20.07.2010 - Held that - As the assessee is engaged in transmission and distribution of electricity after purchasing the same from U.P. Power Corporation Limited and is selling electricity to the consumer, thus for bill the consumer for electricity consumed it is essential to install the electricity meter having capacity to withstand the load provided to the consumer. Thus, any activity or service like erection, commissioning and installation of meters as also technical testing and analysis can easily be termed as the service relating to the transmission and distribution of electricity provided by the service provider to the service receiver - claim of benefit of Notification No. 45/2010-ST allowed - in favour of assessee.

Summary

Issues:
1. Interpretation of Notification No. 45/2010-ST dated 20.07.2010 regarding exemption of service tax for services related to transmission and distribution of electricity.

Analysis:
The judgment by the Appellate Tribunal CESTAT, New Delhi involved cross-appeals by M/s Paschimanchal Vidyut Vitran Nigam Ltd. and the Commissioner of Central Excise, Allahabad against an order-in-Original. The order confirmed a service tax demand of Rs. 16,61,39,016/- against the appellant under Section 73(1) and (2) of the Finance Act, 1994. The appellant was engaged in purchasing electricity from Uttar Pradesh Power Corporation Ltd. and transmitting it to consumers. The dispute arose when the department alleged that the appellant was also involved in taxable services like "erection, commissioning, installation," and "technical testing and analysis." A show-cause notice was issued based on the appellant's balance sheets, leading to the demand for service tax. The appellant contested, claiming the income under "other income" did not relate to taxable services. The jurisdictional Commissioner dropped a substantial portion of the demand but confirmed Rs. 8,87,859/- as service tax demand and imposed penalties.

The main issue revolved around whether the services provided by the appellant, including erection, commissioning, installation, and technical testing, would be covered under the exemption provided by Notification No. 45/2010-ST dated 20.07.2010. The notification exempted taxable services related to transmission and distribution of electricity from service tax. The Tribunal analyzed the notification and found that services like installation of meters for electricity consumers were essential for billing consumers for electricity consumption. Therefore, activities related to transmission and distribution of electricity, including erection, commissioning, and installation of meters, fell under the exemption. The Tribunal referred to a similar case and concluded that the services in question were covered by the exemption. As a result, the Department's appeal was dismissed, and the appellant's appeals were allowed, setting aside the demand confirmed by the impugned order.

In conclusion, the Tribunal's judgment clarified the scope of the exemption under Notification No. 45/2010-ST, emphasizing that services related to transmission and distribution of electricity, including activities like installation of meters, were exempt from service tax. The decision provided a detailed analysis of the appellant's activities and the applicability of the exemption, ultimately ruling in favor of the appellant and dismissing the Department's appeal.