2013 (8) TMI 746 - AT - Service Tax

Erection, Commissioning & Installation Service u/s 65(39) r.w 65(105)(zzb) - retrospective exemption regarding transmission and distribution of electricity - assesse claimed immunity to tax on the basis of Notification No. 45/2010 - Held that - All taxable services provided in relation to distribution of electrical energy were exempt from the liability to service tax - The expression in relation to was of wide import and indicated all activities having a direct and proximal nexus with distribution of electrical energy - Distribution of electricity energy cannot be effectively accomplished without installation of sub-stations, transmission towers and installation of meters to record electricity consumption for periodic billing and recovery of charges. M. P. Power Transmission Co. Ltd. vs. CCE Bhopal 2011 (2) TMI 982 - CESTAT, NEW DELHI - Revenue demand of service tax on transmission and distribution of electricity was declared unsustainable in view of Notification No. 45/2010 the purpose of billing the consumer for electricity consumed it ws essential to install the electricity meter having capacity to withstand the load provided to the customer - any activity or service like erection, commissioning and installation of transmission towers and meters as also technical testing and analysis would constitute the activity of transmission and distribution by the service provider to the service receiver - and such service would be squarely covered under exemption provided under this notification order was unsustainable and was accordingly quashed Decided in favor of assesse.

Summary

Issues:
1. Whether the assessee is liable to pay service tax under the Erection, Commissioning & Installation Service for providing electricity distribution services.
2. Whether the assessee is eligible for exemption from service tax under Notification No. 45/2010-ST dated 20.07.2010.
3. Whether the installation of various equipment by the assessee is an integral part of the distribution of electricity and qualifies for exemption from service tax.

Analysis:

Issue 1: The Appellate Tribunal considered the adjudication order passed by the Commissioner, confirming the demand of service tax, interest, and penalties against the assessee for providing electricity distribution services. The assessee, a distribution licensee under the Electricity Act, claimed immunity from service tax under the Erection, Commissioning & Installation Service. The Tribunal analyzed the nature of the assessee's business, involving the creation and maintenance of a distribution network for supplying electricity to consumers. The revenue initiated proceedings based on the taxable head Erection, Commissioning & Installation Service, under the Finance Act, 1994. The Tribunal examined the services provided by the assessee, including the installation of transmission towers, connectors, and meters for energy supply, and the periodic recovery of charges for these services.

Issue 2: The Tribunal delved into the provisions of Notification No. 45/2010-ST dated 20.07.2010, which exempted service tax on activities related to the transmission and distribution of electricity until specific dates. The Tribunal highlighted the policy choice made by the Central Government to exempt the levy of service tax on distribution of electrical energy by distribution agencies. The Tribunal emphasized that the exemption notification signaled a clear policy decision exempting service tax on activities related to the distribution of electrical energy.

Issue 3: The Tribunal scrutinized the Adjudication Authority's analysis of the assessee's claim for immunity from service tax under the exemption notifications. The Authority held that the installation of various equipment at consumers' premises was not exempt from service tax as it was considered different from the distribution of electricity. The Tribunal disagreed with this interpretation and concluded that all taxable services related to the distribution of electrical energy were exempt from service tax. Citing relevant case laws, the Tribunal emphasized that activities like installation of meters and transmission towers were integral to the distribution of electricity and qualified for exemption under the notification.

In light of the above analysis, the Tribunal found the adjudication order unsustainable and quashed it based on the precedents set by previous decisions. The appeal by the assessee was allowed, and the stay petition was disposed of without costs.