2014 (8) TMI 517 - AT - Service Tax

Erection of pole / tower, erection of earthing and other maintenance and repairing work of their clients - activity as claimed by the appellant that they are laying cables but does not reveal from the works order - Held that - for the purpose of billing the consumer for electricity consumed it is 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. - referring to the decision in the case of Paschimanchal Vidyut Vitran Nigam 2012 (8) TMI 688 - CESTAT, NEW DELHI , demand set aside - matter remanded back.

Summary

Issues:
Tax liability on services rendered to different parties.

Analysis:
The judgment by the Appellate Tribunal CESTAT Ahmedabad involved two appeals against the OIA No.RJT-EXCUS-000-APP-454-455-13-14. The appeals raised a common issue regarding the tax liability of services provided by the appellant to various parties. The appellant had rendered services related to laying electric cables between grids, sub-stations, and distribution points for residential or commercial areas. The lower authorities held against the appellant, stating that the services provided were akin to foundation work, pole erection, and maintenance activities for the clients, who supplied materials like poles, wires, and insulators. The first appellate authority ruled against the appellant based on these grounds.

The appellant argued citing Board's Circular No.123/5/2010-TRU, which specified that laying electric cables up to the distribution point is not a taxable service. They also referenced a similar case in Delhi where it was held that certain activities related to distribution of electricity energy are not taxable. The Departmental Representative reiterated the findings and mentioned that the services were provided to private parties as well.

After considering the submissions and perusing the records, the Tribunal found that the primary contest in the appeals was regarding the tax liability of services provided to specific parties. The Tribunal upheld the tax liability for services rendered to some parties as the appellant did not contest it and had already paid the tax along with interest. However, concerning the services provided to other parties, the Tribunal analyzed payment vouchers showing various activities like erection, mounting of switches, and transformers, which were considered taxable under erection, commissioning, and installation services.

The Tribunal referred to a similar case and held that all taxable services related to the distribution of electrical energy are exempt from service tax. Activities like installation of sub-stations, transmission towers, and meters are crucial for effective distribution of electricity energy and are exempt from service tax. Therefore, the Tribunal set aside the demands in respect of service tax liability on services rendered to certain parties and also revoked the penalties imposed on the appellant for those tax demands. The appeals were allowed based on the judicial pronouncements, and the penalties were set aside invoking the provisions of Section 80 of the Finance Act, 1994, due to a genuine belief that laying cables and towers for private parties might not be taxable events.

In conclusion, the Tribunal allowed the appeals to the extent indicated in the judgment, setting aside the demands and penalties related to service tax liability on services provided to specific parties.