2017 (9) TMI 1120 - AT - Service Tax

Erection, commissioning or installation services - works contract services - management, maintenance or repair services - works orders/ agreements executed by the appellants mainly for Jodhpur Vidyut Vitran Nigam Nigam Ltd. and Dakshin Haryana Bijli Vitran Nigam - N/N. 11/2010-ST dated 27.02.2010 - Held that - Admittedly the appellants are providing various services, which are connected to transmission/ distribution of electricity. All such services provided in relation to transmission or distribution of electricity by a person to any other person has been exempted by the N/N. 45/2010-ST dated 20.07.2010, which was issued in terms of Section 11 C, for retrospective operations - the services rendered by the appellant in connection with transmission (upto 26.02.2010) and distribution (upto 21.06.2010) are exempted from tax liability. For the period post 26.02.2010 (for transmission), as the Notification stipulates that taxable service provided to any person, by any other person for transmission of electricity is exempt from Service Tax. Neither the taxable service nor the provider of service, nor the recipient of service is qualified by any restriction. The Revenue contends that the service for transmission of electricity is only exempt - the services rendered by the appellant, wherever they are for transmission of electricity are to be exempted. In other words, the exemption under N/N. 11/2010-ST is not only for the taxable service of transmission of electricity. Regarding confirmation of Service Tax under works contract service, we note that the application of Notification No.11/2010 has to be examined in view of the above findings and the tax liability has to be calculated only with reference to such taxable services, which are not for transmission of electricity. Appeal allowed by way of remand.

Summary

Issues:
Tax liability under different categories of services provided by the appellant, applicability of specific notifications exempting services related to transmission and distribution of electricity, classification of contracts under works contract service, imposition of penalties under various sections of the Finance Act, 1994.

Analysis:
The appeal addressed the tax liability of the appellant concerning services provided under various contracts, including erection, commissioning or installation service, works contract service, and management maintenance or repair service. The dispute centered around the demand for Service Tax amounting to &8377; 1,23,64,174/- for the period 2007-08 to 2011-12, along with penalties imposed under different sections of the Finance Act, 1994. The appellant contended that certain services provided to electricity companies should be exempt based on specific notifications, namely Notification No.45/2010-ST and Notification No.11/2010-ST. The appellant argued that services related to transmission and distribution of electricity were exempted under these notifications, and thus, the tax liability should be re-evaluated. The appellant also challenged the classification of contracts, asserting that they should fall under works contract service rather than other categories.

The Tribunal considered the contentions of both parties and analyzed the notifications in question. It was observed that services connected to transmission or distribution of electricity were indeed exempted under Notification No.45/2010-ST for specific periods. For services post the specified dates, the Tribunal agreed with the appellant's interpretation of Notification No.11/2010, exempting taxable services related to transmission of electricity without imposing restrictions on the provider, recipient, or nature of service. The Tribunal ruled that services for transmission of electricity should be exempted, irrespective of the specific service category.

Regarding the classification of contracts, the Tribunal agreed with the appellant that contracts involving supply of materials and services should be treated as works contract service. The Tribunal directed the original authority to re-calculate the tax liability under works contract service for contracts not related to transmission of electricity. The Tribunal set aside the impugned order and remanded the matter for re-computation of tax liability based on the observations made.

In conclusion, the Tribunal upheld the appellant's claims regarding exemptions under specific notifications and reclassification of contracts under works contract service. The penalties imposed were not specifically addressed in the judgment, suggesting that the focus was primarily on resolving the tax liability issues.