2019 (6) TMI 862 - AT - Service Tax

Classification of services - management, maintenance and repair service or not? - appellants are engaged in the operations of power plants of others for generation of electricity - time limitation - HELD THAT - The appellants are engaged in the operations of power plants of others for generation of electricity; most of their clients belong to Steel/Automobile industry; by virtue of contracts entered there-into - The appellants charged operation fee and maintenance fee separately from the customers. They have been discharging Service Tax on maintenance fee collected by them from 01.07.2003. Tribunal in the case of Operational Energy Group of India Pvt. Ltd. v. CST, Chennai 2017 (6) TMI 225 - CESTAT CHENNAI has held that the activity would not fall under management of immovable property . That it will get covered under the definition of Business Auxiliary Service; the dominant activity carried out in the power plant being generation of electricity and maintenance of the power plant being only an incidental one. That generation of electricity amounts to manufacture of goods within the meaning of section 2(f) of the Central Excise Act, 1944. That electricity is mentioned under Chapter Heading 27.16 of the First Schedule to the Central Excise Tariff Act, 1985, with effect from 01.03.2005 and electricity being an excisable product, though with nil rate of duty. In the present case, the sole purpose of management of the immovable property. In the present case, the sole purpose is not management of immovable property. Further, the management, if any, of the power plant is done by the appellants and is only incidental to the activity of generation of electricity. The activity carried out in the power plant is not solely management of power plant, but operation of the same. The word operation is not used in the definition of Maintenance and Repair services which is relied by department as amended with effect from 16.06.2005. The said word in seen used in the definition of Business Support Services ( Operational assistance ). Thus, it is very much clear that management of immovable property does not include operation activities. In addition, it cannot be said that the appellants are doing management service for the reason that the management service is done by appellants to themselves and not to any other person. The appellants are operating the power plant to generate electricity on behalf of the owner for supplying the same to TNEB. Appeal allowed - decided in favor of appellant.

Issues Involved:
1. Whether the operation of power plants by the appellants falls under the category of "Management, Maintenance or Repair Services".
2. Applicability of service tax on "operation fees" for the period from 16.6.2005 to 30.4.2006.
3. Whether the demand beyond the normal period is barred by limitation.
4. Imposition of penalties under Sections 76, 77, and 78 of the Finance Act, 1994.

Detailed Analysis:

1. Operation of Power Plants and "Management, Maintenance or Repair Services":
The appellants, engaged in operating power plants, argued that their activities do not fall under "management" as defined in "Maintenance or Repair Services". They cited the principle of "Noscitur A Sociis" to argue that "management" should take its meaning from "maintenance" and "repair", which do not include the operation of power plants. The Tribunal agreed, noting that the appellants were directly involved in the execution of work (generation of electricity) rather than merely managing the property. The Tribunal referenced previous judgments, including CLP Power India Pvt. Ltd. v. CST, Mumbai, which held that the operation of a power plant does not fall under "Management, Maintenance or Repair Services".

2. Service Tax on "Operation Fees":
The appellants contended that they were not liable to pay service tax on "operation fees" for the period from 16.6.2005 to 30.4.2006. They argued that the activities undertaken were for the smooth functioning of the plant and were in the nature of self-service. The Tribunal found that the appellants were already paying service tax on "maintenance fees" and that the operation of the power plant did not constitute "management of immovable property". Thus, no additional service tax could be demanded under this category.

3. Demand Beyond Normal Period and Limitation:
The appellants argued that the demand beyond the normal period was barred by limitation as there was no suppression of facts with the intent to evade tax. They maintained that they were under a bona fide belief that service tax was not applicable to their operations. The Tribunal agreed, noting that the department was aware of the facts from the beginning and had previously issued a show cause notice for a different period. The Tribunal concluded that the demand for the period 16.6.2005 to March 2006 was barred by limitation.

4. Imposition of Penalties:
The appellants argued against the imposition of penalties under Sections 76, 77, and 78 of the Finance Act, 1994, citing that the issue involved was one of interpretation of provisions. The Tribunal agreed, referencing several judicial decisions that supported the appellants' bona fide belief and concluded that no penalties should be imposed. The Tribunal also noted that simultaneous penalties under Sections 76 and 78 were incorrect.

Conclusion:
The Tribunal set aside the impugned order and allowed the appeal with consequential relief, if any, concluding that the operation of power plants by the appellants did not fall under "Management, Maintenance or Repair Services" and that the demand beyond the normal period was barred by limitation. No penalties were imposed due to the bona fide belief and interpretation issues involved.

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