2024 (2) TMI 1401 - AT - Service Tax

Levy of service tax - Erection, Commissioning and Installation Service - various charges recovered by the appellant from the consumers for the erection of Bays, Sub-stations and Transmission Lines - service tax to the extent of 50% under reverse charge on work contract service received by the appellant - only dispute raised by the Revenue is that only service which is directly a service of transmission of electricity is exempted not the present service - Extended period of limitation - Interest on reversal of CENVAT Credit. Levy of service tax - HELD THAT - This issue has been considered in various judgments that any service which is provided in relation to transmission of electricity is exempted under Notification Nos. 45/2010-ST dated 20.07.2010, 11/2020- ST dated 27.02.2010 and as per negative list under Section 66D of the Finance Act, 1994. Reliance placed in Torrent Power Limited 2019 (1) TMI 1092 - GUJARAT HIGH COURT where it was held that ' The services provided by the petitioner are in the nature of composite supply and therefore, in view of the provisions of clause (a) of Section 8 of the CGST Act, the tax liability thereof has to be determined by treating such composite same as a supply of the principal supply of transmission and distribution of electricity. Consequently, if the principal supply of transmission and distribution of electricity is exempt from levy of service tax, the tax liability of the related services shall be determined accordingly.' In the case of M/S HYDERABAD POWER INSTALLATIONS PVT LTD. VERSUS CC, CE ST, HYDERABAD-II 2016 (7) TMI 599 - CESTAT HYDERABAD it was held that 'the demand raised under ECIS is unsustainable and requires to be set aside.' From the above judgments it can be seen that the entire period in the present appeal i.e. related to Notification No. 45/2010-ST, 11/2010-ST and also for the period when negative list under Section 66D was in force, it was held that service for transmission of electricity is not leviable to service tax. Therefore, the issue is no longer res-integra. Accordingly, in the present case also the service tax liability in respect of Erection, Commissioning and Installation Service is not sustainable. Extended period of limitation - Interest on reversal of CENVAT Credit - HELD THAT - There is no dispute that the demand of interest was also raised by invoking extended period. As per facts and circumstances, there is no suppression of facts on the part of the appellant therefore, even for the demand of interest, the longer period cannot be invoked. The Hon ble Supreme Court in the case of Commissioner vs. TVS Whirlpool Limited 1996 (4) TMI 232 - CEGAT, MADRAS held that 'The Appellate Tribunal in its order in question had held that where no time limit is prescribed for demand/recovery of interest under Sections 47 and 61(3) of the Customs Act, 1962, then taking into consideration the scheme of Central Excise law and the limitation periods prescribed under different sections and rules. A reasonable period of limitation would be six months or five years, as the case may be, as provided under Section 28 of the Customs Act, 1962. Therefore, the demand for interest beyond the period of six months from clearance of goods is barred by limitation.' - the demand of interest for the longer period will not sustain. The demand is not sustainable - the impugned order is set-aside - appeal allowed.

Summary

Issues Involved:
1. Taxability of services related to the transmission of electricity.
2. Applicability of exemption notifications.
3. Demand of interest on Cenvat credit.
4. Limitation period for demand and interest.

Issue-wise Detailed Analysis:

1. Taxability of Services Related to Transmission of Electricity:
The primary issue was whether the services provided by the appellant, a Gujarat Government Company, for the erection of Bays, Sub-stations, and Transmission Lines, which are essential for the transmission of electricity, are liable to service tax. The appellant argued that these services are exempt under various notifications and the negative list regime.

Key Judgments and Findings:
- Torrent Power Limited: The Gujarat High Court held that services related to the transmission and distribution of electricity are exempt from service tax as they are essential activities with a direct and close nexus to the transmission and distribution of electricity.
- Hyderabad Power Installations: The Tribunal reiterated that services related to the erection, commissioning, or installation of electrical infrastructure are exempt under Notification No. 45/2010-ST and subsequent notifications.
- Madhya Pradesh Power Transmission Company Limited: The Tribunal confirmed that consultancy services incidental to transmission activities are exempt from service tax.
- Tamilnadu Generation and Distribution Corporation Ltd: The Tribunal emphasized that all activities directly related to the transmission and distribution of electricity are exempt from service tax under the relevant notifications and the negative list.

2. Applicability of Exemption Notifications:
The appellant claimed exemption under Notification No. 45/2010-ST and Notification No. 11/2010-ST, which exempt services related to the transmission and distribution of electricity.

Key Judgments and Findings:
- Torrent Power Limited: The Court clarified that the exemption notifications cover all services directly related to the transmission and distribution of electricity.
- Hyderabad Power Installations: The Tribunal confirmed that services provided for the erection and installation of electrical infrastructure are exempt under the relevant notifications.
- Tamilnadu Generation and Distribution Corporation Ltd: The Tribunal held that all services necessary for the transmission and distribution of electricity are exempt from service tax under the relevant notifications and the negative list.

3. Demand of Interest on Cenvat Credit:
The appellant argued that since the Cenvat credit was reversed without utilization, no interest should be demanded.

Key Judgments and Findings:
- Commissioner vs. TVS Whirlpool Limited: The Supreme Court held that the period of limitation for claiming interest should be the same as for the principal amount.
- Commissioner vs. Emco Limited: The Bombay High Court affirmed that the limitation period for recovering interest should align with the period for the principal demand.
- Hyderabad Power Installations: The Tribunal noted that if the credit and its reversal are reflected in the records, suppression of facts cannot be alleged, and hence, the extended period for demanding interest is not applicable.

4. Limitation Period for Demand and Interest:
The appellant contended that the demand for an extended period is not sustainable due to the absence of suppression of facts.

Key Judgments and Findings:
- Torrent Power Limited: The Court observed that the exemption for services related to transmission and distribution of electricity applies retrospectively, negating the need for service tax for the disputed period.
- Hyderabad Power Installations: The Tribunal emphasized that the demand for interest should be within the limitation period, and the extended period cannot be invoked without evidence of suppression of facts.
- Madhya Pradesh Power Transmission Company Limited: The Tribunal set aside the demand for consultancy charges and liquidated damages, affirming that such demands cannot be sustained beyond the limitation period.

Conclusion:
The Tribunal concluded that the services provided by the appellant for the erection of Bays, Sub-stations, and Transmission Lines are exempt from service tax under the relevant notifications and the negative list. The demand for interest on Cenvat credit was also held to be unsustainable due to the absence of suppression of facts and the applicability of the limitation period. The appeals were allowed, setting aside the impugned orders.