2025 (3) TMI 742 - AT - Service Tax

Failure to pay the appropriate service tax on Erection Commissioning and Installation Service and Works Contract Service under Reverse Charge Mechanism as per the applicable provisions while providing transmission services as per Electricity Act 2003 - demand for interest on Cenvat credit reversed by the appellant - invocation of Extended period of limitation - HELD THAT - It is found that consistently this Bench has held that the appellant are entitled to benefit sought of tax being exempted. The matter is squarely covered with adverse decision to the revenue of this Tribunal as on date. In this regard para 7 9 of the decision in GUJARAT ENERGY TRANSMISSION CORPORATION LIMITED VERSUS COMMISSIONER OF CENTRAL EXCISE ST ANAND 2024 (2) TMI 1401 - CESTAT AHMEDABAD where it was held 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. Conclusion - i) The services related to the transmission of electricity are exempt from service tax. ii) The demand for interest for the longer period would not sustain. Appeal allowed.

1. ISSUES PRESENTED and CONSIDERED

The core legal issues considered in this judgment include:

Whether the appellant is liable to pay service tax on "Erection, Commissioning and Installation Service" and "Works Contract Service" under the Reverse Charge Mechanism as per the applicable provisions while providing transmission services as per the Electricity Act, 2003.
Whether the demand for interest on Cenvat credit reversed by the appellant is sustainable, particularly when the demand is raised by invoking the extended period.

2. ISSUE-WISE DETAILED ANALYSIS

Issue 1: Liability to Pay Service Tax

Relevant legal framework and precedents: The appellant, a Gujarat Government Company, was notified as a State Transmission Utility under the Electricity Act, 2003. The service tax demand was based on charges recovered under "Erection, Commissioning and Installation Service" as defined in Section 65 (105) (zzd) of the Finance Act 1994. The Tribunal referred to previous decisions, including Notification No. 45/2010-ST, 11/2010-ST, and the negative list under Section 66D, which exempted transmission of electricity from service tax.
Court's interpretation and reasoning: The Tribunal consistently held that the appellant was entitled to the benefit of tax exemption for services related to the transmission of electricity. The Tribunal found that the issue was no longer res integra, meaning it had been conclusively settled in favor of the appellant in previous judgments.
Key evidence and findings: The Tribunal relied on previous orders in the appellant's favor, which were not stayed by higher judicial fora, indicating a consistent interpretation that the services in question were not subject to service tax.
Application of law to facts: The Tribunal applied the legal precedent that exempted transmission services from service tax to the appellant's case, determining that the demand for service tax was not sustainable.
Treatment of competing arguments: The Revenue argued against the acceptance of the appeal, citing ongoing appeals in higher judicial fora. However, the Tribunal noted the absence of a stay against the relied-upon orders.
Conclusions: The Tribunal concluded that the service tax liability for "Erection, Commissioning and Installation Service" was not sustainable, and the appeal was allowed.

Issue 2: Demand for Interest on Cenvat Credit

Relevant legal framework and precedents: The demand for interest was raised by invoking the extended period, which the Tribunal examined in light of precedents such as the Supreme Court's decision in Commissioner vs. TVS Whirlpool Limited and the Bombay High Court's decision in Commissioner vs. Emco Limited.
Court's interpretation and reasoning: The Tribunal found no suppression of facts by the appellant, which would justify invoking the extended period for interest demand. The Tribunal referenced the principle that the limitation period for the principal amount should apply to interest claims.
Key evidence and findings: The Tribunal noted the absence of facts justifying the extended period and relied on the Supreme Court's reasoning that a reasonable limitation period for interest claims should align with that for the principal amount.
Application of law to facts: Applying the Supreme Court's decision, the Tribunal determined that the demand for interest beyond the standard limitation period was not sustainable.
Treatment of competing arguments: The Tribunal addressed the Revenue's arguments by emphasizing the established legal principles regarding limitation periods for interest demands.
Conclusions: The Tribunal concluded that the demand for interest for the longer period would not sustain, and the appeal was allowed.

3. SIGNIFICANT HOLDINGS

Verbatim quotes of crucial legal reasoning: "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."
Core principles established: The Tribunal reaffirmed the principle that services related to the transmission of electricity are exempt from service tax. Additionally, it upheld the principle that the limitation period for interest claims should align with the period for the principal amount.
Final determinations on each issue: The Tribunal set aside the impugned order, allowing the appeal and granting consequential relief to the appellant.

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