ELECTRICITY TRANSMISSION AS SUPPORT SERVICES FOR BUSINESS OR COMMERCE

[Dr. Sanjiv Agarwal]

Service tax was  imposed on support services for business or commerce by the Finance Act, 2006 with effect from 1st May, 2006 (Notification No. 15/2006-ST dated 25.04.2006 refers). The gross amount charged by service provider to a person in relation to such taxable services is chargeable to service tax.

Meaning of Support Services of Business or Commerce (Section 65(104c)

Section 65(104c) (as inserted by Finance Act, 2006) defines 'support services of business or commerce' as under -

"support services of business or commerce" means services provided in relation to business or commerce and includes evaluation of prospective customers, telemarketing, processing of purchase orders and fulfilment services, information and tracking of delivery schedules, managing distribution and logistics, customer relationship management services, accounting and processing of transactions, operational assistance for marketing, formulation of customer service and pricing policies, infrastructural support services and other transaction processing.

Explanation.— For the purposes of this clause, the expression "infrastructural support services" includes providing office along with office utilities, lounge, reception with competent personnel to handle messages, secretarial services, internet and telecom facilities, pantry and security;

Support services of business or commerce means services provided in relation to business or commerce and includes evaluation of prospective customers, telemarketing, processing of purchase orders and fulfilment services, information and tracking of delivery schedules, managing distribution and logistics, customer relationship management services, accounting and processing of transactions, operational assistance for marketing, formulation of customer service and pricing policies, infrastructural support services and other transaction processing.

Business support services are different from business auxiliary services as the latter are provided on behalf of a person. Support services are provided to the service receiver.

The aforesaid definition is an inclusive definition and has two parts. First, services in relation to business or commerce, and two, it includes host of services i.e., evaluation of prospective customers, telemarketing etc. the various services which are included are as follows -

     (a) evaluation of prospective customers

     (b) telemarketing

    (c) processing of purchase orders and fulfilment services

     (d) information and tracking of delivery schedules

     (e) managing distribution and logistics

     (f) customer relationship management services

     (g) accounting and processing of various transactions

     (h) operational assistance for marketing

     (i) formulation of customer service and pricing policies

     (j) infrastructure support services and other transaction processing services.

The first part of the definition itself is very wide which otherwise covers all that is mentioned in the inclusive part. CBEC has not clarified on the scope of business and commerce which implies that all services which support business or commerce shall get covered. So far as second inclusive part is concerned, doctrine of ejusdis generis should apply so much so that the services should be same as they flow from the other services mentioned in the definition.

In M.P. Power Transmission Co. Ltd. v CCE [2008 -TMI - 4449 - CESTAT, Delhi], assessee was a state government corporation engaged in arranging of transmission of electricity with minimum loss and at appropriate voltage to end consumer from transom and Discoms. The Tribunal held that  assessee engaged in arranging transmission of electricity with minimum loss and at appropriate voltage to end consumer from Transco and Discoms, is providing support services liable to service tax hence ordered to pre-deposit a sum of Rs 5 crores as against demand of Rs 67.28 crores.

Support services of business or commerce means services provided in relation to business or commerce and includes evaluation of prospective customers, telemarketing, processing of purchase orders and fulfillment services, information and tracking of delivery schedules, managing distribution and logistics, customer relationship management services, accounting and processing of transactions, operational assistance for marketing, formulation of customer service and pricing policies, infrastructural support services and other transaction processing.

The first part of the definition itself is very wide which otherwise covers all that is mentioned in the inclusive part. CBEC has not clarified on the scope of business and commerce which implies that all services which support business or commerce shall get covered. So far as second inclusive part is concerned, doctrine of ejusdis generis should apply so much so that the services should be same as they flow from the other services mentioned in the definition.

Section 65(105)(zzzq) defines taxable service  to mean any services provided or to be provided to any person, by any other person, in relation to support services of business or commerce, in any manner.

Taxable services would cover both services provided and to be provided and must be those services which are in relation to support services of business or commerce. Such services could be provided in any manner. According to the definition, taxable services generally cover all outsourced activities or services in relation to business or commerce (other than those covered under section 65(19) as business auxiliary services) and infrastructure support services like those in relation to business centre etc.

There may be some overlapping of services between business auxiliary services and support services of business or commerce as some of the services were hitherto being taxed as business auxiliary services such as telemarketing, back office transaction processing, customer evaluation etc. While business auxiliary service specifically covers some services, services under this category are much wide as it would cover any service which supports business or commerce. This implies that services availed for personal or domestic purpose will not be covered.

Where as there was no dispute for providing there services, so as to ensure that transmission losses were minimized and power of suitable voltage reach the distribution point, owned by discoms and then ultimately sold to customers, it is also a fact that unlike other goods, electricity can not be stored and is to be instantly transmitted to various points for distribution.

So far as scope of taxable service and definition of support services is concerned, the expressions ;in relation to' and 'in any manner' are very  important. The words, 'in any manner' signify the legislative intent to include services provided by service provider in any manner. 'In relation to' widens the scope and dimension of service. The Tribunal relied upon apex court's judgment on 'in relation to' in Doypack  Systems Pvt Ltd v Union of India (1988) 36 ELT 201 (SC).

The service provided had a close nexus with Transco and Discoms and without the support of subject service provided by assesse, the sale of electricity could not be completed. In conclusion, it was observed that it is irresistible that the assessee was providing support services and was thus liable to pay service tax.