2019 (1) TMI 1236 - AT - Service Tax

Classification of services - Management, Maintenance or Repair service or otherwise? - appellants had entered into an agreement with various clients like M/s.Thermax India Ltd., Tidel Park, JCT, Tamil Nadu Petroleum Ltd. etc for operation and maintenance of power plants - Department was of the view that charges collected on operation of the plants have got nexus with the Management, Maintenance or Repair of Power Plants and above charges are liable to service tax w.e.f. 16.06.2005 under MMRS - Held that - The issue as to whether activity of production of electricity in power plant would amount to management of immovable property or otherwise, has been analyzed and discussed by this Bench in the case of Shapoorji Pallonji Infrastructure 2017 (6) TMI 225 - CESTAT CHENNAI and held in favor of assessee. It was held in the case 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. Impugned order do not sustain - appeal allowed - decided in favor of appellant.

Summary

Issues:
1. Whether charges collected on the operation of power plants are liable to service tax under Maintenance or Repair Service.
2. Whether the activity of production of electricity in a power plant amounts to the management of immovable property.

Analysis:
1. The case involved the appellants registered for Consulting Engineer Service and Maintenance or Repair Service. The Department alleged that charges collected for operation of power plants were liable to service tax under Maintenance or Repair of Immovable Property. A show cause notice was issued, leading to confirmation of service tax demand and penalty by the adjudicating authority. On appeal, the Commissioner modified the order, upholding the demand with interest but setting aside the penalty. The appellants challenged this decision.
2. During the hearing, the appellant's advocate referred to a previous case decided by the same Tribunal in favor of the appellant, arguing that the activity of production of electricity in power plants did not amount to the management of immovable property. The Tribunal had previously held that the generation of electricity in a power plant was not solely for managing immovable property but for the production of electricity. The Tribunal cited various judgments supporting this view, emphasizing that the management of immovable property did not include operational activities. The Tribunal concluded that the impugned order was not sustainable and set it aside, allowing the appeal with consequential relief.