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TMI Blog2017 (6) TMI 278X X X X Extracts X X X X X X X X Extracts X X X X ..... he Electricity Supply Act for a power project and entered into a Power Purchase Agreement with Tamil Nadu Electricity Board for sale of electricity generated in the plant and also entered into operation and maintenance agreement with HHIL. Department was of the view that the activities of the appellant were taxable services and that they are liable to pay service tax on the consideration received for operation of power plant under Consulting Engineers Service as per section 65 (88) of the Finance Act, 1994. A show cause notice was issued proposing recovery of service tax along with interest and imposition of penalty. Subsequent show cause notices have been issued alleging that the said activity would fall under Maintenance and Repair Servic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... no dispute with regard to the said charges/service tax paid by them from 2003. The issue is only with regard to the service tax demand on operation charges received by them. The said charges received by the appellant would not fall under Maintenance or Repair Service. He relied upon the judgement of the Tribunal in the case of Shapoorji Pallonji Infrastructure Capital Co. Ltd. Vs CST Chennai vide Final Order No.40744-40752/2017 dt. 23.05.2017. 4. Against this, ld. A.R Shri K.P. Muralidharan reiterated the grounds of appeal in Appeal No.ST/3/2004 and with respect to other cases, he reiterated the findings in the impugned orders which held that said activity would fall under Maintenance or Repair Service. 5. We have heard submissions of bo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mentioned under Chapter Heading 27.16 of the First Schedule to the Central Excise Tariff Act, 1985, with effect from 1.3.2005 and electricity being an excisable product, though with nil rate of duty. We have to say that this argument of the appellant is not without substance. The major activity in the power plant is production of electricity which is an excisable product. Further, activity of production of electricity cannot be equated with management of immovable property. In a situation where the property is entrusted for management, the dominant intention would be to manage the property to raise profits whereas in the present case, it is for generation of electricity. The contention of the department may be applicable to a situation whe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the facility was run by entering into contracts with different organizations such as CMS who had contracted to undertake the operation and maintenance of the facility. He found that though CMS was operating the facility for generating electricity, the entire activity was carried on by CMS on behalf of ST-CMS. The Commissioner also observed : the agreement also provides for incentive payments/liquidated damages/environmental fines........." This does not happen when any agency provides service to another. A service provider is not responsible to achieve any performance target referring to which it becomes entitled to any reward or incurs penalties. Such provisions in the O&M contract fortify our finding that the appellants were not renderin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ;s right is restricted to entry and access, to be satisfied that the operation is carried out according to standards. He also receives reports about the relevant aspects of operation, status and output. The payment for operation and maintenance are determined under the various clauses of the contract. In addition to the lump sum payment, it also provides for bonus and penalty. The terms of the contract do not envisage or involve providing any consulting or engineering help to the owner. The operator is fully autonomous and responsible for the performance of operation and maintenance. Whatever engineering issues are involved, it is for the operator to find solutions for, and attend to in the course of operation and maintenance. He is not req ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... epair Service. As per our above discussion as well as settled legal position on the identical issue as per the above judgments, we are of the view that the impugned order is not sustainable, therefore, the same is set aside." 11. In the light of the discussions and also following the ratio laid down by the Tribunal in the cases referred supra, we have no hesitation in holding that the demand of service tax on operation charges (i.e. 55% of the fees paid to the appellant) is not sustainable. Hence, will have to be set aside, which we hereby order accordingly. The appeals are disposed of in the following manner:- (i) ST/175/2007 It is held that cost of consumables and spares used in providing maintenance service to be included in gr ..... X X X X Extracts X X X X X X X X Extracts X X X X
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