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TMI Blog2021 (2) TMI 155X X X X Extracts X X X X X X X X Extracts X X X X ..... payment surcharge, meter rent and supervision charges. These three charges have been collected by the appellant in terms of the 2009 Regulations. The Principal Commissioner has confirmed the demand of service tax on late payment surcharge under section 66E(e) of the Finance Act by holding that the same is a consideration received by the appellant for tolerating an act of electricity consumers by receiving the payments after the prescribed due date for payment of electricity bills. The Principal Commissioner has confirmed the demand of service tax on meter rent as a declared service under section 66E(f) of the Finance Act by holding that the same is the consideration received by the appellant for transfer of goods by way of hiring. The Principal Commissioner has also confirmed the demand of service tax on supervision charges collected from electricity consumers by holding that the same is taxable as it is not covered under any exemption. Whether the exemption granted for transmission and distribution of electricity would also include directly connected activities such as meter rents? - HELD THAT:- The Government of India issued a Circular dated December 07, 2010 clarifyin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... al allowed in part. - SERVICE TAX APPEAL NO. 51649 OF 2019 - FINAL ORDER No.51031/2021 - Dated:- 14-1-2021 - MR. DILIP GUPTA, PRESIDENT AND MR. P.V. SUBBA RAO, MEMBER (TECHNICAL) Shri Rajeev Kumar Agarwal, Advocate for the Appellant Shri Vivek Pandey, Authorized Representative for the Department ORDER Madhya Pradesh Poorva Kshetra Vidyut Vitran Co. Ltd. [ the Appellant] has sought the quashing of the order dated March 1, 2019 passed by the Principal Commissioner, CGST and Central Excise, Bhopal [the Principal Commissioner] by which the demand of service tax has been confirmed with interest and penalty. 2. The period of dispute is from July, 2012 to March, 2017 and the dispute raised in this appeal is as to whether service tax is payable on the amount of late payment surcharge, meter rent and supervision charges received by the appellant from the electricity consumers. 3. The appellant is a wholly owned undertaking of the Government of Madhya Pradesh and is engaged in the distribution of electricity in the eastern area of the State. The transmission or distribution of electricity by an electricity transmission or distribution utility is included ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... late payment surcharge is as follow: 33 The Service tax law was revamped in June 2012 and was replaced by a negative list concept as a result of which all activities undertaken for some consideration were made subject to service tax except those service activities which are either specified in the negative list or are specifically excluded from the definition of term service . An important aspect to be noted here is that the term activity has not been defined. However, the Education Guide so issued by the Tax Research Unit, Central Board of Excise and Customs, Ministry of Finance, seems to suggest that an activity could be both active as well as passive; meaning thereby that it would not only include acts or deeds done but would also include forbearance to act . Further, the impugned issue of taxability on receipt of the amounts of Late Payment Surcharge (LPS) charged by the noticee from the customers had been examined with reference to section 66E(e) of the Act and it was observed that the empowerment of the noticee to collect late payment surcharge is for the reason that there has been a delay and the same would be tolerated, but for a price of course, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of provision of Section 66D of Act which specified the services which were out of the purview of the Service Tax provision and the amount so collected by the noticee in the form of Supervision Charges neither found entry in Section 66D of the Act nor exempted vide mega exemption notification no. 26/2012-ST dated 20.06.2012 as amended. Therefore the amount of supervision charges received by the noticee is clearly liable for payment of service tax. Now, after determining the issue of taxability of receipt against supervision charges, it s the turn now to arrive the quantification of the said service. (emphasis supplied) 10. In regard to the amount collected towards lease rent, the Principal Commissioner observed as follows: 42. Next issue which comes in the array of charges raised, is non-payment Service tax on lease rent charges received by the noticee from their customers during the period under investigation. Since, the said service is squarely covered under Renting of Immovable Property service which is declared service as per clause (a) of Section 66E of the Act . I , therefore, hold the noticee liable to discharge service tax short/not paid on the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y Parliament and as per definition, it need not be an activity carried out by one person for another; (ii) At the time of signing the contract, both the parties planned and agreed to tolerate any breach of contract through the payment of liquidated damages. Hence, the consideration is both intentional and at the desire of the parties; (iii) The Constitution Bench of the Supreme Court in Fateh Chand vs. Balkishan Das [ AIR 1963 SC 1405 ] held that reasonable compensation for a breach of contract has to be proportionate to the actual injury suffered, which means injury tolerated since the word suffering is synonymous to tolerating . (iv) A case of compensation or damages for breach of a contract always involves one party tolerating/suffering an injury. Hence, the claim of the appellant in the present case that their contract is not for tolerating anything is fundamentally wrong; (v) In this connection, reliance has also been placed upon the decision of the Delhi High Court in XL Energy Limited Vs. Mahanagar Telephone Nigam Limited [ MANU/DE/1892/2018 ] . 16. The submissions advanced by the learned counsel for the appellant and the learned ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vision charges. 22. These three charges have been collected by the appellant in terms of the 2009 Regulations. The Principal Commissioner has confirmed the demand of service tax on late payment surcharge under section 66E(e) of the Finance Act by holding that the same is a consideration received by the appellant for tolerating an act of electricity consumers by receiving the payments after the prescribed due date for payment of electricity bills. The Principal Commissioner has confirmed the demand of service tax on meter rent as a declared service under section 66E(f) of the Finance Act by holding that the same is the consideration received by the appellant for transfer of goods by way of hiring. The Principal Commissioner has also confirmed the demand of service tax on supervision charges collected from electricity consumers by holding that the same is taxable as it is not covered under any exemption. 23. According to the appellant the amount has been collected in terms of the 2009 Regulations and are the services bundled in the ordinary course of business for providing electricity. They are, therefore, required to be treated as a single service for providing services ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tive list . 26. The issue as to whether the charges collected in connection with transmission of electricity even after July 01, 2012 would be subjected to tax as according to the Department they would not be exempted under section 66D(k) of the Finance Act, came up for consideration before the Gujarat High Court in Torrent Power after referring to the position prior to the introduction of the negative list and the Notifications referred to above and the introduction of the negative list regime w.e.f July 01, 2012, the Gujarat High Court observed as follows: 10. Insofar as the first phase is concerned, the respondents do not dispute that the related/ancillary services to transmission and distribution of electricity are exempt from payment of service tax. The dispute, therefore, relates to the period of the negative list regime and the CGST/SGST regime. 11. Insofar as the second phase, namely, the negative list regime is concerned, with effect from 1.7.2012, section 65B of the Finance Act, 1994 came to be amended and service tax became leviable on all services, other than those services specified in the negative list. Admittedly, transmission and distribution of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... included in another service. Such interpretation would not change merely because such exemption is now granted under some other provision. 14. It may be noted that insofar as the exemptions prior to the negative list regime as well as post the negative list regime are concerned, it is the transmission and distribution of electricity that has been exempted by virtue of notifications. During the negative list regime, transmission and distribution of electricity has been placed in the negative list. Therefore, in all the three phases, what was exempted was transmission and distribution of electricity . However, while for the prenegative list phase, the respondents considered the services related to transmission and distribution of electricity as exempt under the exemption notifications, for the negative list regime and the GST regime, they seek to exclude such services from the ambit of transmission and distribution of electricity. From the affidavits-in-reply filed on behalf of the respondents, there is nothing to show as to how the very services, which stood included within the ambit of transmission and distribution of electricity now stand excluded. The sole refrain of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Finance Act and observed that for the phase relating to the negative list, the services in question would fall within the ambit of bundle services, as contemplated under section 66F of the Finance Act and would have to be treated in the same manner as the service which gives the bundle its essential character, namely transmission and distribution of electricity. The service would, therefore, be exempted from payment of service tax. The relevant portion of the order is reproduced below: 20. The facts of this case are required to be examined in the light of the above statutory provisions. In this case, we are concerned with transmission and distribution of electricity being the main services and application fee for releasing the connection for electricity; rental charges against metering equipment; testing fee for meters/transformers, capacitors etc.; labour charges from customers for shifting of meters or shifting of service lines; charges for duplicate bills provided by DISCOMS to consumers being related services. The question is whether an element of provision of these services is combined with an element or elements of provision of the main service of transmission and di ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e single service of transmission and distribution of electricity which gives the bundle its essential character. 23. Besides, a perusal of the GERC Regulations indicates that the services which are sought to be taxed now are the services, which the petitioner is required to mandatorily provide at the rate prescribed by GERC, a statutory authority constituted under the provisions of the Electricity Act. In the opinion of this court, all these services are essential activities which have a direct and close nexus with transmission and distribution of electricity. In terms of the earlier clarification dated 7.12.2010 issued vide Circular No.131/13-2010-ST, the Government of India had clarified that an activity, which is an essential activity having direct and close nexus with transmission and distribution of electricity would be covered by the exemption for transmission and distribution of electricity extended under the relevant notifications. Therefore, the taxability of the related/ancillary services are required to be given same treatment as is given to the single service, which gives such bundle its essential character, namely, transmission and distribution of electricity. ..... X X X X Extracts X X X X X X X X Extracts X X X X
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