9911796707
TMI Blog2022 (9) TMI 625X X X X Extracts X X X X X X X X Extracts X X X X ..... shall be levied at the rate of 12 per cent on the value of all services, other than those services specified in the negative list, provided or agreed to be provided in the taxable territory by one person to another and collected in such manner as may be prescribed. Section 66D contains a negative list of services, while section 66E contains a list of declared services. Section 65B(44) defines service to mean any activity carried out by a person for another for consideration. Explanation (a) to section 67 provides that consideration includes any amount that is payable for the taxable services provided or to be provided. The recovery of liquidated damages/penalty from the other party cannot be said to be towards any service per se, since neither the appellant is carrying on any activity to receive compensation nor can there be any intention of the other party to breach or violate the contract and suffer a loss. The purpose of imposing compensation or penalty is to ensure that the defaulting act is not undertaken or repeated and the same cannot be said to be towards toleration of the defaulting party. The expectation of the appellant is that the other party complies with the te ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... icity Rules, 1956, no electrical insulation work shall be carried out for the purpose of distribution of electricity except by the licensed contractor under the direct supervision of a Department person to ensure that the quality of line/ instrument and safety checks for protection/ safety of consumers - In M.P. POORVA KSHETRA VIDYUT VITRAN CO. LTD. VERSUS PRINCIPAL COMMISSIONER CGST AND CENTRAL EXCISE BHOPAL [ 2021 (2) TMI 821 - CESTAT NEW DELHI] , it has been held that the amount collected towards these charges cannot be subjected to levy of service tax. The same would be the position for the other charge under this head. Extended period of limitation - suppression of facts or not - HELD THAT:- Even when an assessee has suppressed facts, the extended period of limitation can be evoked only when suppression is shown to be willful and with an intent to evade payment of service tax. In the present case, the Department could not establish conclusively that the appellant had suppressed material facts with an intention to evade payment of service tax. Only a general statement has been made by the Commissioner that the appellant had willfully mis-stated that the consideration ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... red service 3. Cross subsidy surcharge 3,57,35,819/- Collection of cross subsidy charges is a declared service 4. Supervision/Incidental Charges 2,38,62,159/- Service as defined under section 65B (44) of the Finance Act. 5. Transformer amp; Meter Testing Charges 38,55,243/- Same 6. Rental amounts collected from contractors 5,20,266/- Same Total 10,72,23,880/- 4. Shri Y. Sreenivasa Reddy, learned counsel for the appellant, mainly submitted that: (i) The issue of taxability of penalties/liquidated damages is covered by decisions of the Tribunal rendered in M.P. Poorva Kshetra Vidyut Vitran Co. Ltd. vs. Principal Commissioner CGST and Central Excise Bhopal [ 2021 (2) TMI 821-CESTAT New Delhi ], M/s. South Eastern Coalfields Ltd. vs. Commissioner of Central Excise and Servi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e dispute is regarding the amount collected towards collection for penalties for liquidated damages, wheeling charges, cross subsidy charge, supervision/incidental charges, transformer and meter testing charges, and rental amount collected from contractors. These charges have been collected by the appellant in terms of the Electricity Act and the 2009 Regulations. 7. The Commissioner has confirmed the demand of service tax on the amount collected from the penalties under section 66E(e) of the Finance Act by holding that the same is a consideration received by the appellant for tolerating an act . The Commissioner has confirmed the demand of service tax on wheeling charges and cross-subsidy charges treating them to be a declared service. The Commissioner has also confirmed the demand of service tax on supervision/incidental charges, transformer and meter testing charges and the rental amount collected from contractors by holding that the same is for a service contemplated section 65B(44) of the Finance Act. 8. According to the appellant, the amount has been collected in terms of the 2009 Regulations for the services bundled in the ordinary course of business for providing ele ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ransmission or distribution utility . 12. The issue as to whether the charges collected in connection with transmission of electricity even after 01.07.2012 would be subjected to service 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. 01.07.2012, 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, transmiss ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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. ***** The respondents having themselves considered the services in question as being covered by the exemption for transmission and distribution of electricity as such services were essential activities having a direct and close nexus cannot be now permitted to take a U-turn and seek to exclude such services without pointing out any specific change in the nature of the exemptions, except that they are provided under different statutory provisions. In the opinion of this court, the meaning of transmission and distribution of electricity does not change either for the negative list regime or the GST regime . If that be so, the services which stood included within the ambit of transmission and distribution of electricity during the pre-negative list regime cannot now be sought be excluded by merely issuing a clarificatory circular, that too, with retrospective effect. By the clarificatory circular, the respondents seek to give a different interpretation of the very same services as against the clarification i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... carrying electricity is mandatorily required to be provided to the consumer by the licensee. Moreover, any plant, equipment, apparatus or appliance or any part thereof used for, or connected with, the generation, transmission, distribution or supply of electricity, except for electric meter and any electrical equipment, apparatus or appliance under the control of a consumer fall within the ambit of electrical plant as defined under section 2(22) of the Electricity Act. Sub-section (2) of section 43 of the Electricity Act casts a duty upon the licensee to provide if required electric plant or electric line for giving electric supply to the premises. Therefore, providing electric line and electric plant are elements of service which are naturally bundled in the ordinary course of business, with the single service of transmission and distribution of electricity which gives the bundle its essential character. The only related service which does not fall within the ambit of the definitions of electric line and electric plant is the meter used for ascertaining the quantity of electricity supplied to any premises. However, insofar as installation of electricity meter and hire charges coll ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Court that the activities that are related/ancillary to transmission and distribution of electricity would be exempt from payment of service tax since transmission and distribution of electricity is exempted. It is also clear from aforesaid decision that all services related to transmission and distribution of electricity are bundled services, as contemplated under section 66F(3) of the Finance Act, and are required to be treated as a provision of a single service of transmission and distribution of electricity, which service is exempted from payment of service tax. 15. The aforesaid judgment of the Gujarat High Court was followed by the Rajasthan High Court in Jodhpur Vidyut Vitran Nigam Ltd. 16. A Division Bench of the Tribunal in M.P. Poorva Kshetra Vidyut Vitran Co. Ltd. also followed the aforesaid judgment of the Gujarat High Court and held that all services related to transmission and distribution of electricity are exempted from service tax. 17. Each of the heads under which the demand has been confirmed can now be examined. Collection of penalties or liquidated damages 18. Service tax has been confirmed on the amount of penalty and liquidated damages colle ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ll June 2017 for the reason that by collecting the said amount the appellant agreed to the obligation to refrain from an act or to tolerate the nonperformance of the terms of the contract by the other party. 23. Section 65B (44) defines service to mean any activity carried out by a person for another person for consideration, and includes a declared service. Under section 66E (e), a declared service shall constitute agreeing to the obligation to refrain from an act, or to tolerate an act or situation, or to do an act. Section 66 B provides that service tax shall be levied at the rate of 12 per cent on the value of all services, other than those services specified in the negative list, provided or agreed to be provided in the taxable territory by one person to another and collected in such manner as may be prescribed. Section 66D contains a negative list of services, while section 66E contains a list of declared services. 24. It is in the light of what has been stated above that the provisions of section 66E(e) have to be analyzed. Section 65B(44) defines service to mean any activity carried out by a person for another for consideration and includes a declared service. One o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ranted to the consumers. 28. Wheeling is nothing but transmission of electricity undertaken by the appellant Discom using its infrastructure as the power producer is not permitted to transmit electricity. Transmission is not leviable to service tax. Even assuming that the wheeling charges are collected as charges for permitting the power producer to transmit its electricity using the infrastructure of the appellant, since it is an activity related to transmission of electricity and also that the main activity of transmission is done by the appellant, wheeling charges would not be leviable to service tax in view of the decision of the Gujarat High Court in Torrent Power. The appellant had not agreed to tolerate any act of any person by transmitting electricity through its network. Therefore, wheeling service would not be leviable to service tax and it cannot be termed as a declared service as it does not fall within the meaning of section 66E(e) of the Finance Act. 29. Collection of cross subsidy charges is provided under the Electricity Act and the Regulations to meet the requirements of current level of cross subsidy within the area of supply of the distribution licenc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s was not leviable to service tax. 33. The Commissioner has merely observed that the onus of making a proper assessment of liability rests with the assessee and in the scheme of self assessment, the Department comes to know of the facts only during the scrutiny of the statutory forms. The Commissioner has also observed that the appellant failed to declare the correct turn over in the ST-3 returns and suppressed the facts of the taxable amount towards the aforesaid services and thereby they had deliberately and willfully ignored payment of service tax. Thus, by willfully suppressing these facts, the appellant had contravened the provisions of the Finance Act. 34. Section 73(1) of the Finance Act, deals with recovery of service tax not levied or paid or short levied or short paid. The extended period of limitation can be invoked under the proviso to section 73(1) of the Finance Act, in which case notice can be served within five years. If the extended period of limitation is not invoked any demand of service tax would be time barred. One circumstance mentioned in the proviso to section 73(1) of the Finance Act, is when there has been a suppression of facts . 35. In Pushpam ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n of penalty. Also, the word suppression‟ in the proviso to Section 11A(1) of the Excise Act has to be read in the context of other words in the proviso, i.e. fraud, collusion, wilful misstatement . As explained in Uniworth (supra), misstatement or suppression of facts does not mean any omission. It must be deliberate. In other words, there must be deliberate suppression of information for the purpose of evading of payment of duty. It connotes a positive act of the assessee to avoid excise duty. ***** Thus, invocation of the extended limitation period under the proviso to Section 73(1) does not refer to a scenario where there is a mere omission or mere failure to pay duty or take out a license without the presence of such intention. ***** The Revenue has not been able to prove an intention on the part of the Appellant to avoid tax by suppression of mention facts. In fact it is clear that the Appellant did not have any such intention and was acting under a bonafide belief 38. It is, therefore, clear that even when an assessee has suppressed facts, the extended period of limitation can be evoked only when suppression is shown to be willful and with an inte ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
