9911796707
TMI Blog2023 (12) TMI 1242X X X X Extracts X X X X X X X X Extracts X X X X ..... t and penalty. 2. The appellant is a wholly owned subsidiary of M/s. Power Grid Corporation of India Limited Power Grid. It started functioning independently in the capacity of a Central Transmission Utility CTU with effect from 1.4.2021. Power Grid was an enterprise of the Government of India and was engaged in transmission of electricity through the inter-state transmission system ISTS from generating stations to the load centres as well as long distance telecommunication services. 3. The Ministry of Power, by order dated 9.3.2021, divided Power Grid into two separate entities on the basis of the functions to be performed by them. As a consequence, Power Grid has been divided into two entities- a) The appellant for the purpose of functioning as a CTU; and b) Power Grid, for the purpose of functioning as a Transmission Licensee. 4. The Central Government notified the appellant as a CTU by a Notification dated 27.11.2003 in exercise of powers vested under section 38 of the Electricity Act, 2003. Accordingly, the appellant has been entrusted with the function of transmission of electricity across ISTS and to provide non-discriminatory open access to its transmissions system f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... power generating companies by collecting relinquishment charges for breach of the terms and conditions of the contract. The appellant filed a reply to the show cause notice contending that relinquishment charges are naturally bundled with the transmission charges and thus covered under the Negative List and also that in any view of the matter, the said charges do not constitute consideration for any service. 10. The show cause notice was adjudicated upon by the Principal Commissioner by order dated 04.03.2021, which order has been assailed in this appeal. 11. Shri B.L. Narasimhan, learned counsel for the appellant assisted by Ms. Poorvi Asati submitted that relinquishment charges are not taxable under section 66E (e) of the Finance Act for the reason that the said charges collected by the appellant are not towards the provision of any service, but are in the nature of compensation on account of pre-mature termination of access by the exiting power generating companies from the ISTS network. In this connection, learned counsel relied upon Agreement dated 24.10.2010. 12. Learned counsel for the appellant also submitted that the amount paid in the nature of compensation or the dama ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ransmission customer shall not relinquish or transfer its rights and obligations specified in the Bulk Power Transmission Agreement, without prior approval of POWER GRID AND CERC and subject to payment of compensation in accordance with the CERC Regulations issued from time to time." 18. The impugned order, in paragraphs 51.1 and 51.2, has observed as follows :- "51.1 The Noticee has submitted that the demand proposed in the show cause notice is not maintainable as the relinquishment charges collected by the Noticee are not towards provisions of any service, rather the same are collected as compensation on account of pre-mature termination of access by the existing companies. In this regard I find that the "Relinquishment Charges" are compensatory charges in nature as per the report of the Committee constituted by the Central Electricity Regulatory Commission vide order dated 28.8.2015 on relinquishment of LTA. But the same is actually standalone charges for stranded capacity of transmission or unused capacity due to non-use by a power producer. Therefore, I find that the relinquishment charges is nothing except standalone charges and hence taxable under section 66E (e) of the F ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of money from one party to another. It also mentions that unless payment has been made for an independent activity of tolerating an act under an independent arrangement entered into for such activity or tolerating an act, such payment will not constitute "consideration" and such activities will not constitute "supply". The relevant portion of the Circular is reproduced below : "Agreement to do or refrain from an act should not be presumed to exist There has to be an express or implied agreement: oral or written, to do or abstain from doing something against payment of consideration for doing or abstaining from such act, for a taxable supply to exist. An agreement to do an act or abstain from doing an act or to tolerate an act or a situation cannot be imagined or presumed to exist just because there is a flow of money from one party to another. Unless there is an express or implied promise by the recipient of money to agree to do or abstain from doing something in return for the money paid to him, it cannot be assumed that such payment was for doing an act or for refraining from an act or for tolerating an act or situation. Payments such as liquidated damages for breach of cont ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... anation (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 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 terms of the contract and a penalty is imposed only if there is non-compliance. 29. The situation would have been different if the party purchasing coal had an option to purchase coal from "A" or from "B" and if in such a situation "A" and "B" enter into an agreement that "A" would not supply coal to the appellant provided "B" paid some amount to it, then in such a case, it can be said that the activity may result in a deemed service contemplated under section 66E (e). 30. The acti ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
