Whether the ancillary services provided in respect of installation of meters at the premises of electricity consumers be covered by exemption?

PJ/Case Laws/2012-13/1338

Case:- Paschimanchal Vidyut Vitran Nigam Ltd. Versus Commr. Of C. Ex., Meerut

Citation:- 2012 (28) S.T.R. 412 (Tri. – Del.)

Brief Facts:-The appellant assessee is engaged in the purchase of electricity from Uttar Pradesh Power Corporation Ltd. and transmitting it to various consumers within its jurisdiction. The department pursuant to the intelligence came to know that apart from transmission of electricity, the appellant assessee was also engaged in the business of "erection, commissioning and installation" as also "technical testing and analysis" which according to the department, were subject to levy of service tax in terms of provisions of Finance Act, 1994. During the enquiry, the appellant assessee furnished balance sheets for the year 2003-04 and 2004-05 which revealed that income of the appellant assessee comprised of revenue from, sale of power, subsidies, grants and other income. The department was of the view that the income shown under the head "other income" in the balance sheet for the relevant financial years was in respect of amounts received by the assessee appellant for providing taxable service i.e. "erection, commissioning and installation" as also "technical testing and analysis". Accordingly, based on profit and loss statement, the appellant assessee was served with show cause notice raising demand of service tax for the period 2003-04 and 2004-05. The appellant contested the show cause notice and claiming that the income shown in the statement of account for the years 2003-04 and 2004-05 under the head "other income" comprised of - (a) Interest on loan to staff (b) Delayed payment charged from customer (c) Other income for the year 2003-04 was Nil but for the year 2004-05, interest from banks and discount/rebate received for timely payments of loans. (d) Income from contractors/suppliers. (e) Rental income charges from the staff (f) Excess found of physical verification of stores (g) Miscellaneous receipts which is for the year 2003-04. (h) Miscellaneous receipt which is for the year 2004-05. On merits the appellant also raised the plea of limitation on the ground that there was no justification for invoking extended period of five years. The jurisdictional Commissioner vide the impugned order dropped substantial portion of the demand raised vide show cause notice for confirmed service tax demand with interest against the appellant and also imposed penalty under Section 76 and further penalty of same amount under Section 78 and further penalty of Rs. 1,000/- under section 77 of the Finance Act, 1994. The Appellant has challenged the demand confirmed by impugned order-in-original as also penalty imposed on the ground that the appellant assessee is not engaged in the business or activity which may call for levy of service tax.

Appellant Contentions:-The appellant has relied upon the Notification No. 45/2010-S.T., and submitted that vide this notification Central Government has exempted persons engaged in transmission and distribution of electricity from levy of service tax in respect of taxable service relating to transmission and distribution of electricity retrospectively. Thus, it is pleaded that in view of exemption notification, impugned order confirming demand and imposing penalty is not sustainable in law.

Respondent Contentions:-Respondent submitted that benefit of Notification No. 45/2010-S.T. would be available to the appellant assessee only if it is established that the service on which service tax is levied are related to transmission and distribution of electricity. Respondent further submitted that income under the head "other income" detailed in the statement of account of the assessee relates to the services other than transmission and distribution of electricity as such adjudicating authority has wrongly dropped substantial portion of demand raised vide the show cause notice. Respondent has argued as to allow the appeal preferred by the department and modify the impugned order to confirm the demand raised in show cause notice.

Reasoning of Judgment:-We have considered the submissions on both the sides. At present, issue for determination in these appeals is whether or not the services provided by the assessee in respect of erection, commissioning and installation as also technical testing and analysis and installation of meters at the premises of electricity consumers would be covered under the exemption benefit provided by Notification No. 45/2010-S.T., dated 20-7-2010.

Notification No. 45/2010-S.T., dated 20-7-2010 reads thus :- "Electricity - Exemption to all taxable services relating to transmission of electricity till 26-2-2010 and distribution of electricity till 21-6-2010 Whereas, the Central Government is satisfied that a practice was generally prevalent regarding levy of service tax under section 66 of the Finance Act, 1994, on all taxable services relating to transmission and distribution of electricity provided by the service provider to service receiver, and that all such services were liable to service tax under the said Finance Act, which were not being levied according to the said practice during the period up to 26th day of February, 2010 for all taxable services relating to transmission of electricity, and the period up to 21st day of June, 2010 for all taxable services relating to distribution of electricity; Now, therefore, in exercise of the powers conferred by section 11C of the Central Excise Act, 1944, read with section 83 of the said Finance Act, the Central Government hereby directs that the service tax payable on said taxable services relating to transmission and distribution of electricity provided by the service provider to the service receiver, which was not being levied in accordance with the said practice, shall not be required to be paid in respect of the said taxable services relating to transmission and distribution of electricity during the aforesaid period.”

On careful reading of the aforesaid notification we find that this notification exempts the services relating to transmission and distribution of electricity provided by the service provider to the service receiver from the incidence of levy of service tax. Admittedly, the assessee is engaged in transmission and distribution of electricity after purchasing the same from U.P. Power Corporation Limited. Since the assessee is selling electricity to the consumer, in our view to bill the consumer for electricity consumed it is essential to install the electricity meter having capacity to withstand the load provided to the consumer. Thus, any activity or service like erection, commissioning and installation of meters as also technical testing and analysis can easily be termed as the service relating to the transmission and distribution of electricity provided by the service provider to the service receiver. Thus, in our considered view such service, which is subject matter of this appeal, would be squarely covered under the exemption provided under Notification referred to above. We may note that similar view was taken by the coordinate Bench of this Tribunal in the matter of M.P. Power Transmission Company Limited v. CCE, Bhopal [2011 (24) S.T.R. 67 (Tri. – Del.)] in relation to interpretation of similar exemption Notification No. 11/2010-S.T., dated 27-2-2010 which is pari materia to the Notification No. 45/2010-S.T., dated 20-7-2010, In view of the discussion above, we do not find any merit in the appeal of the Department which is accordingly dismissed. The appeals filed by the assessee are allowed and the demand confirmed by the impugned order is set aside.

Decision:- Appeal allowed.

Comment:- The analogy drawn from this case is that when the main service of transmission and distribution of electricity is exempted by the notification, then the subsidiary services like errection and installation of electricity meters etc., would also be squarely covered by the said exemption notification.

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PJ/Case Laws/2012-13/1338

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