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ST - In Notfn 11/2010 expression 'for' means 'for purpose of' - Transmission, as per Electricity Act includes conveyance of electricity by transmission lines and includes setting up of sub-stations to accommodate transformers, therefore, activity of industrial construction in this regard also stands exempted: CESTAT

By TIOL News Service

MUMBAI, OCT 29, 2014: THE applicants had undertaken the work allotted by Maharashtra State Electricity Transmission Company Ltd. and M/s. Power Corporation of India Ltd. in respect of construction of foundation walls for sub-station or control rooms, foundation for electricity tower etc.

On this activity, the CCE, Kolhapur has confirmed a service tax demand of more than Rs.1.99 crores.

Before the CESTAT, the applicant submitted that the activity is retrospectively exempted from payment of service tax by section 11C Notification No. 45/2010-ST dated 20.7.2010. Inasmuch as this Notification exempts from payment of service tax in respect of all taxable services relating to transmission/distribution of electricity. They also relied on Notification No. 11/2010-S.T. dated 27.2.2010which grants exemption to service provided to any person for transmission of electricity. It was further submitted that the demand for the period after 26.02.2010 comes to Rs.11 lakhs and they had already deposited Rs.18.54 lakhs during investigation.

There is also another service tax demand of Rs.1.36 lakhs which is in respect of construction of Hostel and Synthetic Track. The appellant submitted that since it is not a commercial or industrial construction service, the ST demand is not sustainable.

The Bench observed that major portion of the demand is exempted by notfn. 45/2010-ST; as against the demand of Rs.11 lakhs for the period post 26.02.2010 appellant had already deposited Rs.18.54 lakhs during investigation; prima facie the activity of construction of Hostel & Synthetic track is not commercial. Holding that the amount deposited is sufficient for hearing the appeal, the pre-deposit of dues was waived & recovery was stayed. Please see 2014-TIOL-829-CESTAT-MUM.

The appeal was heard recently.

The Bench after hearing the submissions made by both sides observed -

++ Out of the total demand confirmed of Rs.2,04,14,368/- bulk of the demand of Rs.1,90,47,124/- pertains to Commercial or Industrial Construction service rendered to Maharashtra State Electricity Transmission Co. Ltd., Maharashtra State Electricity Distribution Co. Ltd., Sunil Hi-Tech, Suraj Constructions, V.B. Bhike, etc. for transmission of electricity. Vide Notification 45/10-ST, all taxable services rendered 'in relation to' transmission and distribution of electricity have been exempted from the purview of service tax. The expression 'relating to' is very wide in its amplitude and scope as held by the Hon'ble Apex Court in Doypack Systems P. Ltd. 2002-TIOL-389-SC-MISC. Therefore, all taxable services rendered in relation to transmission/distribution of electricity would be eligible for the benefit of exemption under the said Notification for the period prior to 27.02.2010.

++ As regards the demand for the period w.e.f. 27.02.2010, the said exemption is available if the taxable services are rendered for transmission of electricity. As held by the Hon'ble Apex Court in the case cited supra the expression "for" means 'for the purpose of'. As per the definition of transmission (given in the Electricity Act, 2003), it covers a very wide gamut of activities including sub-station and equipments. Therefore, the various activities undertaken by the appellant, though classifiable under Commercial or Industrial Construction prior to 01.06.2007 or under works contract service on or after 01.06.2007, would be eligible for the benefit of exemption as held by this Tribunal in the case of Noida Power Co. Ltd., Pashchimanchal Vidyut Vitran Nigam, Purvanchal Vidyut Vitran Nigam and Shri Ganesh Enterprises cited supra. Therefore, the confirmation of service tax demand in respect of the construction, maintenance or repair activities undertaken by the appellant so far as it relates to the transmission/distribution of electricity cannot be sustained in law. As regards the other demands which has been confirmed in respect of construction of transformer station for the sugar factory or GTA service etc. the appellant is not disputing the tax liability and therefore in respect of the other activities of the appellant which are not related to either transmission or distribution of electricity, the demands confirmed are upheld along with interest.

++ Since the issue relates to interpretation of an exemption Notification and the statutory provisions, imposition of penalties are not warranted.

The appeal was partly allowed.

In passing: Incidentally, there is also a demand of ST in respect of construction of Hostel for Women and Synthetic Track in University.By the way the notification 45/2010-ST granted Exemption to all taxable services relating to transmission of electricity till 26.2.2010 and distribution of electricity till 21.6.2010. ROM in the making…?

(See 2014-TIOL-2138-CESTAT-MUM)


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