Service Tax Exemption Available On Rendering Transmission Of Electricity: CESTAT

The Chattisgarh Customs, Excise and Service Tax Appellate Tribunal (CESTAT), consisting of Justice Dilip Gupta (President) and P. Anjani Kumar (Technical Member), has held that the service tax exemption is available on the transmission of electricity.The appellant/assessee is in the business of manufacturing power transmission towers and parts and accessories. The appellant was also engaged in the supply of such towers, parts and accessories, and the erection, commissioning, and installation of such towers. It was allotted two separate contracts by various electricity distribution authorities. The first one was for ex-works supply of parts of towers manufactured as per the designs provided by EDAs. The second was for the setting up of transmission lines, which included erection and installation of towers, for which goods such as conductors and insulators were provided by EDAs. The appellant discharged excise duty and VAT on the sale price of the parts of towers sold to EDAs under the first contract. For the second contract, the appellant was using materials such as concrete, reinforcement steel, nuts, bolts, etc., and was discharging its service tax liability under works contract services.The department issued a show cause notice for the period from 1.06.2007 to 31.03.2011 alleging that the value of towers/parts supplied by the appellant under the first contract should have been added to the value of the second contract for determining the service tax liability. It was also alleged that the appellant had artificially split the two contracts to evade the payment of service tax. The show cause notice was adjudicated by an order dated 31.01.2013 confirming the demand levied in the show cause notice.In continuation of the proceedings and on the basis of the allegations contained in the show cause notice, another show cause notice for the period 2011–12 was issued to the appellant. It was adjudicated by order and the proposed demand was confirmed.The appellant submitted that the supply contract and erection contract cannot be construed as a single contract. The different clauses of both the contracts clearly show that the parties intended to execute two separate and independent contracts for the supply of towers and erection.The appellant contended that in any case, the service for transmission of electricity was exempted for the entire relevant period by virtue of notifications dated 20.07.2010 (till the period of 26.02.2010) and 27.02.2010 (w.e.f. 27.02.2010). Therefore, so far as the activities undertaken by the appellant are concerned, no service tax is payable as these activities are towards the erection of transmission linesThe department contended that they did not call for any interference in the appeals. The appellant was not entitled to take the benefit of the two notifications dated 27.02.2010 and 20.07.2010.The CESTAT relied upon the decision of the Tribunal in Kedar Construction and also considered the notification dated 27.02.2010 for the period 27.02.2010 onwards and held that since the exemption is available if the taxable services are rendered for the transmission of electricity, the expression "for" would cover a very wide gamut of activities and, therefore, the activities undertaken by the appellant would be eligible for the benefit of a notification, as was held by the Tribunal in Noida Power Company Limited.The CESTAT held that the appellant is, therefore, clearly entitled to the benefit of both the notifications dated 20.07.2010 and 27.02.2010."The orders dated 31.01.2013 and 10.09.2013 passed by the Commissioner cannot, therefore, be sustained and are set aside," the CESTAT said.Case Title: M/s. KEC International Ltd. Versus Commissioner of CGSTCitation: Service Tax Appeal No. 57583 of 2013Date: 23.08.2022Counsel For Appellant: Advocates B.L. Narasimhan, Krati Singh and Priyanka SinglaCounsel For Respondent: Special Counsel Saurav Goel and Authorised Representative Bhasha RamClick Here To Read The Order

Service Tax Exemption Available On Rendering Transmission Of Electricity: CESTAT

Mariya Paliwala

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Service Tax Exemption Available On Rendering Transmission Of Electricity: CESTAT

Mariya Paliwala

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INR 1099+GST

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