The Ahmedabad Bench of Customs, Excise and Service Tax Appellate Tribunal (CESTAT) has held that no service tax payable on works contract service for building construction in relation to electricity transmission.
The bench of Ramesh Nair (Judicial Member) and C L Mahar (Technical Member) has observed that the service relating to transmission of electricity is exempted but the term relating to transmission is very wide, accordingly, not only the actual service of transmission but all the infrastructure made for the purpose of ultimate objective of transmission of electricity covered under the terms “relating to transmission” of electricity.
The appellant/assessee has submitted that the works contract service in respect of construction of C R Building, foundation, cable trench, compound wall, etc. to Gujarat Energy Transmission Corporation Ltd (GETCO) which is directly in relation to the overall installation for transmission of electricity. The service related to transmission of electricity is exempted under Notification No. 45/2010 – ST dated 20.07.2010 and Notification No. 11/2010-ST dated 27.02.2010.
The issue raised was whether works contract services of C R Building, foundation, cable trench, compound wall, etc to Gujarat Energy Transmission Corporation Ltd (GETCO) in relation to transmission of powers provided by the appellant is liable to service tax.
Yet another issue raised was whether the Show Cause Notice by which demand of service tax for the period 2010-11 to 2011-12 raised in relation to the issue of whether the disputed services are exempted is barred by limitation.
The tribunal noted that the works contract service was provided by the appellant to M/s. GETCO and this service is exclusively for the overall activity of the recipient in relation to transmission of electricity. Such service has been made exempted retrospectively as well as prospectively by Notification No. 45/2010 – ST dated 20.07.2010 and Notification No. 11/2010-ST dated 27.02.2010.
As per Notification No. 45/2010 – ST dated 20.07.2010 and Notification No. 11/2010-ST dated 27.02.2010 the service tax payable on 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 practice, shall not be required to be paid in respect of the taxable services relating to transmission and distribution of electricity. For the purpose of billing the consumer for electricity consumed it is essential to install the electricity meter having capacity to withstand the load provided to the customer. Any activity or service like erection, commissioning and installation of transmission towers and meters as also technical testing and analysis would constitute the activity of transmission and distribution by the service provider to the service receiver. The service would be squarely covered under exemption provided under the notification.
The conclusion of the Exemption Notification dated 22-6- 2010 and the immunity Notification dated 20-7-2010 is compelling that all taxable services provided in relation to distribution of electrical energy are exempt from the liability to Service Tax. The expression “in relation to” is of wide import and indicates all activities having a direct and proximal nexus with distribution of electrical energy. Distribution of electricity energy cannot be effectively accomplished without installation of sub-stations, transmission towers and installation of meters to record electricity consumption for periodic billing and recovery of charges.
The tribunal held that there is no suppression of fact or any mala fide intention to evade payment of service tax on the part of appellant, therefore, the demand beyond one year is not sustainable on limitation also.
The tribunal while allowing the appeal held that the appellant’s service of works contract is covered by the exemption Notification No. 45/2010 – ST dated 20.07.2010 and Notification No. 11/2010-ST dated 27.02.2010.
Case Title: Vraj Construction Versus Commissioner of C.E. & S.T.-Surat-i
Case No.: Service Tax Appeal No. 12200 of 2014 – DB
Date: 03.09.2024
Counsel For Appellant: Rahul Gajera
Counsel For Respondent: Anoop Kumar Mudvel
