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TMI Blog2021 (2) TMI 155X X X X Extracts X X X X X X X X Extracts X X X X ..... Pradesh and is engaged in the distribution of electricity in the eastern area of the State. The "transmission or distribution of electricity by an electricity transmission or distribution utility" is included in the negative list of services in section 66D(k) of the Finance Act, 1994 [the Finance Act] and so the power charges collected from the consumers of electricity are exempted from levy of service tax. 4. The officers of the Directorate General of Central Excise Intelligence collected information that the appellant charged late payment surcharge in the electricity consumption bills issued to the customers and recovered the same in case the customers made payment after the due date mentioned in the bill. Further investigation revealed that during the period from July, 2012 to March, 2017, the appellant had recovered late payment surcharge but service tax was not paid even though the amount was liable to service tax as it was a "declared service" defined under section 66E(e) of the Finance Act. The officers also noticed that the appellant was collecting meter rent from the consumers and since only "transmission and distribution of electricity" was covered under the negative l ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd it was observed that the empowerment of the noticee to collect late payment surcharge is for the reason that there has been a delay and the same would be tolerated, but for a price of course, as per-determined and agreed upon and the 'noticee' agreed to accept these amount in lieu to refrain from an act, or to tolerate an act. Hence, the amount of such receipt is appropriately classifiable under the definition of the service declared under section 66E(e) of the Finance Act, 1944." (emphasis supplied) 8. In regard to the amount collected by the appellant towards the meter rent, the Principal Commissioner observed as follows: "38................. After inception of Negative List only the service namely "transmission and Distribution of Electricity" are covered under the negative list and other service beyond the scope of activities of the transmission and distribution of electricity whether or not related to the said service are neither covered under the negative list nor exempted vide any notification as was the case prior to the introduction of negative list. Also, sub-clause 44 of Section 65B of the Finance Act, 1994(viz. the Act which regulates the levy and collection o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... service which is declared service as per clause (a) of Section 66E of the 'Act'. I , therefore, hold the noticee liable to discharge service tax short/not paid on the taxable value as received by them towards "Lease rent charges" from the customers as service rendered under Section 65B(44) of the Finance Act, 1994, under the provision of section 73(1) of the Act, ibid." 11. It would be seen that the Commissioner has confirmed the demand of service tax on 'late payment surcharge' under section 66E(e) of the Finance Act by holding that the same is a consideration received by the appellant "for tolerating an act of electricity consumers by receiving the payments after the prescribed due date for payment of electricity bills; the Commissioner has confirmed the demand of service tax on 'meter rent' under section 66E(f) of the Finance Act by holding that the same is a consideration received by the appellant for transfer of goods by way of hiring; and the Commissioner has confirmed the demand of service tax on 'supervision charges' collected from the electricity consumers by holding that the same is a taxable service since it is not covered under any exemption. 12. It needs to be note ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ]. 16. The submissions advanced by the learned counsel for the appellant and the learned Authorized Representative of the Department have been considered. 17. The issue that arises for consideration in this appeal is whether the appellant is providing taxable service by way of collecting amount under the following headings: Late payment Surcharge Taxable under section 66E(e) of the Finance Act as a 'declared service' Meter Rent Taxable under section 66E(f) of the Finance Act as a 'declared service' Supervision Charges Taxable under section 66B(44) of the Finance Act that defines the term 'service'. 18. As noticed above, there is no dispute on payment of service tax on the lease rent income, on which the demand of service tax to the extent of Rs. 3,69,543/- has been paid by the appellant. The dispute on this amount is only on the amount of penalty that has been levied. 19. The appellant is a Public Sector Undertaking primarily engaged in the business of transmission and distribution of electricity, which is covered under Negative List entry under section 66D(k) of the Finance Act relating to "transmission or distribution of electricity by an electricity transmissio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... empted under the negative list under section 66D(k) of the Finance Act. 24. In this connection it needs to be noted that prior to introduction of the negative list regime for service tax under the Finance Act, there was no specific clause in the charging provisions of the Finance Act requiring payment of service tax on the amount collected from the consumers in relation to transmission and distribution of electricity. The Government of India issued a Notification dated February 27, 2010 exempting taxable service provided to any person by any other person for transmission of electricity. Another Notification dated June 22, 2010 was issued exempting taxable service provided to any person by a distribution, licensee or franchisee for distribution of electricity. There was some confusion and notices were issued by the department in respect of the activities relating to transmission and distribution of electricity for the period prior to the aforesaid notification. Various representations were received by the Government relating to the period prior to February 27, 2010 and June 22, 2010 as the transmission/ distribution companies believed that service tax was not required to be paid o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... list and, is therefore, not exigible to service tax. 12. The first question that arises for consideration is whether services relating to transmission and distribution of electricity fall within the ambit of clause (k) of section 66D of the Finance Act and, are therefore, exempt. In this regard, it may be noted that prior to the coming into force of the negative list regime, goods and services were exempted by virtue of notifications issued in exercise of powers under sub-section (1) of section 93 of the Finance Act. By virtue of Notification No. 11/2010 dated 27.2.2010, the Central Government exempted transmission of electricity from the whole of service tax leviable thereon under section 66 of the Finance Act; and by virtue of Notification No.32/2010-Service Tax dated 22.6.2010, distribution of electricity came to be exempted from the whole of service tax leviable thereon under section 66 of the Finance Act. Thus, what was exempt under those provisions was transmission and distribution of electricity, despite which, during the pre-negative list regime, the respondents have considered services related to transmission and distribution of electricity as exempted from service tax ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n also stands rescinded. What is lost sight of is that the clarification was only in respect of electric meters, whereas all related services were included within the ambit of transmission and distribution of electricity and given the benefit of the exemption notifications. Moreover, the clarificatory circular merely clarifies the stand of the Government as regards what would stand included within the meaning of "transmission and distribution services" namely, essential activities having direct and close nexus with the transmission and distribution of electricity. The respondents having themselves considered the services in question as being covered by the exemption for transmission and distribution of electricity as such services were essential activities having a direct and close nexus cannot be now permitted to take a U-turn and seek to exclude such services without pointing out any specific change in the nature of the exemptions, except that they are provided under different statutory provisions. In the opinion of this court, the meaning of "transmission and distribution of electricity" does not change either for the negative list regime or the GST regime. If that be so, the se ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the main service of transmission and distribution of electricity for the pre-negative list regime. Apart, therefrom, considering this issue independently, reference may be made to certain provisions of the Electricity Act. Sections 43 and 45 of the Electricity Act. 22. Thus, any line which is used for carrying electricity for any purpose as well as any apparatus connected to any such line for the purpose of carrying electricity is mandatorily required to be provided to the consumer by the licensee. Moreover, any plant, equipment, apparatus or appliance or any part thereof used for, or connected with, the generation, transmission, distribution or supply of electricity, except for electric meter and any electrical equipment, apparatus or appliance under the control of a consumer fall within the ambit of electrical plant as defined under section 2(22) of the Electricity Act. Sub-section (2) of section 43 of the Electricity Act casts a duty upon the licensee to provide if required electric plant or electric line for giving electric supply to the premises. Therefore, providing electric line and electric plant are elements of service which are naturally bundled in the ordinary course ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bundled services as contemplated under subsection (3) of section 66F of the Finance Act, and would have to be treated in the same manner as the service which gives the bundle its essential character, namely, transmission and distribution of electricity and, would therefore, be exempt from payment of service tax." (emphasis supplied) 28. It is clear from the aforesaid judgment of the Gujarat High Court that the activities that are related/ancillary to transmission and distribution of electricity would be exempt from payment of service tax since transmission and distribution of electricity is exempted. It is also clear from aforesaid decision that all services related to transmission and distribution of electricity are bundled services, as contemplated under section 66F(3) of the Finance Act, and are required to be treated as a provision of a single service of transmission and distribution of electricity, which service is exempted from payment of service tax. 29. Thus, for all the reasons stated above, it is not possible to sustain the levy of service tax on the amount collected by the appellant for late payment surcharge, meter rent and supervision charges. 30. The issue th ..... X X X X Extracts X X X X X X X X Extracts X X X X
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