TMI Blog2021 (7) TMI 1107X X X X Extracts X X X X X X X X Extracts X X X X ..... an exercise cannot be done in a writ proceedings under Article 226 of the Constitution of India. Thus, the High Court is expected to be cautious while entertaining a writ petition filed against the show cause notice. It is not in dispute between the parties that transmission and distribution of electricity are exempted from service tax. Question arises, what all are the services falling under the exemption clause and the other services which all are not covered under the exemption clause. The first respondent has specifically stated that they have issued the show cause notice only in respect of the services stated above, which all are not covered under the exemption clause under the Act. This Court is of the considered opinion that only if the exemption clause is applicable, then alone the jurisdiction point needs to be considered with reference to the facts of the present case. However, in the present case, the first respondent himself has categorically admitted both in the show cause notice as well as in the counter filed by them that specifically exemption is granted for transmission or distribution of electricity by any electricity transmission or distribution utility. T ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing Engineer/Chief Engineer of various Circles more specifically, Distribution Circle, Thermal Power Station and Transmission Circle. 2.Since the prayers sought for in all the writ petitions are identical, the writ petitions were heard together and with the consent of the parties, Writ Petition No.15388 of 2018 is taken as the lead case and the facts set out therein are taken up for consideration to decide the writ petitions. 3.The petitioner states that TANGEDCO forms part of Tamil Nadu Electricity Board, which is wholly owned and controlled by the State of Tamil Nadu. The petitioner is distributing electricity to the customers either domestic or commercial/industrial in respect of the areas falling under the jurisdiction. 4.The first respondent issued a show cause notice dated 30.10.2017, calling upon the petitioner to show cause as to why service tax should not be imposed on them in respect of certain services rendered by the petitioner, which is not falling under the Negative List of the Finance Act, 1994 (hereinafter referred to as the Act ). The petitioner has challenged the very show cause notice mainly on the ground that the show cause notice was issued without ju ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Act. Therefore, the incidental services would also fall within the ambit of transmission or distribution of electricity and thus, the demand of service tax for such incidental services has no sanction in law and the first respondent, who is a quasi judicial authority has exercised excess power, which is not contemplated. 9.The learned counsel for the petitioner enumerated the meaning of electricity under the provisions of the Electricity Act, 2003 and further referred to Section 65(51) of the Act wherein taxable service is defined, which means any service on which service tax is leviable under Section 66B. Section 65(44) of the Act defines service , which means any activity carried out by the person for another for consideration, and includes a declared service, but shall not include (a) an activity which constitutes merely, (i) a transfer of title in goods or immovable property, by way of sale, gift or in any other manner; (ii) such transfer delivery or supply of any goods which is deemed to be a sale within the meaning of clause (29A) of Article 226 of the Constitution of India; and (iii) a transaction in money or actionable claim. 10.The main contentions raised on be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ore, held that plaintiff would be entitled to ST/50567/2019 retain only an amount of ₹ 1000/- that was received as earnest, out of amount of ₹ 25,000/-. 42. The conclusion drawn by the learned authorized representatives of the Department from the aforesaid decision of the Supreme Court that compensation received is 'synonymous' with 'tolerating' or that the Supreme Court acknowledged that in a breach of contract, one party tolerates an act or situation is not correct. 43. It is, therefore, not possible to sustain the view taken by the Principal Commissioner that penalty amount, forfeiture of earnest money deposit and liquidated damages have been received by the appellant towards consideration for tolerating an act leviable to service tax under section 66E(e) of the Finance Act. 44. The impugned order dated December 18, 2018 passed by the Commissioner, therefore, cannot be sustained and is set aside. The appeal is, accordingly, allowed. 12.In order to substantiate the entertainability of a writ petition against a show cause notice, the learned counsel for the petitioner referred to the order passed by this Court dated 07.11.2019, i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... service tax. The dispute, therefore, relates to the period of the negative list regime and the CGST/SGST regime. 11. Insofar as the second phase, namely, the negative list regime is concerned, with effect from 1.7.2012, section 65B of the Finance Act, 1994 came to be amended and service tax became leviable on all services, other than those services specified in the negative list. Admittedly, transmission and distribution of electricity by an electricity transmission or distribution utility, finds place in the negative 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 ta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ty as exempt under the exemption notifications, for the negative list regime and the GST regime, they seek to exclude such services from the ambit of transmission and distribution of electricity. From the affidavits-inreply filed on behalf of the respondents, there is nothing to show as to how the very services, which stood included within the ambit of transmission and distribution of electricity now stand excluded. The sole refrain of the respondents is that in view of the fact that the exemption notification stands rescinded, the clarification 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 que ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ntal charges against metering equipment; testing fee for meters/transformers, capacitors etc.; labour charges from customers for shifting of meters or shifting of service lines; charges for duplicate bills provided by DISCOMS to consumers being related services. The question is whether an element of provision of these services is combined with an element or elements of provision of the main service of transmission and distribution of electricity. As noticed earlier, the respondents have themselves treated such related/ancillary services as part 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and close nexus with transmission and distribution of electricity would be covered by the exemption for transmission and distribution of electricity extended under the relevant notifications. Therefore, the taxability of the related/ancillary services are required to be given same treatment as is given to the single service, which gives such bundle its essential character, namely, transmission and distribution of electricity. 25. Thus, insofar as the phase relating to the negative list regime is concerned, the services in question would fall within the ambit of 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. 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 are bundles services, as contemplated under Sect ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ontract services, rent a cab operators and liquidated damages and legal services were availed during the period from 01.07.2012 to 31.03.2017 and those services are not exempted under the provisions of the Act. Thus, the show cause notice was issued. 17.All the services stated above were subjected to service tax either payable directly or on reverse charge mechanism basis. The Finance Act, 1994, does not distinguish between the Corporate Tax Payers, an individual, PSU or Government owned authorities. As per the records, if any taxable services as envisaged in the Act are provided or availed by a tax payer, they are liable to pay appropriate service tax and file prescribed ST-3 returns. The show cause notice further reveals that TANGEDCO have availed various taxable services as alleged in the notices and have not paid the appropriate service tax and not declared the value of taxable services in their periodical returns. Thus, the authorities have jurisdiction to issue the show cause notice and the petitioner is bound to submit their objections and explanations along with the documents, enabling the authorities to consider and adjudicate the issues and take appropriate decision ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , the High Court is expected to be cautious while entertaining a writ petition filed against the show cause notice. 21.Regarding the entertainability of the writ petition, the petitioner has raised the point of jurisdiction mainly on the ground that transmission or distribution of electricity by any electricity transmission or distribution utility is included in the Negative List in the Act. In view of the fact that transmission and distribution of electricity is exempted, all incidental services rendered are also exempted and therefore, the very initiation is in violation of provisions of the Act and thus, the show cause notice is untenable. Secondly, it is contended that with reference to the taxable services, the petitioner is promptly paying the taxes. When the petitioner, being an organisation, owned by the State, is paying the service tax as applicable in respect of the services falling within the ambit of the Act, there is no reason whatsoever for the first respondent to issue show cause notice with reference to the services attached to the transmission or distribution of the electricity. Thus, the entire exercise made by the first respondents is beyond the scope of juris ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Annexure I to VIII and the Abstract thereon to this notice. 25.A careful reading of the above paragraph would reveal that the respondent in W.P.No.26713 of 2018 has issued the show cause notice only with reference to the works contract services, rent a cab services, man power services, goods transport services and legal consultancy services they have received and on the services TTS the petitioner provided and failed to file service tax returns, which resulted in non-payment of the service tax. 26.In reply, the learned counsel appearing for the petitioner has contended that they have paid service tax to the goods transport agency and they are having receipts for such payment and that was informed to the authorities. However, all such payments, if any, already made by the petitioner, are to be considered by the authorities while undertaking the process of adjudication and considering the documents. 27.High Court cannot go into the details regarding the payments already made with reference to certain service charges and the claims and allegations set out in the show cause notice. Any differences, in this regard, are to be sorted out by the petitioner and respondents, b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the queries, doubts raised in the show cause notice with reference to the documents and evidences and defend their case, in the manner known to law. 33.As far as the jurisdictional point raised by the petitioner is concerned, this Court is of the considered opinion that only if the exemption clause is applicable, then alone the jurisdiction point needs to be considered with reference to the facts of the present case. However, in the present case, the first respondent himself has categorically admitted both in the show cause notice as well as in the counter filed by them that specifically exemption is granted for transmission or distribution of electricity by any electricity transmission or distribution utility. The first respondent has made it clear that show cause notice has not been issued demanding service tax for transmission or distribution of electricity. The service tax are demanded only for other services which all are not covered under the exemption clause and therefore, these facts are to be adjudicated with reference to the documents and evidences. When there is a slightest doubt in respect of the point of jurisdiction is raised, then the benefit of the said doubt is ..... X X X X Extracts X X X X X X X X Extracts X X X X
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