The New Delhi Bench of the Customs, Excise and Service Tax Appellate Tribunal (CESTAT), quashed service tax demand and noted that the amount collected for consultation services is connected to services incidental to transmission activities.
Madhya Pradesh Transmission Company Limited has filed the appeal to assail the passed by the Principal Commissioner confirming the demand of Rs. 13 crores towards service tax on the amount collected by the appellant towards liquidated damages, supervision charges and hire charges.
For the transmission of electricity, the appellant is required to erect or construct electric sub-stations, electricity poles, electrical lines, provide consultation for transmission of electricity from one point to another, transmit electricity from the power grid or dams or power generation area to the city limits or to the customers.
The issue that arises for consideration is whether service tax could be levied on the amount collected by the appellant towards consultancy charges.
The Counsel for the appellant submitted that service tax is not leviable on the amount collected by the appellant towards consultancy services and also that service tax could also not have been levied on the appellant on the amount collected by the appellant towards liquidated damages or penalties.
Dr. Radhe Tallo, authorized representative appearing for the department pointed out that for the hire charges the appellant could not substantiate the factual aspects and so the Commissioner was justified in confirming the demand.
The Tribunal of Justice Dilip Gupta, President and Hemambika R Priya, Technical Member observed that “In the present case the amount collected towards consultation services is in connection with services which are incidental to the transmission activities carried out by the appellant. The demand, therefore, cannot be sustained.”
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