No Service Tax on Operational Charges provided to Owners of Power Plants: CESTAT [Read Order]

In a significant judgement, the Chennai bench of the Customs, Excise & Service Tax Appellate Tribunal (CESTAT) has held that no service tax on operational charges is provided to owners of power plants.

Shri T.R. Ramesh appeared for the appellant and Shri R. Rajaraman appeared for the Revenue.

M/s. Operational Energy Group India Pvt. Ltd, the appellant undertakes to operate and maintain power plants of various clients in terms of the agreements entered with them. As per the agreements, the appellant is receiving maintenance charges and operational charges. Revenue has contended that the appellant is paying service tax only on the maintenance charges and they have not discharged the service tax on the operational charges received from their clients.

The issue is whether the assessee is liable to pay service tax on the operational charges provided by them to the owners of the power plants and whether the penalty is imposable or not. Section 73 of Chapter V of the Finance Act, 1994, authorises the Central Excise officers to issue notice, demanding a specified amount of service tax.

A Coram comprising of P. Dinesha, Member (Judicial) and Shri M. Ajit Kumar, Member (Technical) observed that the issue of whether service tax is required to be discharged on operational charges by the appellant has already been examined and decided in favour of the appellant in the appellant’s case.

While allowing the appeal, the Tribunal held that the assessee is not liable to pay service tax on the operational charges provided by them to the owners of the power plants and the penalty does not arise.

To Read the full text of the Order CLICK HERE

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