Services Directly Linked to Power Transmission and Distribution Eligible for Exemption: CESTAT [Read Order]

The Chandigarh Bench of Customs, Excise and Service Tax Appellate Tribunal(CESTAT)ruled that services directly linked to the construction and erection of transmission lines for electricity distribution authorities are eligible for service tax exemption.

Rpg Transmission Limited, appellant-assessee, was involved in constructing and erecting transmission lines for electricity distribution authorities. The Revenue issued a show cause notice on 23.11.2010, stating the appellant was not eligible for concessional duty under the Works Contract Service scheme. The notice was adjudicated through an order on 23.09.2013, confirming the proposal.

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The assessee's counsel argued that the show cause notices claimed the appellants were ineligible for the composition scheme. The impugned orders denied the benefit, saying the construction of electricity distribution lines was not considered a service related to electricity transfer. The counsel also pointed out that the issue had already been settled in the assessee’s case by Final Order No. 60120-60121/2022, dated 23.08.2022.

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The CESTAT examined both sides' submissions and reviewed the case records. The appellants argued that the services provided by them, specifically concerning transmission and erection of transmission lines, were exempted under two notifications dated 20.07.2010 and 27.02.2010. These notifications exempted service tax for services related to the transmission and distribution of electricity.

The appellate tribunal found that the phrase "relating to" used in the notifications had a broad scope and included various services that were integral to transmission and distribution of electricity, such as the erection of transmission lines. Thus, the services provided by the appellants were deemed exempt from service tax under the relevant notifications.

The two member bench comprising Somesh Arora(Judicial Member) and P.Anjani Kumar(Technical Member) referred to past decisions, including those involving Kedar Construction and Noida Power Company Ltd., where similar claims were upheld, confirming that services directly linked to transmission and distribution of electricity are eligible for the exemption.

As a result, the tribunal quashed the Commissioner’s orders dated 31.01.2013 and 10.09.2013, allowing the appeals and setting aside the service tax demands.

To Read the full text of the Order CLICK HERE

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