The Calcutta High Court has held that the transaction of obtaining high-tension electric supply converting it to low-tension supply, and supplying it to the occupants, raising bills on such occupants and realizing the electricity consumption charges from such occupants, is a service which is exigible to Service Tax under the Finance Act, 1994.
The petitioner has a commercial complex named as “Galaxy Mall”. The petitioner supplied electric supply to the various occupants of the complex. The Superintendent of Service Tax held that such a service is exigible to tax under the Finance Act, 1994.
Before the High Court, the petitioners contended that the action of redistribution of electricity is a sale/trading activity which cannot be termed as a service. It was contended that the absence of any license under the Electricity Act, 2003 does not mean that, the petitioner is not selling or trading in electric supply. According to him, electricity is a ‘goods’ on which, service tax cannot be levied.
Analyzing the provisions of the Electricity Act, 2003, the Court observed that the petitioner cannot be said to be a generating company.
“It has not claimed itself to be so. It also cannot be said that, the petitioner is engaged in the supply or trading of electricity as, the definition of ‘supply’ and ‘trading’ does not allow the petitioner to come within the same. The petitioner is not an electricity trader as defined in Section 2(26) of the Electricity Act, 2003. The petitioner does not have a licence to undertake trading in electricity under Section 12 of the Electricity Act, 2003,” the Court said.
It was held that the service is defined in Section 65B(44) as an activity carried out by a person for another for consideration and includes a declared service. The activity of the petitioner comes within the definition of service. The activity of the petitioner sought to be made exigible to tax does not come within exclusions contained in Section 65B(44).
“The Finance Act, 1994 provides a negative list of services in Section 66D. If, an activity which does not come within the negative list of services as defined in Section 66D of the Finance Act, 1994, such an activity is to be termed as a service exigible to tax under the Finance Act, 1994. It is the contention of the petitioner that, the activity of the petitioner comes within the negative list of services defined in Section 66D particularly in view of Section 66D(e) and (k). As noted above, the petitioner cannot be said to be indulging in trading of goods or in transmission or distribution of electricity within the meaning of the Electricity Act, 2003. Although electricity is a ‘goods’ as held in National Thermal Power Corpn. Ltd. (supra) and is capable of being traded, the petitioner does not have the requisite licence to trade in electricity. The activity of the petitioner, therefore, cannot be treated as a trade as it would violate the provisions of the Electricity Act, 2003. Therefore, it cannot be said that, the petitioner is trading in electricity,” the Court said.
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