Relief to TANTRANSCO: CESTAT Holds No Service Tax on Services Relating to Transmission of Electricity and No Extended Limitation for Cab Service [Read Order]

The Customs, Excise and Service Tax Appellate Tribunal (CESTAT), Chennai Bench, set aside the service tax demand against Tamil Nadu Transmission Corporation Ltd, holding that services relating to transmission of electricity are exempt, while also ruling that extended limitation is not invokable in absence of wilful suppression.

The appellant, Tamil Nadu Transmission Corporation Ltd (TANTRANSCO) is an undertaking by the Government of Tamil Nadu engaged in transmission of electricity.

The respondent, Commissioner of GST & Central Excise, noted that the appellant had failed to pay service tax under section 68(2) of the Finance Act, 1994 read with Notification No. 30/2012-ST for the period 01.07.2012 to 31.03.2014 on services received from contractors.

A show cause notice (SCN) was issued to the appellant proposing recovery of duty with interest and penalties under sections 76, 77 and 78. Upon appeal, the Adjudicating Authority confirmed the demand with interest, appropriated the tax paid and imposed penalties.

The appellant filed an appeal challenging the order confirming demand under reverse charge mechanism on works contract, manpower supply and rent-a-cab services by Adjudicating Authority.

V. Ravindran, the counsel for the appellant contended that all services were integrally connected with transmission and distribution of electricity, which is covered under the negative list under Section 66D(k) of the Finance Act, 1994.

The appellant counsel relied on various judicial precedents to submit that services “relating to” transmission of electricity must be given wide interpretation and include all ancillary and support services without which transmission would not be possible.

Sanjay Kakkar, the counsel for the respondent contended that services such as works contract, manpower supply and rent-a-cab are independent taxable services and not covered under the exemption.

Ajayan T.V, Judicial Member and M. Ajit Kumar, Technical Member observed that transmission of electricity under Section 66D(k) includes not only the core activity but also all services having a direct and proximate nexus with such activity.

The Tribunal also observed that rent-a-cab services do not have a direct nexus with transmission activity and are taxable. The Tribunal held there was no suppression or intent to evade tax and extended limitation can not be invokable.

In the light of facts and circumstances, the Tribunal set aside the demand on works contract and manpower services and held the demand on rent-a-cab service as time-barred.

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