UltraTech’s Installation and Operation of Fly Ash Collection System Not a Taxable Service to TNEB: CESTAT [Read Order]
CESTAT held that UltraTech’s installation and operation of the Fly Ash Collection System at MTPS was only for procuring fly ash for its own use and did not amount to any taxable service rendered to TNEB.
UltraTech - cements - taxscan
UltraTech - cements - taxscan
The Chennai Bench of the Customs, Excise, and Service Tax Appellate Tribunal (CESTAT) ruled that UltraTech’s installation, operation, and maintenance of the Fly Ash Collection System at Mettur Thermal Power Station (MTPS) did not amount to a taxable service provided to the Tamil Nadu Electricity Board (TNEB).
UltraTech Cement Ltd., the appellant, entered into a Memorandum of Understanding (MOU) with TNEB in 2002 for collecting fly ash from MTPS. Under the MOU, UltraTech had to install the Fly Ash Collection System at its own cost, and the system would become the property of TNEB. UltraTech received an allotted share of fly ash, which is an essential raw material for manufacturing cement.
The department alleged that UltraTech had provided a taxable service to TNEB by installing and operating the system and that the allotment of fly ash was a form of consideration. A show cause notice and subsequent orders demanded service tax on this basis.
Know How to Investigate Books of Accounts and Other Documents, Click Here
The appellant’s counsel argued that it did not provide any service to TNEB. It explained that the system was installed and operated only to secure fly ash for its manufacturing needs, and not to supply any service. It pointed out that TNEB merely permitted removal of fly ash and did not pay any consideration. The appellant also argued that the arrangement was one of procurement and self-use, not a commercial service arrangement.
The revenue counsel argued that UltraTech’s activities amounted to “Business Support Service” and that receiving fly ash was a non-monetary consideration.
The bench comprising M. Ajit Kumar (Technical Member) and Ajayan T.V. (Judicial Member) observed that the MOU showed a mutually beneficial arrangement and not a service transaction.
The tribunal explained that UltraTech had acted to secure fly ash as a raw material and that the activity did not constitute a taxable service.
It also pointed out that TNEB permitted UltraTech to collect fly ash free of cost, except for service charges paid by the appellant to TNEB, and this did not amount to consideration flowing from TNEB to UltraTech. The appeal on this issue was allowed.
Support our journalism by subscribing to Taxscanpremium. Follow us on Telegram for quick updates
