Service Tax Exemption On Renting Of Immovable Property Service For Transmission Or Distribution Of Electricity By TANGEDCO: CESTAT

The Chennai Bench of Customs, Excise, and Service Tax Appellate Tribunal (CESTAT) has held that service tax is not payable on the renting of immovable property services for the transmission or distribution of electricity by Tamil Nadu Generation and Distribution Corporation Limited (TANGEDCO).

The bench of P. Dinesha (Judicial Member) and M. Ajit Kumar (Technical Member) has observed that all taxable services provided for the transmission and distribution of electrical energy are exempt from the liability to service tax.

The appellant, TANGEDCO, is a provider of various services, viz., ‘Business Auxiliary Service’, ‘Consulting Engineering Service’, ‘Renting of Immovable Property Service', and ‘Commercial Training or Coaching Service’. The appellants are registered under the category of ‘Management or Business Consultant Service’.

Based on intelligence regarding the non-payment of service tax on amounts collected towards processing and transfer fees from wind energy generators, an investigation was taken up by the officers of the Survey, Intelligence, and Research (SIR) Wing of the Commissionerate.

The investigation revealed that the appellant, Tangedo, had been collecting fees and charges for various purposes.

Firstly, fees and charges from the developers of windmills for processing their registration, application, or name transfer from their Wind Energy are classifiable under the category of ‘Business Auxiliary Service’.

Secondly, consultancy charges for the preparation of field feasibility reports, etc., to establish wind farms at notified sites, i.e., Tirunelveli and Udumalpet, in the state, which services are classifiable under the category of ‘Consultant Engineer Service’.

Thirdly, a fee from non-employees towards participation in the training or workshop conducted by them at their training institute, which is classifiable under ‘Commercial Coaching and Training’ from 2010–11 onwards.

Lastly, the appellant had also let out their vacant land on a rental lease to M/s. GMR Vasavi Power Corporation for setting up their diesel engine-based power plant at Basin Bridge, Chennai. The lease rental income received from M/s. GMR Power Corporation appeared to be taxable under the taxable category of ‘Renting of Immovable Property Service’.

The adjudicating authorities confirmed the service tax demand along with interest and imposed penalties under various provisions of the Finance Act, of 1994.

The assessee contended that it is a 100% government-owned public sector undertaking formed under Section 131 of the Electricity Act, 2003, as an electricity generation and distribution utility, and its primary functions are the generation, transmission, and distribution of electricity to various consumers located in the state of Tamil Nadu in terms of the provisions of the Electricity Act, 2003. Taxes on the consumption or sale of electricity fall under Sl. No. 53 in List II in the Seventh Schedule to the Constitution. ‘Transmit’ as defined under Section 2(74) of the Electricity Act, 2003' means conveyance of electricity by means of transmission lines, and the expression “transmission” shall be construed accordingly’. Prior to 1.7.2012, services for the transmission of electricity or distribution of electricity were not liable for the service tax levy.

The department contended that the assessee, though a government department, should have declared the value of services, and even if they were of the belief that their services were exempt, they should have approached the department for clarification. The exemptions are specific to services related to the transmission and distribution of electricity only and do not exempt taxable services in relation to the generation of electricity or, in general, the services provided by an authorised transmission and distribution utility.

The tribunal held that the activities are ‘for’ ensuring the transmission and distribution of electricity. These services are not provided independently and are part of the appellant’s statutory functions and are hence done ‘for’ transmission and distribution of electric power to various consumers located within the state of Tamil Nadu in terms of the provisions of the Electricity Act, 2003.

Counsel For Appellant: V. Ravindran

Counsel For Respondent: Anandalakshmi Ganeshram

Case Title: M/s. Tamil Nadu Generation and Distribution Corporation Limited Versus Commissioner of GST & Central Excise

Case No.: Service Tax Appeal No.40367 of 2019

Click Here To Read The Order