FACTS: Assessee being a service provider was engaged in the business of distribution of electricity to consumers within its jurisdiction. In pursuant of its business of electricity supply, assessee had developed an efficient distribution network. For the purpose of creating the network, the assessee was involved in providing the services of erection, commissioning & installation of transmission towers for smooth supply of electricity through transmission of energy & installation of electricity meters for measuring the energy consumed by various consumers for the purpose of billing them.
Though the activity of transmission & Distribution of electricity by electricity transmission & distribution utility is not taxable service, yet the above said services provided in relation for developing network were taxable under the head of “Erection, Commissioning & Installation service” as defined in the Finance Act 1994 but Assessee claimed immunity from service tax for the taxable services in pursuance of the Exemption Notification No 45/2010-ST & Notification No 32/2010-ST.
However the Adjudicating Authority rejected assessee’s claim on the ground that service of installation of various equipments at the consumer premise are taxable service & is different from the main business of rendering service of distribution of electricity.
HELD: The following facts were confirmed:
1.Exemption Notification No 45/2010-ST clearly stated that all taxable services provided in relation to non taxable service of transmission of electricity provided by the service provider to the service receiver shall be exempted for the period till 26-02-2010 & taxable service provided in relation to non taxable service of distribution of electricity shall not be required to be paid for the period till 22-06-2010.
2.While Exemption Notification No 32/2010-ST. exempted all taxable service provided in relation to distribute power by distribution licensee, a distribution franchisee or any other person authorized under the Electricity Act prospectively from 22-06-2010 onwards.
Hence from the above analysis of the Exemption Notifications although it is compelling that all taxable services provided in relation to distribution of electricity are exempted from service tax levy. However the expression “ in relation to” indicates that all activities having direct & proximal nexus with the distribution of electricity will be exempted from liability to service tax.
Henceforth since installation of various equipments such as transmission towers & electricity meters in the consumer premises for establishing the electricity distribution network is essential component for distribution of electricity & without such installation distribution of electricity cannot be effectively accompolished. Since the taxable service of “Erection, Commissioning & Installation service” has direct nexus with distribution of electricity, assessee’s claim for immunity of service is allowed & Revenue demand of service tax for the impugned service was not found sustainable.
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