NESCO Utility Vs Principal Commissioner (CESTAT Kolkata)
The CESTAT Kolkata examined an appeal challenging a demand of ₹25.33 crore towards service tax, along with interest and penalties, imposed on a distribution company engaged in transmission and distribution of electricity. The appellant, a wholly owned Government of Odisha undertaking, operated as a licensed distribution utility under the Electricity Act, 2003, with its activities regulated by statutory authorities.
The dispute arose from a show cause notice issued by the Directorate General of GST Intelligence for the period 2014–15 to June 2017, invoking the extended limitation period and alleging suppression of facts. The demand was calculated based on consolidated figures from the appellant’s financial statements without segregating receipts service-wise.
The appellant submitted detailed bifurcation of income into various categories, supported by documentary evidence and Chartered Accountant certification. It contended that the demand was unsustainable as it covered receipts that were either not taxable or exempt, including income related to transmission and distribution of electricity and incidental services.
The Tribunal noted that the issue was already settled by earlier decisions, particularly in cases involving similar electricity distribution companies. It observed that transmission and distribution of electricity had been fully exempt from service tax, and that ancillary or related services having a direct and close nexus with such activities were also covered by the exemption.
