No Service Tax on works contract & manpower services integrally linked to electricity transmission

Tamil Nadu Transmission Corporation Ltd. Vs Commissioner of GST & Central Excise (CESTAT Chennai)

The case before the Customs, Excise and Service Tax Appellate Tribunal (CESTAT), Chennai, concerns an appeal challenging an Order-in-Original dated 18.11.2016, which confirmed service tax demand, interest, and penalties against the appellant for the period 01.07.2012 to 31.03.2014. The demand arose under the reverse charge mechanism in respect of services such as works contract, manpower supply, and rent-a-cab services received by the appellant.

The appellant, a government-owned entity functioning as a State Transmission Utility under the Electricity Act, 2003, is engaged exclusively in the transmission of electricity. Intelligence gathered by the department indicated that the appellant had received services relating to erection, commissioning, installation, and dismantling of transmission infrastructure, along with manpower and transport services. It was alleged that service tax was not paid on these services as required under Section 68(2) of the Finance Act, 1994 read with Notification No. 30/2012-ST. Following investigation, a show cause notice dated 17.07.2015 was issued proposing recovery of tax, interest, and penalties.

The appellant argued that all the services in question were integrally connected with transmission and distribution of electricity, which is placed in the negative list under Section 66D(k) of the Finance Act, 1994, and therefore exempt from service tax. It relied on judicial precedents and exemption notifications asserting that services “for” or “relating to” transmission and distribution of electricity should be interpreted broadly. It was also contended that the demand was time-barred and that there was no suppression or intent to evade tax.