Madhya Pradesh Poorva Kshetra Vidyut Vitaran Company Limited Vs Commissioner of CGST & Central Excise (CESTAT Delhi)
The CESTAT Delhi considered a batch of appeals filed by three Government of Madhya Pradesh public sector electricity distribution companies involving identical issues relating to the levy of service tax and penalties. The Tribunal noted that, except for the issue of liquidated damages, the disputes had already been decided in its earlier order dated 14 January 2021 following the Gujarat High Court judgment in Torrent Power Ltd. versus Union of India. Although the Revenue’s appeal against that earlier order was pending before the Supreme Court, the Tribunal found no reason to take a different view.
The issues before the Tribunal concerned the taxability of late payment surcharge, meter renting charges, supervision charges (including reconnection and disconnection charges), lease rental from pole users for cable TV networks, works contract service, and liquidated damages recovered from contractors. The Tribunal reiterated that late payment surcharge, meter rent and supervision charges are related and ancillary to transmission and distribution of electricity, which is covered by the negative list under Section 66D(k) of the Finance Act. Relying on the Gujarat High Court’s decision, it held that these services are naturally bundled with transmission and distribution of electricity under Section 66F(3) and therefore receive the same tax treatment as the principal exempt service. Consequently, the service tax demands on these components were held to be unsustainable.
