Commissioner of Central Goods & Service Tax Vs NHPC Limited (CESTAT Chandigarh)
The appeal before the Customs, Excise and Service Tax Appellate Tribunal (CESTAT), Chandigarh, was filed by the Revenue against Order-in-Original No. 22/2020-ST dated 09.12.2020, whereby the adjudicating authority had dropped the entire service tax demand of ₹101,00,08,680 along with interest and penalties proposed against NHPC Limited for the period from 01.04.2013 to 30.06.2017.
NHPC Limited was engaged in the generation and supply of electricity to various distribution companies (DISCOMs) under Power Purchase Agreements (PPAs). Besides energy charges, NHPC collected Late Payment Surcharge (LPS) from DISCOMs when payments were delayed beyond the prescribed period. The Revenue alleged that the LPS constituted consideration for tolerating delayed payment by customers and was taxable as a declared service under Section 66E(e) of the Finance Act, 1994. A show cause notice dated 22.10.2018 was issued demanding service tax under Section 73(1), along with interest under Section 75 and penalties under Sections 77(2) and 78.
The adjudicating authority dropped the proceedings after holding that generation and supply of electricity were exempt under the service tax law; LPS represented interest on delayed payment for the exempt supply of electricity; it could not be treated as an independent service; it formed part of the tariff structure prescribed by the Central Electricity Regulatory Commission (CERC); and NHPC had not rendered any declared service under Section 66E(e). Consequently, no service tax was payable on the LPS collected from DISCOMs.
