Commissioner of Central Tax Vs Northern Power Distribution Company of Telangana Ltd. (CESTAT Hyderabad)
Summary: CESTAT Hyderabad considered the Department’s appeal against the order dropping service-tax proposals against M/s Northern Power Distribution Company of Telangana Ltd., an electricity distribution utility in Telangana. The disputed receipts comprised additional charges or surcharge collected from consumers for delayed payment of electricity bills and meter-testing charges. The Show Cause Notice proposed service tax of ₹50,71,82,945/- on additional charges of ₹374,41,24,477/- on the basis that the surcharge represented consideration for the declared service of agreeing to tolerate an act or situation under Section 66E(e) of the Finance Act, 1994, and separately proposed tax on meter-testing charges treating meter testing as an independent service.
The Tribunal noted that Section 66D(k) placed transmission or distribution of electricity by an electricity transmission or distribution utility in the negative list during the relevant period and considered Section 66F(3) on naturally bundled services. Relying on Torrent Power Ltd. Vs Union of India and Madhya Pradesh Vidyut Vitaran Company Ltd., the Tribunal held that ancillary activities having a direct and close nexus with electricity distribution and naturally bundled with that principal service could not be artificially separated merely because separate charges or accounting entries existed.
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