Madhya Pradesh Power Transmission Company Ltd. Vs Principal Commissioner (CESTAT Delhi)
The Central Electricity Service Tax Appellate Tribunal (CESTAT), Delhi, ruled on an appeal filed by Madhya Pradesh Power Transmission Company Ltd. (MPPTCL) challenging a service tax demand of over ₹13 crore. The demand was originally confirmed by the Principal Commissioner in March 2019 and related to three components: consultancy charges, liquidated damages, and hire charges. MPPTCL, a state-run utility responsible for electricity transmission in Jabalpur, contested the tax imposed on amounts collected during 2014–2017. The appellant argued that the consultancy services were directly incidental to its primary function of electricity transmission and thus exempt under service tax rules. Similarly, they claimed liquidated damages, collected as penalties from contractors for contract breaches, were not payments for any service and thus not taxable.
The Tribunal agreed with MPPTCL’s position on consultancy services and liquidated damages. Relying on earlier rulings, including decisions in Madhya Pradesh Poorva Kshetra Vidyut Vitaran Co. Ltd. and Torrent Power Ltd., the CESTAT reaffirmed that services incidental to electricity transmission, such as consultancy, are exempt from service tax under bundled service provisions in Section 66F(3) of the Finance Act. Furthermore, liquidated damages for non-compliance or breach of contract terms were not considered taxable services, following established judicial precedents, including the Southeastern Coal Fields case.
