Ajmer Vidyut Vitaran Nigam Limited Vs Principal Commissioner of CGST & Central (CESTAT Delhi)
In the case Ajmer Vidyut Vitaran Nigam Limited (AVVNL) vs. Principal Commissioner of CGST & Central Excise, the CESTAT Delhi reviewed a service tax demand order issued on 16.05.2018, covering the period from July 2012 to March 2016. The order followed a show cause notice issued on 09.02.2018, post-audit, proposing a service tax demand of ₹3.12 crore. This included tax on support services allegedly received from the Rajasthan State Police Department, amounts recovered from employees upon pre-term resignation, and penalties for non-compliance with tender terms.
AVVNL contested the ₹2.43 crore tax levied under ‘Business Support Services’ for payments made to the Police Department for deploying personnel to assist with electricity theft prevention. AVVNL argued that the reimbursement of police salaries was not a taxable service but a sovereign function carried out by the state under the Police Act. The vigilance teams formed by AVVNL to curb electricity theft in Rajasthan often faced threats, prompting requests for state police support. AVVNL emphasized that these payments were not service fees but reimbursements mandated by law and state notification. Citing precedent, including the Deputy Commissioner of Police Jodhpur case (affirmed by the Supreme Court), AVVNL asserted that police deployment is not a business activity and thus not subject to service tax.
