Madras High Court
M/S.Tamil Nadu Transmission ... vs The Commissioner Of Gst & Central ... on 7 July, 2021
W.P.Nos.15388 of 2018 etc., batch
IN THE HIGH COURT OF JUDICATURE AT MADRAS
DATED : 07.07.2021
CORAM
THE HONOURABLE MR.JUSTICE S.M.SUBRAMANIAM
W.P.Nos.15388 of 2018,
5715, 8577, 26713, 26718, 26723, 27042, 27045,
27053, 28012, 28018, 28020, 28022, 28336,
30585, 33906, 33910 & 33914 of 2018
and
W.M.P.Nos.31007, 31080, 31085, 31441,
31449, 31457, 32585, 32602, 35667, 32598, 33045,
39362, 39368, 39371 & 39593 of 2018
W.P.No.15388 of 2018 :-
M/s.Tamil Nadu Transmission Corporation Ltd.,
(TANTRANSCO)
Rep., by its Superintending Engineer,
Attur Bye Pass Road,
Kamarajar Colony, Salem-636 001. .. Petitioner
-vs-
1.The Commissioner of GST & Central Excise (Audit),
Coimbatore Audit Commissionerate,
No.6/7, A.T.D. Street, Race Course,
Coimbatore.
2.The Commissioner of Central GST &
Central Excise, Salem,
No.1, Foulks Compound, Anai Road, Salem. .. Respondents
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Petition filed under Article 226 of the Constitution of India praying
for issuance of Writ of Prohibition forbearing the respondents from
proceeding further, pursuant to the impugned show cause notice SCN
Sl.No.06/2017-ST-Commr-SLM dated 30.10.2017 issued by the first
respondent as the same is barred by limitation, without jurisdiction, arbitrary
and not sustainable in law.
For Petitioner : Mr.K.Jayachandran
For Respondents : Mr.Rajanish Pathiyil,
(In W.P.Nos.15388, Senior Standing Counsel
5715 & 8517 of 2018)
For Respondent(s) : Mr.A.P.Srinivas,
(In W.P.Nos.26713, Senior Standing Counsel
26718 & 26723, 27042, 27045,
27053, 28336 & 30585 of 2018)
For Respondent : Mr.Umesh Rao,
(In W.P.Nos.28012, Standing Counsel
28018, 28020 & 28022
33906, 33910, 33914 of 2018)
******
COMMON ORDER
The petitioners are Tamil Nadu Generation and Distribution
Corporation Limited (TANGEDCO), represented by its respective
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Superintending Engineer/Chief Engineer of various Circles more
specifically, Distribution Circle, Thermal Power Station and Transmission
Circle.
2.Since the prayers sought for in all the writ petitions are identical,
the writ petitions were heard together and with the consent of the parties,
Writ Petition No.15388 of 2018 is taken as the lead case and the facts set
out therein are taken up for consideration to decide the writ petitions.
3.The petitioner states that TANGEDCO forms part of Tamil Nadu
Electricity Board, which is wholly owned and controlled by the State of
Tamil Nadu. The petitioner is distributing electricity to the customers either
domestic or commercial/industrial in respect of the areas falling under the
jurisdiction.
4.The first respondent issued a show cause notice dated 30.10.2017,
calling upon the petitioner to show cause as to why service tax should not
be imposed on them in respect of certain services rendered by the petitioner,
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which is not falling under the Negative List of the Finance Act, 1994
(hereinafter referred to as "the Act"). The petitioner has challenged the very
show cause notice mainly on the ground that the show cause notice was
issued without jurisdiction and the petitioner is not falling under the
definition "service provider" so as to issue show cause notice with reference
to certain services rendered by the petitioner. Undoubtedly, Section 66D(k)
of the Act contemplates that “transmission or distribution of electricity by
any electricity transmission or distribution utility” is in the Negative List
and therefore, the incidental services falling under the transmission or
distribution of electricity are also not taxable and thus, the issuance of very
show cause notice is not falling under the definition of “service” so as to
respond. Thus, the petitioner is constrained to move the present writ
petition.
5.The learned counsel for the writ petitioner mainly contended that
they are challenging the proposal/levy of service tax on certain amounts
collected by the unit, viz., (i) liquidated damages for non-performance or
partial performance of the contracts from the contractors; (ii) cheque
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dishonour charges from consumers when the cheque given for payment of
current consumption charges returned unpaid; (iii) for delayed payment of
current consumption charges, belated payment charges are collected from
the consumers (belated payment surcharge); (iv) forfeiture of EMD charges
for not fulfilling the contracts from contractors; and (v) fine and penalty
amounts from consumers who indulge in theft of energy.
6.By referring to Section 66E(e) of the Act, alleging that the above
activities will have to be treated as “declared services”, it is contended that
there is no dispute in respect of “declared service” under Section 66E of the
Act. Therefore, the very issuance of show cause notice is without
jurisdiction.
7.The learned counsel for the petitioner contended that the officers of
the Central Excise Department are authorised to perform the duties and
powers under the Act and consequently, they became quasi-judicial
authority. When there is a prohibition under the Act, nor any sanction under
the Act, the authorities competent cannot issue any such show cause notice
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and thus, the notice itself is untenable, exceeding the jurisdiction and in
violation of the provisions of the Act.
8.The learned counsel for the petitioner referring to Section 66D(k) of
the Act, states that transmission or distribution of electricity by any
electricity transmission or distribution utility is in the Negative List of the
Act. Therefore, the incidental services would also fall within the ambit of
transmission or distribution of electricity and thus, the demand of service
tax for such incidental services has no sanction in law and the first
respondent, who is a quasi judicial authority has exercised excess power,
which is not contemplated.
9.The learned counsel for the petitioner enumerated the meaning of
“electricity” under the provisions of the Electricity Act, 2003 and further
referred to Section 65(51) of the Act wherein “taxable service” is defined,
which means any service on which service tax is leviable under Section
66B. Section 65(44) of the Act defines “service”, which means any activity
carried out by the person for another for consideration, and includes a
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declared service, but shall not include (a) an activity which constitutes
merely, (i) a transfer of title in goods or immovable property, by way of
sale, gift or in any other manner; (ii) such transfer delivery or supply of any
goods which is deemed to be a sale within the meaning of clause (29A) of
Article 226 of the Constitution of India; and (iii) a transaction in money or
actionable claim.
10.The main contentions raised on behalf of the petitioner are that the
first respondent has no jurisdiction to issue show cause notice. There is no
authority under law to issue any such show cause notice demanding service
tax from the petitioner and the transmission and distribution of electricity is
included in the Negative List in the Act and therefore, the entire claims set
out in the show cause notice are baseless and without any jurisdiction.
11.The learned counsel, to substantiate the said contention, referred to
the judgment passed by the Customs, Excise and Service Tax Appellate
Tribunal (CESTAT), New Delhi in the case of M/s.South Eastern
Coalfields Ltd. vs. Commissioner of Central Excise and Service Tax,
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Raipur reported in 2020 (12) TMI 912. The learned counsel contended that
the case decided by the CESTAT also pertains to a show cause notice and
the observations made by the CESTAT are hereunder:-
“40. It is in this context and in the context of section 74
of the Contract Act, that the Supreme Court observed:
“20.Section 74 declares the law as to
liability upon breach of contract where
compensation is by agreement of parties pre-
determined, or where there is a stipulation by way
of penalty. But the application of the enactment is
not restricted to cases where the aggrieved party
claims relief as a plaintiff. The section does not
confer a special benefit upon any party; it merely
declares the law that notwithstanding any term in
the contract for predetermining damages or
providing for forfeiture of any property by way of
penalty, the court will award to the party aggrieved
only reasonable compensation not exceeding the
amount named or penalty stipulated.”
41. The Supreme Court also noticed that section 74 of
the Contract Act merely dispenses with the proof of “actual
loss or damages”. It does not justify the award of
compensation, when in consequence of the breach no legal
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injury at all has resulted, because compensation for breach of
contract can be awarded to make good the loss or damage
which actually arose or which the parties knew when they
made the contract 'to be likely to result from the breach'. The
Supreme Court also found that there was no evidence that
any loss was suffered by the plaintiff in consequences of the
default by the defendant, save as to the loss suffered by being
kept out of possession of the property. The Supreme Court,
therefore, held that plaintiff would be entitled to
ST/50567/2019 retain only an amount of Rs. 1000/- that was
received as earnest, out of amount of Rs. 25,000/-.
42. The conclusion drawn by the learned authorized
representatives of the Department from the aforesaid decision
of the Supreme Court that compensation received is
'synonymous' with 'tolerating' or that the Supreme Court
acknowledged that in a breach of contract, one party
tolerates an act or situation is not correct.
43. It is, therefore, not possible to sustain the view
taken by the Principal Commissioner that penalty amount,
forfeiture of earnest money deposit and liquidated damages
have been received by the appellant towards “consideration”
for “tolerating an act” leviable to service tax under section
66E(e) of the Finance Act.
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44. The impugned order dated December 18, 2018
passed by the Commissioner, therefore, cannot be sustained
and is set aside. The appeal is, accordingly, allowed.”
12.In order to substantiate the entertainability of a writ petition
against a show cause notice, the learned counsel for the petitioner referred
to the order passed by this Court dated 07.11.2019, in W.P.Nos.35728 to
35734 of 2016 wherein, the following observations are made:-
“12.Though normally, a contract of employment
qua an employer and employee has to be read as a
whole, there are situations within a contract that
constitute rendition of service such as breach of a
stipulation of noncompete. Notice pay, in lieu of sudden
termination however, does not give rise to the rendition
of service either by the employer or the employee.
13.Towards conclusion Mr.Srinivas, Counsel
raises the plea of availability of alternate remedy.
However, since the matter involves an interpretation of
the statutory provision in the light of undisputed facts
available on record, I see no need to relegate the
petitioner to statutory appeal. This plea is also
rejected.”
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13.In yet another case, the Principal Bench of CESTAT, New Delhi
ruled that once the subject is included in the Negative List in the Act, there
is no scope for any claim of service tax by the authorities. In the present
case, transmission and distribution of electricity is admittedly included in
the Negative List and therefore, all incidental services provided are also
exempted from payment of service tax and thus, the issuance of show cause
notice is beyond the scope of jurisdiction and the first respondent cannot
dissect or categorize the services which all are otherwise incidental to
transmission and distribution of electricity. The CESTAT in the above case,
referred to the judgment of the Gujarat High Court in the case of Torrent
Power Limited vs. Union of India [Special Civil Application No.5443 of
2018, dated 19.12.2018] and held as follows:-
“26.The issue as to whether the charges collected in
connection with transmission of electricity even after July 01,
2012 would be subjected to tax as according to the
Department they would not be exempted under Section
66D(k) of the Finance Act, came up for consideration before
the Gujarat High Court in Torrent Power after referring to
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the position prior to the introduction of the negative list and
the Notifications referred to above and the introduction of the
negative list regime w.e.f July 01, 2012, the Gujarat High
Court observed as follows:-
“10. Insofar as the first phase is concerned,
the respondents do not dispute that the
related/ancillary services to transmission and
distribution of electricity are exempt from payment
of service tax. The dispute, therefore, relates to the
period of the negative list regime and the
CGST/SGST regime.
11. Insofar as the second phase, namely, the
negative list regime is concerned, with effect from
1.7.2012, section 65B of the Finance Act, 1994
came to be amended and service tax became
leviable on all services, other than those services
specified in the negative list. Admittedly,
transmission and distribution of electricity by an
electricity transmission or distribution utility, finds
place in the negative list and, is therefore, not
exigible to service tax.
12. The first question that arises for
consideration is whether services relating to
transmission and distribution of electricity fall
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within the ambit of clause (k) of section 66D of the
Finance Act and, are therefore, exempt. In this
regard, it may be noted that prior to the coming
into force of the negative list regime, goods and
services were exempted by virtue of notifications
issued in exercise of powers under sub-section (1)
of section 93 of the Finance Act. By virtue of
Notification No. 11/2010 dated 27.2.2010, the
Central Government exempted transmission of
electricity from the whole of service tax leviable
thereon under section 66 of the Finance Act; and
by virtue of Notification No.32/2010-Service Tax
dated 22.6.2010, distribution of electricity came to
be exempted from the whole of service tax leviable
thereon under section 66 of the Finance Act. Thus,
what was exempt under those provisions was
transmission and distribution of electricity, despite
which, during the pre-negative list regime, the
respondents have considered services related to
transmission and distribution of electricity as
exempted from service tax by virtue of those
notifications. Insofar as electricity meters are
concerned, vide circular No.131/13/2010-ST dated
7.12.2010, it was clarified that supply of electricity
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meters for hire to consumers being an essential
activity, having direct and close nexus with
transmission and distribution of electricity, the
same is covered by the exemption for transmission
and distribution of electricity extended under
relevant notifications.
13. Thus, the reason for saying that supply of
electricity meters for hire to consumers is covered
by the exemption notification is that such service is
an essential activity having direct and close nexus
with transmission and distribution of electricity.
This circular only provides an interpretation of
when a service would stand included in another
service, namely, when such service is an essential
activity having direct and close nexus with the
exempted activity. Therefore, the fact that the
exemption notifications came to be rescinded would
have no bearing inasmuch as the circular only
clarifies what according to the Government of
India would stand included in another service.
Such interpretation would not change merely
because such exemption is now granted under some
other provision.
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14. It may be noted that insofar as the
exemptions prior to the negative list regime as well
as post the negative list regime are concerned, it is
the transmission and distribution of electricity that
has been exempted by virtue of notifications.
During the negative list regime, transmission and
distribution of electricity has been placed in the
negative list. Therefore, in all the three phases,
what was exempted was “transmission and
distribution of electricity”. However, while for the
prenegative list phase, the respondents considered
the services related to transmission and
distribution of electricity as exempt under the
exemption notifications, for the negative list regime
and the GST regime, they seek to exclude such
services from the ambit of transmission and
distribution of electricity. From the affidavits-in-
reply filed on behalf of the respondents, there is
nothing to show as to how the very services, which
stood included within the ambit of transmission and
distribution of electricity now stand excluded. The
sole refrain of the respondents is that in view of the
fact that the exemption notification stands
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rescinded, the clarification also stands rescinded.
What is lost sight of is that the clarification was
only in respect of electric meters, whereas all
related services were included within the ambit of
transmission and distribution of electricity and
given the benefit of the exemption notifications.
Moreover, the clarificatory circular merely
clarifies the stand of the Government as regards
what would stand included within the meaning of
“transmission and distribution services” namely,
essential activities having direct and close nexus
with the transmission and distribution of electricity.
The respondents having themselves considered the
services in question as being covered by the
exemption for transmission and distribution of
electricity as such services were essential activities
having a direct and close nexus cannot be now
permitted to take a U-turn and seek to exclude such
services without pointing out any specific change in
the nature of the exemptions, except that they are
provided under different statutory provisions. In
the opinion of this court, the meaning of
“transmission and distribution of electricity” does
not change either for the negative list regime or the
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GST regime. If that be so, the services which stood
included within the ambit of transmission and
distribution of electricity during the pre-negative
list regime cannot now be sought be excluded by
merely issuing a clarificatory circular, that too,
with retrospective effect. By the clarificatory
circular, the respondents seek to give a different
interpretation of the very same services as against
the clarification issued for the prenegative list
regime.
15. Thus, from the very manner in which the
respondents have treated the services related to
transmission and distribution of electricity during
the pre-negative list regime, such services would
stand covered by the exemption granted to
transmission and distribution of electricity by
virtue of inclusion of such services in the list of
negative services under section 66D (k) of the
Finance Act as well as by virtue of exemption
notification issued under the CGST Act.”
27.The Gujarat High Court also examined whether
serviced provided with fall within the ambit of bundle
services as contemplated under Section 66F(3) of the Finance
Act and observed that for the phase relating to the negative
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list, the services in question would fall within the ambit of
bundle services as contemplated under Section 66F of the
Finance Act and would have to be treated in the same manner
as the service which gives the bundle its essential character,
namely transmission and distribution of electricity. The
service would, therefore, be exempted from payment of
service tax. The relevant portion of the order is reproduced
below:-
“20. The facts of this case are required to be
examined in the light of the above statutory
provisions. In this case, we are concerned with
transmission and distribution of electricity being
the main services and application fee for releasing
the connection for electricity; rental charges
against metering equipment; testing fee for
meters/transformers, capacitors etc.; labour
charges from customers for shifting of meters or
shifting of service lines; charges for duplicate bills
provided by DISCOMS to consumers being related
services. The question is whether an element of
provision of these services is combined with an
element or elements of provision of the main
service of transmission and distribution of
electricity. As noticed earlier, the respondents have
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themselves treated such related/ancillary services
as part of the main service of transmission and
distribution of electricity for the pre-negative list
regime. Apart, therefrom, considering this issue
independently, reference may be made to certain
provisions of the Electricity Act. Sections 43 and 45
of the Electricity Act.
22. Thus, any line which is used for carrying
electricity for any purpose as well as any apparatus
connected to any such line for the purpose of
carrying electricity is mandatorily required to be
provided to the consumer by the licensee.
Moreover, any plant, equipment, apparatus or
appliance or any part thereof used for, or
connected with, the generation, transmission,
distribution or supply of electricity, except for
electric meter and any electrical equipment,
apparatus or appliance under the control of a
consumer fall within the ambit of electrical plant as
defined under section 2(22) of the Electricity Act.
Sub-section (2) of section 43 of the Electricity Act
casts a duty upon the licensee to provide if required
electric plant or electric line for giving electric
supply to the premises. Therefore, providing
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electric line and electric plant are elements of
service which are naturally bundled in the ordinary
course of business, with the single service of
transmission and distribution of electricity which
gives the bundle its essential character. The only
related service which does not fall within the ambit
of the definitions of electric line and electric plant
is the meter used for ascertaining the quantity of
electricity supplied to any premises. However,
insofar as installation of electricity meter and hire
charges collected in respect of electricity meters
are concerned, by the circular dated 7th December,
2010, the Government of India has clarified that
supply of electricity meters for hire to the
consumers is an essential activity having direct and
close nexus with transmission and distribution of
electricity and therefore, is covered by the
exemption for transmission and distribution of
electricity extended under the relevant
notifications. Evidently therefore, all the services
related to transmission and distribution of
electricity are naturally bundled in the ordinary
course of business of the petitioner and are
required to be treated as provision of the single
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service of transmission and distribution of
electricity which gives the bundle its essential
character.
23. Besides, a perusal of the GERC
Regulations indicates that the services which are
sought to be taxed now are the services, which the
petitioner is required to mandatorily provide at the
rate prescribed by GERC, a statutory authority
constituted under the provisions of the Electricity
Act. In the opinion of this court, all these services
are essential activities which have a direct and
close nexus with transmission and distribution of
electricity. In terms of the earlier clarification
dated 7.12.2010 issued vide Circular No.131/13-
2010-ST, the Government of India had clarified
that an activity, which is an essential activity
having direct and close nexus with transmission
and distribution of electricity would be covered by
the exemption for transmission and distribution of
electricity extended under the relevant
notifications. Therefore, the taxability of the
related/ancillary services are required to be given
same treatment as is given to the single service,
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which gives such bundle its essential character,
namely, transmission and distribution of electricity.
25. Thus, insofar as the phase relating to the
negative list regime is concerned, the services in
question would fall within the ambit of bundled
services as contemplated under subsection (3) of
section 66F of the Finance Act, and would have to
be treated in the same manner as the service which
gives the bundle its essential character, namely,
transmission and distribution of electricity and,
would therefore, be exempt from payment of service
tax.”
28.It is clear from the aforesaid judgment of the
Gujarat High Court that the activities that are
related/ancillary to transmission and distribution of
electricity would be exempt from payment of service tax since
transmission and distribution of electricity are bundles
services, as contemplated under Section 66F(3) of the
Finance Act, and are required to be treated as a provision of
a single service of transmission and distribution of electricity,
which service is exempted from payment of service tax.”
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14.The respective learned Senior Standing Counsels appearing on
behalf of the respondents advanced their arguments by contending that it is
not in dispute that transmission or distribution of electricity is exempted and
Section 66D of the Act deals about “negative list of services”. Sub-clause
(k) of the said Act specifically exempts transmission or distribution of
electricity by any electricity transmission or distribution utility. There is no
quarrel on the statutory exemption granted under the Act, as far as the
transmission or distribution of electricity by any electricity transmission or
distribution utility is concerned. However, the learned Senior Standing
Counsels drawn the attention of this Court that the show cause notice has
not been issued demanding service tax for transmission or distribution of
electricity. It is contended that the statute does not provide any exemption
for the activities undertaken by the TANGEDCO, such as erection,
commissioning of towers, construction of building and structures,
transportation of personnel, engaging man power, etc.,
15.The main contentions on behalf of the respondents are that the
ground raised by the petitioners regarding charging of service tax for
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transmission or distribution of electricity, is not the issue in the show cause
notice. The show cause notice has not been issued demanding any service
tax for transmission or distribution of electricity, but demanding service tax
for the services provided or received which all are not exempted under the
provisions of the Act and the show cause notice confines only with
reference to those services for which there is no exemption under the
provisions of the Act. Thus, the very writ petition is misplaced and contrary
to the provisions of the Act, as applicable regarding the facts.
16.It is contended on behalf of the respondents that TANGEDCO has
taken endorsement in their ST-3 Registration only in respect of goods
transport agency services to pay service tax on reverse charge mechanism
basis. The show cause notice was issued not based on assumptions or
presumptions, as stated by the petitioner. The services, namely man power
supply agency services, works contract services, rent a cab operators and
liquidated damages and legal services were availed during the period from
01.07.2012 to 31.03.2017 and those services are not exempted under the
provisions of the Act. Thus, the show cause notice was issued.
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17.All the services stated above were subjected to service tax either
payable directly or on reverse charge mechanism basis. The Finance Act,
1994, does not distinguish between the Corporate Tax Payers, an individual,
PSU or Government owned authorities. As per the records, if any taxable
services as envisaged in the Act are provided or availed by a tax payer, they
are liable to pay appropriate service tax and file prescribed ST-3 returns.
The show cause notice further reveals that TANGEDCO have availed
various taxable services as alleged in the notices and have not paid the
appropriate service tax and not declared the value of taxable services in
their periodical returns. Thus, the authorities have jurisdiction to issue the
show cause notice and the petitioner is bound to submit their objections and
explanations along with the documents, enabling the authorities to consider
and adjudicate the issues and take appropriate decisions and pass orders.
18.With reference to the point of jurisdiction raised by the petitioner,
the respondents in W.P.Nos.26713, 26718 and 26723 of 2018 have stated
that the period of limitation of five years, as contended by the petitioners, is
incorrect. The show cause notice has been issued within the period of
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limitation. The notice has been issued invoking larger period of limitation of
five years, as contended by the petitioner, is incorrect. The CBEC vide
Order Nos.03/2012-Service Tax dated, 15.10.2012; and 01/2013-Service
Tax, dated 06.03.2012, have extended the date of filing of ST-3 returns for
the period from 01.04.2012 to 30.06.2012 and 01.07.2012 to 30.09.2012 to
25th November, 2012 and 15th April, 2013 respectively. The relevant date of
filing ST-3 returns for the said periods are 25 th November, 2012 and 15th
April, 2013. Thus, the show cause notices were issued within the period of
limitation.
19.At the outset, it is contended that the first respondent has not
issued the show cause notice in respect of the service tax which all are
exempted under the Act. There is a specific mentioning in the show cause
notice indicating what all are attracted under the provisions of the Act and
therefore, the petitioner is liable to pay service tax. Even in respect of the
grounds on merits, they are to be adjudicated before the competent
authorities and the authorities are bound to consider the same by following
the procedures. Thus, the writ petitions are liable to be rejected.
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20.Considering the arguments as advanced by the respective learned
counsels appearing on behalf of the parties to the lis, this Court is of an
opinion that the High Court is expected to be slow in entertaining a writ
petition against a show cause notice. A writ against a show cause notice
may be entertained only if the said notice is issued by an incompetent
authority having no jurisdiction or if an allegation of malafides is raised.
Even in case of raising an allegation of malafides, the authorities against
whom such an allegation is raised, is to be impleaded as party respondent in
his personal capacity. In all other circumstances, the allegations or counter
allegations are to be adjudicated with reference to the evidences to be
produced by the respective parties and such an exercise cannot be done in a
writ proceedings under Article 226 of the Constitution of India. Thus, the
High Court is expected to be cautious while entertaining a writ petition filed
against the show cause notice.
21.Regarding the entertainability of the writ petition, the petitioner
has raised the point of jurisdiction mainly on the ground that transmission or
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distribution of electricity by any electricity transmission or distribution
utility is included in the Negative List in the Act. In view of the fact that
transmission and distribution of electricity is exempted, all incidental
services rendered are also exempted and therefore, the very initiation is in
violation of provisions of the Act and thus, the show cause notice is
untenable. Secondly, it is contended that with reference to the taxable
services, the petitioner is promptly paying the taxes. When the petitioner,
being an organisation, owned by the State, is paying the service tax as
applicable in respect of the services falling within the ambit of the Act,
there is no reason whatsoever for the first respondent to issue show cause
notice with reference to the services attached to the transmission or
distribution of the electricity. Thus, the entire exercise made by the first
respondents is beyond the scope of jurisdiction and therefore, the relief is to
be granted.
22.Per contra, the respondents have contended that it is not as if all
the services are exempted under the provisions of the Act. They have
specifically stated that certain services are not exempted under the Act i.e.,
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man power supply agency services, works contract services, rent a cab
operators and liquidated damages and legal services. The show cause notice
is confined only to those services which all are not exempted under the
provisions of the Act and therefore, the petitioner is bound to submit their
explanations with reference to the allegations raised in the show cause
notice and defend their case.
23.It is not in dispute between the parties that transmission and
distribution of electricity are exempted from service tax. Question arises,
what all are the services falling under the exemption clause and the other
services which all are not covered under the exemption clause. The first
respondent has specifically stated that they have issued the show cause
notice only in respect of the services stated above, which all are not covered
under the exemption clause under the Act.
24.Let us consider the contentions in the show cause notice. The
show cause notice has been issued, elaborately setting out the facts and
details, as well as the allegations. The introductory paragraph of the show
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cause notice dated 21.11.2017, challenged in W.P.No.26713 of 2018
unambiguously stipulates as follows:
“Whereas it appears that Tamil Nadu Generation
and Distribution Corporation Ltd., (TANGEDCO),
CEDC, South, Tatabad, Coimbatore-641 012
(“TANGEDCO, CEDC, South” for brevity) holding STC
No.AADCT4784ESC020), have contravened the
provisions of the Sections 69, 68 and 70 of the Finance
Act, 1994 read with Rules 4, 6 and 7 of the Service Tax
Rules, 1994 read with Section 174 of the Central Goods
and Services Tax Act, 2017 inasmuch as they have
failed to get registered in time, failed to pay the service
tax on partial reverse charge basis on the services viz.,
Work Contract Service, Rent a Cab Service, Manpower
Service, Goods Transport Agency service and Legal
Consultancy service they received and on the services
TTS they provided and failed to file the Service Tax
Returns, resulting in the non payment of service tax to
the tune of Rs.1,17,41,403/- fro the period from
01.04.2012 to 31.03.2017 as detailed in the Annexure I
to VIII and the Abstract thereon to this notice.”
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25.A careful reading of the above paragraph would reveal that the
respondent in W.P.No.26713 of 2018 has issued the show cause notice only
with reference to the works contract services, rent a cab services, man
power services, goods transport services and legal consultancy services they
have received and on the services TTS the petitioner provided and failed to
file service tax returns, which resulted in non-payment of the service tax.
26.In reply, the learned counsel appearing for the petitioner has
contended that they have paid service tax to the goods transport agency and
they are having receipts for such payment and that was informed to the
authorities. However, all such payments, if any, already made by the
petitioner, are to be considered by the authorities while undertaking the
process of adjudication and considering the documents.
27.High Court cannot go into the details regarding the payments
already made with reference to certain service charges and the claims and
allegations set out in the show cause notice. Any differences, in this regard,
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are to be sorted out by the petitioner and respondents, based on the
documents and evidences. Thus, an adjudication, in this regard, is imminent.
High Court cannot form an opinion with reference to such differences on
factual aspects of the matter and such an adjudication is to be done by
following the procedures, as contemplated.
28.The show cause notice further provides various details and it is
clearly stated that they have gathered information through the Intelligence
Wing of the Department and based on the facts collected, as well as the
allegations, issued the show cause notice in order to provide opportunity to
the petitioner to submit their explanations.
29.Even before issuing the show cause notice, the office of HPU has
called for certain details from TANGEDCO, CEDC. Certain documents
were also produced by the TANGEDCO. Additional documents were also
submitted. Those, officials of the TANGEDCO were asked to appear in
person by the authorities. In response, they have given a letter and more
specifically, the Deputy Financial Controller, TANGEDCO, in one case,
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appeared before the Superintendent of HPU and a statement was also
recorded. Therefore, an opportunity was provided even before issuing the
show cause notice with reference to the allegations. However, in most of the
cases, based on the Intelligence Officers' informations and based on the
records, the show cause notices were issued.
30.The show cause notice further reveals that they are seeking
explanation with reference to the services provided for works contract
services, goods transport agency services and other services, as stated
above. Thus, it is for the petitioner to submit their explanations, produce
documents and evidences to defend their case, in the manner known to law.
31.The learned counsel for the petitioner relied on a Circular issued
by the Board, stating that pre-hearing opportunity is to be provided, if the
central excise demand exceeds Rs.50 Lakhs. However, the case on hand is
not relating to the demand of central excise duty and it is only the service
tax, which is to be paid and as per the Circular, no such pre-hearing is
contemplated and thus, the petitioner has to avail the opportunity by
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submitting their explanations and documents for the purpose of defending
their case.
32.The show cause notice is elaborate and contains all the details
regarding the allegations. Thus, the petitioner is bound to explain the
queries, doubts raised in the show cause notice with reference to the
documents and evidences and defend their case, in the manner known to
law.
33.As far as the jurisdictional point raised by the petitioner is
concerned, this Court is of the considered opinion that only if the exemption
clause is applicable, then alone the jurisdiction point needs to be considered
with reference to the facts of the present case. However, in the present case,
the first respondent himself has categorically admitted both in the show
cause notice as well as in the counter filed by them that specifically
exemption is granted for transmission or distribution of electricity by any
electricity transmission or distribution utility. The first respondent has made
it clear that show cause notice has not been issued demanding service tax
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for transmission or distribution of electricity. The service tax are demanded
only for other services which all are not covered under the exemption clause
and therefore, these facts are to be adjudicated with reference to the
documents and evidences. When there is a slightest doubt in respect of the
point of jurisdiction is raised, then the benefit of the said doubt is to be
given for the Revenue. This being the general principles in the present case
and the petitioner is also an organisation owned by the State, the first
respondent has issued the show cause notice with reference to the services
which all are not covered in the exemption clause. Thus, these disputed
aspects are to be considered by the authorities competent, based on the
documents and evidences. Undoubtedly, the first respondent, being the
quasi-judicial authority, is empowered to consider the legal grounds also.
Thus, provisions of the Act, if any, relied on by the petitioner, the same are
also to be considered by the first respondent, while considering the issues
and before taking decision on the allegations. The said exercise is to be
done by the first respondent by providing opportunity to the petitioner,
enabling them to defend their case. Personal hearings are to be granted as
per the provisions of the Act.
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34.In view of the facts and circumstances, the following orders are
passed:-
(i) the relief as such sought for in W.P.No.15388 of 2018
stands rejected and the writ petition stands dismissed:-
(ii) consequently, W.P.Nos.5715, 8517, 26713, 26718, 26723,
27042, 27045, 27053, 28012, 28018, 28020, 28022, 28336,
30585, 33906, 33910, and 33914 of 2018 are also dismissed:-
(ii) the petitioners are directed to submit their explanations,
documents and evidences along with legal submissions, if
any, within a period of eight weeks from the date of receipt of
a copy of this order.
(iii) on receipt of the explanations from the petitioners, the
concerned respondents are directed to proceed with the
enquiry by affording opportunity to the petitioners, including
personal hearing, as contemplated and complete the process
and pass final orders as expeditiously as possible. If the
petitioners are aggrieved from and out of the said final orders,
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to be passed thereafter, they are at liberty to approach the
appellate authority for redressal of their grievances.
With the above directions, all the Writ Petitions stand disposed of.
No costs. Consequently, connected miscellaneous petitions are closed.
07.07.2021
Index : Yes
Speaking Order
abr
To
1.The Commissioner of GST & Central Excise (Audit),
Coimbatore Audit Commissionerate,
No.6/7, A.T.D. Street, Race Course,
Coimbatore.
2.The Commissioner of Central GST &
Central Excise, Salem,
No.1, Foulks Compound, Anai Road, Salem.
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S.M.SUBRAMANIAM, J.
(abr)
W.P.Nos.15388 of 2018, 5715, 8517, 26713,
26718, 26723, 27042, 27045, 27053, 28012,
28018, 28020, 28022, 28336, 30585,
33906, 33910, 33914 & of 2018
07.07.2021
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