By TIOL News Service

KOLKATA, MAR 15, 2019: THE petitioner has a commercial complex developed and operated under the name and style of "Galaxy Mall" and has many occupants.

In order to effect electric supply to the commercial complex, the petitioner entered into an agreement with DPSC Ltd. (now known as Indian Power Corporation Ltd.) who provides electric supply through an 11KV sub-station installed at the commercial premises.

The licensee raises a single consolidated electricity bill upon the petitioner.

The petitioner on receipt of electric supply redistributes the same to the occupiers of the commercial complex. The petitioner has installed sub-meters for the respective occupiers. Based on the readings of such sub-meters, the petitioner raises bills upon such occupiers.

The petitioner initially collected Service Tax. However, upon objections being raised by some of the occupiers, the petitioner consulted the Superintendent of Service Tax and who informed that such a service is exigible to tax.

The petitioner had obtained legal advice which was of a contrary view. Thereafter, the petitioner by its letter dated January 30, 2015 intimated the respondent that it was not liable to pay Service Tax.

However, the Assistant Commissioner of Service Tax, by a letter dated March 27, 2015 viewed that the redistribution of electricity by the petitioner was exigible to Service Tax.

The petitioner has, therefore, by a Writ Petition, sought a declaration that supply of electricity by the petitioner to the occupiers of "Galaxy Mall", a commercial complex, is not a service exigible to tax under the Finance Act, 1994.

It is inter alia submitted that the action of re-distribution of electricity is a sale/trading activity and cannot be termed as a service; that electricity is 'goods' in view of Chapter 27 of the CETA, 1985 which incorporates electrical energy under the heading 271160000 thereof as 'goods'; that the West Bengal Value Added Tax Act, 2003 includes electrical agency as a 'good' capable of being bought and sold and exempts the same from any levy thereunder. Reliance is also placed on the decisions in State of Andhra Pradesh v. National Thermal Power Corpn. Ltd. - 2002-TIOL-107-SC-CT-LB , CCE Customs v. Larsen & Toubro Ltd. - 2015-TIOL-187-SC-ST & Bharat Sanchar Nigam Ltd. v. Union of India - 2006-TIOL-15-SC-CT-LB. Mention is also made of Section 66D(e) of the Finance Act, 1994 read with Section 66B thereof wherein trading of goods is excluded from the scope of taxability under the Act of 1994.

The counsel for the respondents submitted that the petitioner is receiving high tension electric supply from the licensee and is supplying the low tension electricity to the various occupiers; that the conversion from high tension to low tension and the distribution thereof to the occupiers is a service and hence exigible to Service Tax.

The High Court considered the submissions and after adverting to the provisions of the Electricity Act, 2003 (sections 2, 12) and sections 65B, 66B and 66D of the Finance Act, 1994 observed thus -

++ The petitioner is not an electricity trader as defined in Section 2(26) of the Electricity Act, 2003. The petitioner does not have a licence to undertake trading in electricity under Section 12 of the Electricity Act, 2003. The petitioner also cannot be said to be engaged in the business of transmission as the petitioner does not have such a licence. The petitioner is not a person authorised to transmit, supply, distribute or undertake trading in electricity. In view of the definitions as obtaining in the Electricity Act, 2003, therefore, the petitioner cannot be said to be distributing or selling or trading in electricity when, it is receiving high-tension supply from Indian Power Corporation Ltd. and providing low-tension electricity to the occupants of the commercial complex.

++ Sale, trading and distribution being taken out of the contention, the only other thing that remains to describe the activity undertaken by the petitioner, is service.

++ Any other interpretation will render the steps taken by the petitioner in receiving high-tension electric supply and making over low-tension electric supply to the occupants, violative of the provisions of the Electricity Act, 2003. Such an interpretation should be avoided.

++ Service is defined in Section 65B(44) as an activity carried out by a person for another for consideration and includes a declared service. The activity of the petitioner comes within the definition of service. The activity of the petitioner sought to be made exigible to tax does not come within exclusions contained in Section 65B(44). The Finance Act, 1994 provides a negative list of services in Section 66D. If, an activity which does not come within the negative list of services as defined in Section 66D of the Finance Act, 1994, such an activity is to be termed as a service exigible to tax under the Finance Act, 1994.

++ It is the contention of the petitioner that, the activity of the petitioner comes within the negative list of services defined in Section 66D particularly in view of Section 66D(e) and (k). As noted above, the petitioner cannot be said to be indulging in trading of goods or in transmission or distribution of electricity within the meaning of the Electricity Act, 2003.

++ Although electricity is a 'goods' as held in National Thermal Power Corpn. Ltd. (supra) and is capable of being traded, the petitioner does not have the requisite licence to trade in electricity. The activity of the petitioner, therefore, cannot be treated as a trade as it would violate the provisions of the Electricity Act, 2003. Therefore, it cannot be said that, the petitioner is trading in electricity.

Holding that the judgments cited do not apply to the case of the petitioner, it was concluded that the transaction of the petitioner in obtaining high-tension electric supply, converting it to low-tension supply, and supplying it to the occupants, raising bills on such occupants and realizing the electricity consumption charges from such occupants, is a service which the petitioner renders and such an activity is exigible to Service Tax.

The writ petition was dismissed.

(See 2019-TIOL-594-HC-KOL-ST)