Custom, Excise & Service Tax Tribunal
Tirunelveli vs Tuticorin Thermal Power Station on 4 October, 2023
IN THE CUSTOMS, EXCISE AND SERVICE TAX APPELLATE TRIBUNAL
CHENNAI
REGIONAL BENCH - COURT NO. I
Service Tax Appeal No. 40953 of 2014
WITH
Service Tax Cross Objection No. 40422 of 2015
(Arising out of Order-in-Original No. 01/ST/COMMR/2014 dated 23.01.2014 passed
by the Commissioner of Central Excise, Central Revenue Building, NGO - 'A' Colony,
Tirunelveli - 627 007)
Commissioner of Central Excise : Appellant
NGO 'A' Colony, Tractor Road,
Tirunelveli - 627 007
VERSUS
Tuticorin Thermal Power Station : Respondent
Harbour Estate, Tuticorin - 628 004 APPEARANCE:
Shri Rudra Pratap Singh, Additional Commissioner for the Appellant Shri V. Ravindran, Advocate for the Respondent CORAM:
HON'BLE MR. P. DINESHA, MEMBER (JUDICIAL) HON'BLE MR. M. AJIT KUMAR, MEMBER (TECHNICAL) FINAL ORDER NO. 40863 / 2023 DATE OF HEARING: 31.08.2023 DATE OF DECISION: 04.10.2023 Order : [Per Hon'ble Mr. P. Dinesha] This appeal is filed by the Revenue against the Order-in-Original No. 01/ST/COMMR/2014 dated 23.01.2014 passed by the Commissioner of Central Excise, Tirunelveli.
2.1 Facts that emerge from the impugned order as well as the documents placed on record of that the assessee M/s. Tuticorin Thermal Power Station (TTPS) is engaged in 2 Appeal No.: ST/40953/2014-DB & ST/CO/40422/2015 the generation of electricity from coal, during which fly ash is generated as one of the residues. Fly ash is a fine powder and the same is collected in silos to avoid environmental pollution. This fly ash is collected by customers of TTPS under agreements and cleared to cement units. For this, TTPS would collect service charges from such customers for clearing the fly ash, for which they were also providing infrastructural facilities for the collection and disposal of the same.
2.2 Entertaining a doubt that the above activity of TTPS, in connection with the collection and removal of fly ash from TTPS was covered under the category of business support service and accordingly the same was amenable to Service Tax, but however, no Service Tax was apparently paid by TTPS, a Show Cause Notice No. 09/COMMR/ST/2011 dated 19.09.2011 came to be issued covering the period from May 2006 to November 2010, proposing thereby to demand service tax on business support service, under the proviso to Section 73(1) of the Finance Act, 1994, along with applicable interest under Section 75 ibid., apart from levy of penalty under Sections 76/78, 77 ibid.
2.3 A similar Show Cause Notice No. 05/COMMR/ST/2012 came to be issued dated 20.04.2012, covering the period from December 2010 to December 2011, proposing similar demand of Service Tax.
3. The assessee submitted a detailed reply, inter alia contending as under: -
• The activity of disposal of fly ash was done as per the directions of the Central and State Governments, no service is rendered by TTPS for disposal of the fly ash.
• Nominal charges were collected by them, which was only for meeting the expenses towards protection of 3 Appeal No.: ST/40953/2014-DB & ST/CO/40422/2015 environment, and the same was not a consideration towards any taxable service.
• Supply of fly ash that arose due to cost of power generation in the thermal plants could only be called disposal activity and never a service, • TTPS had no obligation whatsoever to render any service and only the users would come to their Thermal Stations for collection of fly ash and hence, the same did not involve any service.
• The act of disposal of fly ash was done in compliance with Notification issued by the Ministry of Environment & Forests, Government of India and also as per the Order of the Industries Department, Government of Tamil Nadu and therefore, the same can never be considered as provision of a taxable service for the levy of Service Tax.
• The definition of "support services of business or commerce" would cover various services pertaining to the ordinary trade and merchandise which cannot be equated with the functions performed as per the government policies.
• Fly ash is not a good arising out of any manufacturing process, and hence it is not an excisable product.
• Reference was made to the Show Cause Notice issued by the Department dated 17.04.2012 wherein the Revenue had demanded central excise duty on the same product and hence the Show Cause Notices issued by the Department are clearly contradictory.
4. The Commissioner of Central Excise having considered the explanation offered by the assessee during adjudication and also after hearing, vide impugned Order- in-Original, has discussed the issue in the light of the 4 Appeal No.: ST/40953/2014-DB & ST/CO/40422/2015 documents available on record, including relied upon documents and replies and the applicable legal provisions. From a perusal of the impugned order, the following emerge: -
(i) Fly ash is a natural by-product that emerges during the course of production of electricity in thermal power stations.
(ii) The same is a fine gloss powder which is stored in solos/dykes, which is then collected by customers.
(iii) Facilities like infrastructure, monitoring and related works like security check of fly ash lifting vehicles, standard weighment fixation of each vehicle, etc., are only provided by TTPS which can in no way be termed as providing supporting service or promoting the business activity of TTPS.
(iv) Fly ash is it toxic waste, a contaminant which needs to be disposed of without causing pollution to the atmosphere, soil or water.
(v) The same contains several heavy metals which are potential threats to the environment when disposed of in the open.
(vi) The same cannot also be dumped in the open, but however, since the same could be used as a raw material in cement and brick industries, the Government of India had announced measures to promote the use of fly ash.
(vii) From the Memorandum of Understanding executed between Tamil Nadu Electricity Board and M/s. Tamilnadu Ash Tech (P) Ltd., Pollachi, it emerges that collection and disposal of fly ash is not a routine business adventure, but a statutory requirement.5
Appeal No.: ST/40953/2014-DB & ST/CO/40422/2015
(viii) The facilitation extended by TTPS for the collection is only towards complying with the statutory requirement, and not with any profit motive.
(ix) It is also a fact borne on record that the nominal cost collected was not even sufficient to meet the expenses towards lighting, sprinkling of water to bring down the drifting fly ash particles.
(x) The disposal of fly ash is invariably a statutory regulatory mechanism and hence, is not even 'sale'; there is absolutely no element of trade or business involved in the disposal of fly ash.
(xi) A similar issue has been considered by the Chennai CESTAT in the case of Mettur Thermal Power Station v. Commissioner of C.Ex. (S.T.), Salem [2015 (38) S.T.R. 606 (Tri. - Chennai)] and the Bench vide Final Order No. 40456 of 2013 dated 07.10.2013 had set aside a similar demand and the impugned order therein and hence, the said order has been followed by the original authority to hold that TTPS did not render any service to the cement companies for collection and removal of fly ash and hence the proposed demand of service tax under support services of business or commerce as proposed in Show Cause Notices were dropped.
5. It is against this order that the Revenue has filed the present appeal before this forum, on the following grounds:-
• The Revenue has not accepted the Final Order of this Bench in the case of Mettur Thermal Power Station (supra).
• In terms of the explanation to Section 65(104c) of the Finance Act, 1994, the expression 6 Appeal No.: ST/40953/2014-DB & ST/CO/40422/2015 "infrastructural support services" is inclusive one and therefore it would cover the activities of TTPS.
• The services mentioned in the explanation, namely, providing office along with office utilities, lounge, reception with competent personnel to handle messages, secretarial services, internet and telecom facilities, pantry, and security, are only illustrative and not exhaustive.
• The expression is, therefore, omnibus and covers other services also which are in the nature of providing infrastructural support to the service receivers.
• The activity of making available facilities like infrastructure, water, lighting, road maintenance, etc., and supply of technical expertise also to be considered as in the nature of provision of infrastructural support services within the meaning of business support services.
• The maintenance of fly ash collection system is the responsibility of TTPS who generate and supply fly ash to various user industries; both TTPS and the user agencies are business entities.
• The very fact that TTPS has collected service charges would indicate that there was provision of service/ facilities like infrastructure, water, lighting, road maintenance, etc. • In the light of the above, the impugned order of the Commissioner on the basis of the order of this Bench in Mettur Thermal Power Station (supra) is incorrect.
6.1 We have heard Shri Rudra Pratap Singh, Ld. Additional Commissioner. He has furnished before us copies of the Memorandum of Understanding referred to in the impugned order, but in any case, we find that the terms and conditions of the same are not being disputed by either 7 Appeal No.: ST/40953/2014-DB & ST/CO/40422/2015 of the parties insofar as the charges for the fly ash collected are concerned.
6.2 He has also furnished copy of the Order-in-Original in the case of M/s. Mettur Thermal Power Station wherein the demands proposed in the Show Cause Notice came to be confirmed, but however, since the said demands have been set aside by this Bench, the findings of the Commissioner therein are therefore of no consequence.
6.3 Ld. Additional commissioner though fairly admitted that the findings in Order-in-Original in respect of M/s. Mettur Thermal Power Station has been set aside by this Bench, but has invited our notice on the status of the appeal filed by the Revenue before the Hon'ble Madras High Court wherein the appeal is shown to be pending.
7. Per contra, Shri V. Ravindran, Ld. Advocate, relied on the order of this bench in the case of Mettur Thermal Power Station (supra) and submitted that the very issue of charging Service Tax for the collection of fly ash under business support services has been set aside by this Bench.
8. We have considered the rival contentions, we have carefully perused the impugned Order-in-Original as well as the documents that are referred to in the Show Cause Notices and the impugned order. We have also gone through the order of this Bench relied upon by the Ld. Advocate in the case of Mettur Thermal Power Station (supra).
9.1 The facts that were considered by this Bench in the relied upon case are as under: -
"M/s. Mettur Thermal Power Station, Mettur Dam, the appellant herein, is a unit of Tamil Nadu Electricity Board, a Government of Tamil Nadu undertaking, engaged in the generation of electricity. During the course of generation of electricity, Fly Ash is generated as a by-product which was being dumped in the site. As per Order No. 248, dated 22-9-1997, as amended by Order GO (MS) 629, dated 29-7-1999, issued by Industry Department, Government of Tamil Nadu, the appellant supplied this Fly 8 Appeal No.: ST/40953/2014-DB & ST/CO/40422/2015 Ash to cement and asbestos sheet companies for manufacturing cement, bricks, etc., and charged Rs. 60/- per tonne on Dry Fly Ash and Rs. 40/- per Tonne on Wet Fly Ash. A show cause notice dated 7-10-2010 was issued by the Commissioner of Central Excise, Salem proposing demand of service tax along with interest and penalty for the period May, 2006 to June, 2008 on this amount charged for the supply of Fly Ash under the category of "Business Support Service". By the impugned order, the Commissioner confirmed the demand of Service Tax of Rs. 1,42,29,961/- along with interest and extended cum- tax benefit and also granted relief from penalty under Sections 76 and 78 in terms of Section 80 of the Finance Act, 1994."
9.2 This Bench has considered the rival contentions, notifications referred to during the course of arguments and the issue as to chargeability to Service Tax on the collection and disposal of fly ash generated at the thermal power stations, has also considered the Notification issued by Ministry of Environment & Forests, Government of India, policy decision of the Government of Tamil Nadu, in the context of the scope of levy under business support service, to hold as under: -
"16. In our considered view, the activity of collection and removal of Fly ash as per rate of the order of Government of Tamil Nadu would not constitute "infrastructural support service" under the definition of "Support Service of Business or Commerce". We have noticed that Government of India, Ministry of Environment and Forests issued Notification dated 14-9-1999 to the effect that Fly ash should be supplied free of cost. Subsequently, by Notification dated 6-11-2008, issued by Ministry of Environment and Forest, Thermal Power Stations are permitted to sell Fly ash to the user agencies. It makes it clear that the consideration received by the appellant from the cement and asbestos sheet companies for supply of Fly ash seems to be for sale of fly ash. In our opinion, it is not for any service provided to the persons taking delivery of Fly ash, notwithstanding the name under which, it is collected. Hence, the demand of Service Tax along with interest is not sustainable.
17. We also find force in the submission of the learned Senior Advocate on limitation insofar as the adjudicating authority had granted relief from penalty under Sections 76 and 78 of Finance Act, 1994 by invoking Section 80 of the said Act, 1994. As the demand of Service Tax is not 9 Appeal No.: ST/40953/2014-DB & ST/CO/40422/2015 maintainable on merit, there is no need to discuss on limitation in detail.
18. In view of the above discussion, we set aside the impugned order. The appeal filed by the appellant is allowed with consequential relief, if any."
The Hon'ble High Court though has admitted the appeal, but however, no stay has been granted.
10. In terms of the above ruling of this very Bench and as judicial discipline demands us to follow the order of a co-ordinate Bench, we hold that the proposed tax liability on the assessee was rightly deleted by the Commissioner and hence, the order of the Commissioner does not call for any interference.
11. Resultantly, we dismiss the appeal filed by the Revenue. We find that the cross-objection filed by the assessee is in support and hence, the same is disposed of accordingly.
(Order pronounced in the open court on 04.10.2023) Sd/- Sd/-
(M. AJIT KUMAR) (P. DINESHA) MEMBER (TECHNICAL) MEMBER (JUDICIAL) Sdd