Custom, Excise & Service Tax Tribunal
Gujarat Energy Transmission ... vs Service Tax - Ahmedabad on 9 January, 2026
Customs, Excise & Service Tax Appellate Tribunal
West Zonal Bench at Ahmedabad
REGIONAL BENCH-COURT NO.2
Service Tax Appeal No. 10866 of 2020- DB
(Arising out of OIA-AHD-EXCUS-003-APP-35-020-21 dated 12.10.2020 passed by the
Commissioner (Appeal) CGST & Central Excise-Ahmedabad)
GUJARAT ENERGY TRANSMISSION
CORPORATION LTD ........Appellant
66 KV S/S COMPOUND, CONSTRUCTION DIV. OFFICE,
AGIYOL, MOTIPURA CIRCLE, NEAR CITY CORNER
HIMMATNAGAR, GUJARAT
VERSUS
Commissioner of CGST &
Central Excise- Gandhinagar ....Respondent
2nd Floor, Customs House, Navrangpura, Ahmedabad-380009 APPEARANCE:
Shri J. C. Patel and Shri Rahul Gajera, Advocates appeared for the Appellant Shri Himanshu P Shrimali, Superintendent (AR) appeared for the Respondent CORAM:
HON'BLE MEMBER (JUDICIAL), DR. AJAYA KRISHNA VISHVESHA HON'BLE MEMBER (TECHNICAL), MR. SATENDRA VIKRAM SINGH Final Order No. 10006/2026 DATE OF HEARING: 02.09.2025 DATE OF DECISION: 09.01.2026 SATENDRA VIKRAM SINGH
1. M/s. Executive Engineer (Construction), Gujarat Energy Transmission Corporation Limited, Himmatnagar, (Appellant) are engaged in providing and receiving various services such as Erection, Commissioning and Installation Service, Works Contract Service etc. Audit of their records for the period March 2012 to March 2016 revealed that they had collected various charges such as estimated cost of Materials, Erection Charges, Contingency Charges, Supervision Charges, Development Charges, Pro-rata Charges, Revenue Loss Charges & Other Charges such as Crop Compensation Charges, Penal Charges etc. on which they were not paying the service tax. After conducting investigation, they were issued a show cause notice dated 01.09.2017 for classifying their activity under "Erection, Commissioning and Installation Service" and "Declared Service" and demanding service tax of Rs.33,43,343/- 2 ST/10866/2020-DB under proviso Section 73(l) of the Finance Act, 1994 along with interest under Section 75 and penalty under Section 77 & 78 of the said Act for suppressing the taxable value of services in their ST-3 returns.
1.1 In Adjudication, the Assistant Commissioner vide Order-in-Original dated 19.03.2019 dropped the demand of Rs.2,09,217/- on penal charges collected from the suppliers and contractors and confirmed the rest demand of Rs.31,34,126/- along with interest under Section 75, equal penalty under Section 78 and a penalty of Rs.10,000/- under Section 77(2) of the Finance Act, 1994. Aggrieved with this order, the appellant filed an appeal before the Commissioner (Appeals) who vide impugned order dated 12.10.2020 observed that the amount collected to pay "Crop Compensation Charges"
due to erection of lines on farmer's land is not leviable to service tax. He also held that no service tax can be levied on amount collected towards "Revenue Loss" due to shifting and realignment of electric lines. He also approved the findings of the Lower Authority for excluding the "Material Cost"
for levy of service tax. He remanded the matter to the Adjudicating Authority to pass fresh order with directions to the appellant to provide necessary documents for re-quantification. Against this order, the appellant have filed appeal before this Tribunal.
2. In appeal, following grounds have been taken: -
a) The Commissioner (Appeals) has not considered that the appellant functions as per Electricity Act, 2003. Notification No.11/2010-ST dated 27.02.2010 exempts the taxable services, provided to any Person, by any other Person, for Transmission of Electricity, from the whole of Service Tax, leviable thereon.
b) The Notification No. 45/2010-S.T., dated 20.07.2010, issued under Section 11-C exempted the service tax payable on taxable services, relating to Transmission and Distribution of Electricity, provided by the Service Provider, to the Service Receiver, which were not being levied in 3 ST/10866/2020-DB accordance with the said practice. This Notification is for the period from 26.02.2010 to 21.06.2010.
c) In negative list regime, as per Section 66-D(k) of the Finance Act, 1994, Transmission or Distribution of Electricity, by an Electricity Transmission or Distribution Utility, are not liable to service tax. Further, vide Circular No. 123/5/2010-TRU dated 24.05.2010, no service tax is payable, on services viz. Laying of Electric Cables between Grids/Sub- stations/Transformer Stations enroute, Laying of Electric Cables up to Distribution Point of Residential or Commercial Localities/Complexes etc.
d) As per Notification No., 12/2003-S.T., dated 20.6.2003, value of Goods and Materials, sold by the Service Provider, to the Recipient of Service, are not taxable.
e) Deposit amount relates to actual Cost of Erection of Transmission Lines etc., used for the purpose of Transmission of Electricity is therefore, not taxable. Pro-rata charges and Development charges, are part of deposit and so, service tax is also not chargeable on these charges.
f) Under deposit scheme, any work is divided into three parts, (A) The work of feeder bays including Erection and Commissioning of Electric equipment to be carried out at GETCO Sub-Station end (PART-I). (B) The Work of Feeder Bay, including Erection & Commissioning of Electrical Equipment, to be carried out at the Sub-Station at Applicants' end (PART-II). (C) The Work of the Erection of Transmission Line from GETCO end to Applicants' end, such as, Overhead ETH Line or Underground Cable (PART-III). Four options are given to any applicant who wants deposit work, in Option 1, all three parts are done by GETCO. In Option- 1A, Part-I and Part-III, are carried out by GETCO, whereas, Part-II is done by the Applicant. In Option-II, only Part-I, is done by GETCO, and rest Part-II and Part-III, are done by the Applicant. In Option-III, all three parts are done by the Applicant.
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g) They have paid service tax on Erection and Supervision Charges, under the category of "Erection, Commissioning or Installation Service". All portion of Deposit Work, except Supervision Work, are done by Sub- contractors who pay service tax. They have not availed CENVAT Credit of service tax, paid by their Sub-Contractors. The demand has been raised on the entire Deposit Work without taking into account availability of CENVAT Credit of service tax paid by GETCO to their Sub-Contractors on Deposit Work.
h) Gross Amount charged by the Appellants for Erection Work includes Cost of Materials, Erection Charges, Contingency Charges, Supervision Charges, Development Charges, Pro-rata Charges, Revenue Loss Charges and other Charges and for Cost of Material, the payment is received towards reimbursement of actual Cost of Material and so, no service tax is payable. In Contingency Charges, they collect amount from consumers, considering future variation, which may arise in the Cost of Labour and Material. These Charges, are collected as Deposit and if, there is no variation, the Charges so collected are paid back to the Consumers. The final Bill, is prepared and Service Tax is paid by the Appellant, on Service portion. They have paid service tax on contingency charges correctly.
i) Regarding Pro-rata Charges and Development Charges, they have to ensure development of an efficient co-ordinated and economical system of Intra-State Transmission Lines, for smooth flow of electricity. For this and with aim, to have minimum transmission losses and interruptions, they need to expand their network involving huge cost which they recover from the consumers on Pro-rata charge basis and the amount so recovered is capitalised. Since, these charges are in relation to Transmission and Distribution of electricity, they are not liable to service tax. They rely on the decision of Delhi Tribunal in the case of U.P. Rajkiya Nirman Nigam Ltd. Vs. Commissioner of Central Excise, Meerut-I 5 ST/10866/2020-DB reported at 2016 (41) STR 967. Similar ruling was given by Tribunal in the case of Noida Power Co. Ltd., Vs. Commissioner of Central Excise, Noida reported at 2014 (33) STR 383 (Tri-Del.).
j) They rely on Circular No.123/5/2010-TRU, dated 24.05.2010, issued by CBIC clarifying scope of various taxable services including Erection, Commissioning and Installation services. It also clarifies that certain charges such as shifting of overhead cables/ wires for any reasons such as widening/ renovation of roads, laying of cable under or alongside road, Laying of electric cables between grids/ substation/ transformer/ stations enroute. Laying of electric cables up to distribution point of residential or commercial localities/ complexes, is also not liable to service tax.
k) They rely on Final Order No. A/11422-11423/2014, dated 24.07.2014 of this Tribunal in the case of Shri Dayalal R. Dhabi Vs. CCE & ST, Rajkot.
l) The demand is barred by limitation as show cause notice is issued on 01.09.2017 for the period from March-2012 to March-2016. There is nothing which was suppressed or hidden from the department as other units of GETCO have also been issued show cause notices and therefore, all facts were within the knowledge of the department. They are also not liable to penalty either under Section 77 or under Section 78 of the Finance Act, 1994. They rely on the decision of Mumbai Tribunal in the case of CCE & Cus., Aurangabad Vs. Wockhardt Ltd reported at 2009- TIOL-1308-Cestat-Mumbai and Larger Bench decision in the case of Cosmic Dye Chemical Vs. CCE, Bombay reported at 2002-TIOL-236-SC- CX-LB. The appellant prayed for allowing their appeal and setting aside the impugned order.
3. During hearing, learned Advocate highlighted the points taken in their appeal and also cited following case laws decided on the same issue to plead 6 ST/10866/2020-DB that there is no merit in the department's case and hence, their appeal may be allowed by setting aside the impugned order: -
• Final Order No. 10331-10332/2024 dt.06.02.2024 (in Appeal Nos. ST/10317- 10318/2017) • Final Order No. 10952/2024 dt.26.04.2024 (in Appeal No: ST/10713/2017). • Final Order No.11096/2024 dt.13-5-2024 (in Appeal No.ST/11111/2018). • Final Order No.11590/2024 dated 22-7-2024 (in Appeal No. 11487 of 2019). • Final Order No. 10181/2025 dated 4-3-2025 (in Appeal No. ST/11129/2019). • Hyderabad Power Installations P. Ltd Vs. CST- reported at 2016 (7) TMI 599 • Hyderabad Power Installations P. Ltd Vs. CST-reported at 2016 (45) STR 217. • CCE Vs. Sri Rajyalakshmi Cement Products-2017 (52) STR 309 • Madhya Pradesh Power Transmission Co. Ltd Vs. Pr. Commr - 2023 (385) ELT 152 • Madhya Pradesh Poorva Kshetra Vidyut Vitran Co Ld Vs. Commr.-2021 (2) TMI 155 • Kailash Devbuild India P. Ltd Vs. CCE-2023 (12) TMI 1010: 113- • Tamilnadu Generation and Distribution Corpn Ltd Vs. CCE-2023 (10) TMI 61 • Tamilnadu Generation and Distribution Corpn Ltd Vs. CCE-2023 (11) TMI 14 • Purvanchal Vidyut Vitran Nigam Ltd Vs. CCE-2013 (30) STR 259 • Noida Power Co. Ltd Vs. CCE-2014 (33) STR 383 • M.P.Power Transmission Co. Ltd Vs. CCE-2011 (24) STR 67 • U.P.Rajkiya Nirman Nigam Ltd Vs. CCE-2016 (41) STR 967 • Shri Ganesh Enterprises Vs. CCE-2014 (35) STR 348 • Torrent Power Ltd Vs. UOI-2020 (34) GSTL 385 (Guj)
4. Learned AR on the other hand reiterates the findings of the lower authorities and prays for dismissing the appeal stating that Commissioner(Appeals) had remanded the matter for re-computation of service tax demand in the light of observations made in the impugned order with directions to the appellant to produce requisite details/ documents.
Learned AR also mentions that the appellant did not give cost of materials for excluding the same from the total charges, in absence of which, Adjudicating Authority had no option but to confirm demand of service tax on this amount also. Regarding Contingency Charges, Pro-rata Charges and Development 7 ST/10866/2020-DB charges, he mentions that the Appellate Authority has correctly held leviability of service tax on these charges which are not exempt. He argues that the appellant should have provided necessary details/ documents to the Adjudicating Authority for correct quantification of service tax liability in remand proceedings.
5. We have heard counter arguments and seen their submissions. Revenue had proposed demand of service tax on amounts collected by the appellant from customers in respect of Material Cost, Erection Charges, Contingency charges, Supervision charges, Pro-rata charges and Development charges, Revenue Loss charges, Row charges and on penalty charges collected from contractors/ suppliers.
5.1 As per appellant's letter dated 09.12.2016, details of amounts collected by them are as under:-
I. Cost of Material is the payment received towards reimbursement of actual cost of material. Since, these were not part of service, no service tax is charged on this portion.
II. Erection Charges are recovered from the consumer for shifting of overhead cables/ wires.
III. Contingency Charges are collected from consumers considering future variations which may arise in the cost of labour and material. If there is no fluctuation in the value of labour and material at the time of issue of final bill, the charges so collected are paid back to the consumers. In case, of upward fluctuation in the cost, the contingency charges so collected are adjusted against the increased cost. When final bill is prepared, they suitably charge service tax on the value of service provided.
IV. Supervision Charges are collected for supervision of entire erection works irrespective of whether work is undertaken by the appellant or by 8 ST/10866/2020-DB consumer. They have paid service tax on this portion and there is no dispute with the department.
V. Revenue Loss Charges are recovered to meet loss of electricity transmission charges due to line outage required to carry out work of shifting and realignment of electrical lines.
VI. Row charges (Crop Compensation Charges) are recovered to pay to the farmers due to erection of lines on their land. Other charges also include welfare cess payable which are statutory dues, TDS adjustment and some other charges.
VII. Pro-rata Charges and Development Charges are collected for creating a fund to undertake network expansion for continuous and reliable transmission of electricity with minimum transmission losses and interruptions. We find that as per Electricity Act, 2003, appellant has to ensure development of an efficient, co-ordinated and economical system of intra state transmission lines for a smooth flow of electricity from generating station to the load centres. The appellant therefore, is obligated to ensure an efficient transmission network throughout the state for which they recover cost from new consumers as well as existing consumers whenever they request for provision of additional load. These charges are also capitalized by them. Such contribution has been made mandatory by GERC (Licensee's power to recover expenditure incurred in providing supply and other miscellaneous charges) Regulation, 2005 for the transmission company to recover from the consumers in the form of Pro-rata charges as per prescribed formula of GERC based on demand of load by the consumers. As per GERC regulations, cost of transmission sub station equipment is estimated and Pro-rata charges are worked out on the basis of cost data which do not include cost of lines and are recovered considering the augmentation to be carried out at the upstream sub station and augmentation of existing sub station which is must for higher capacity than the demand received from the consumer 9 ST/10866/2020-DB so as to take care of future load growth. This matter has been settled by the decision dated 29.09.2008 by Hon'ble Gujarat High Court in its order, para-12 of which is reproduced below:-
"12. So far as the submission of the learned counsel appearing for the petitioner about justification for the extra expenditure incurred by creating facilities on pro-rata basis on the demanded power, which is not based on the working out the actual expenditure that would be required at the particular sub-station and, thereafter, dividing the same amongst the applicants who apply for power from a particular sub-station, is concerned, the respondents have worked out the expected expenditure of entire plant and charge the new applicant on pro-rata basis. The respondents have made it clear that it had become unavoidable for the erstwhile Board to develop infrastructural facilities and continue the same for providing transmission lines and sub-stations to meet power requirements of the new applicants as well existing consumers considering rapid industrial and increasing power demand. As provided in the earlier circular no.676 dated 5-7-1997, the developmental charges was 900 per KVA and, thereafter it was reduced, after considering the representation, to 850/- per KVA as per the notification. Thus, the justification to charge 850/- on pro-rata basis has genesis with the object sought to be achieved and to streamline recovery and to avoid disparity amongst beneficiaries of different areas of the State and even certain beneficiaries of the same area embedded on different GETCO sources, so that the charges can be recovered evenly from all the beneficiaries." (Emphasis Supplied).
5.2 In adjudication proceedings, learned Adjudicating Authority in para 28, has already dropped the service tax demand on Penalty charges so collected. In para 24A and in 24 C, he has also held that no service tax is leviable on cost of materials and Contingency Charges (wherever already refunded to the Customers), but he could not quantify the same as the appellant did not provide required details of cost of materials and amounts refunded to the customers where there was no fluctuation in the value. We also find that in impugned order, the Commissioner (Appeal) has held that no service tax is payable on Crop Compensation charges and Revenue Loss charges and remanded the matter to the Adjudicating Authority for computation of service tax liability. Therefore, what is left before us now, is the amount collected towards Pro-rata charges and Development charges as well as Erection charges.
10 ST/10866/2020-DB 5.3 We find that Pro-rata charges and Development charges are actually collected for development of network for transmission of power which is the responsibility and duty of the appellant being a Transmission utility. It has been clarified by CBIC by issue of various Notifications and Circulars that service of transmission of electricity is exempt from service tax. We are therefore of the view that no service tax is liable to be paid on these charges. 5.4 Regarding Erection Charges, we find from explanation of the appellant that these are recovered from the consumers for shifting of overhead cables/ wires which are exempt from service tax in view of CBIC Circular No.123/5/2010-TRU dated 24.05.2010. The relevant part of this Circular is reproduced below:-
3. The taxable status of various activities, on which disputes have arisen S. Activity Status No.
1. Shifting of overhead cables/ wires Not a taxable service under any for any reasons such as clause of sub-section (105) of widening/renovation of roads section 65 of the Finance Act, 1994.
2. Laying of cables under or Not a taxable service under any alongside roads clause of sub-section (105) of section 65 of the Finance Act, 1994
3. Laying of electric cables between Not a taxable service under any grids/sub-stations/ transformer clause of sub-section (105) of stations en route section 65 of the Finance Act, 1994.
4. Installation of transformer/ Taxable service, namely Erection, substations undertaken commissioning or installation independently services [section 65(105)(zzd)].
5. Laying of electric cables up to Not a taxable service under any distribution point of residential or clause of sub-section (105) of commercial localities/ complexes section 65 of the Finance Act, 1994.
6. Laying of electric cables beyond Taxable service, namely the distribution point of residential commercial or industrial or commercial construction' or 'construction of localities/complexes. complex' service [section 65(105)(zzq)/(zzzh)], as the case may be.
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7. Installation of street lights, traffic Taxable service, namely Erection, lights flood lights, or other commissioning or installation electrical and electronic services [section 65(105)(zzd)].
appliances/devices or providing electric connections to them
8. Railway electrification, Not a taxable service under any electrification along the railway clause of sub-section (105) of track section 65 of the Finance Act, 1994.
5.5 Regarding cost of material and Contingency Charges, we find that the matter has already been remitted to the Adjudicating Authority for re- computation of service tax liability after taking requisite data from the appellant. We therefore are not interfering with this finding and direct the Appellant to produce required details before the said authority. We also direct the Adjudicating Authority to examine case of the appellant in the light of following decisions, wherein, it has been categorically held that service tax on expenses related to transmission and distribution of electricity are not liable to any service tax. Some of these are as under:-
a) Final Order No.10331-10332/2024 dated 6th February 2024, Final Order No. 19052/2024 dated 26th April 2024 and Final Order No. 10181/2025 dated 4-3-2025 passed in Appellant's own case (Nadiad unit)
b) Final Order No. 11096/2024 dated 13-5-2024 passed in Appellants' own case (Mehsana unit),
c) Final Order No.11590/2024 dated 22-7-2024 passed in Appellant's own case (Deesa unit)
d) Hyderabad Power Installations P. Ltd v CST- 2016 (7) TMI 599 wherein, it is held that erection and installation of Sub-Stations, related Lines, transformers and other electrical equipment for the purpose of Transmission of Electricity is not liable to service tax in view of Notification No.45/2010. This decision was followed by the Tribunal in the case of CCE v Sri Rajyalakshmi Cement Products-2017 (52) STR 309 while setting aside demand of service 12 ST/10866/2020-DB tax on the activity of erection of Sub-stations, Transmission Lines, Transformers for transmission of electricity.
e) Madhya Pradesh Power Transmission Co. Ltd v Pr. Commr_ 2023 (385) ELT 152 wherein, demand for Service tax for the period 2014-15 to 2016-17 on Erection of Sub-Stations, Electricity Poles, Lines for transmission of Electricity was set aside by holding that all services related to transmission of electricity are required to be treated as provision of single service of transmission of electricity which is exempt from service tax.
f) Madhya Pradesh Poorva Kshetra Vidyut Vitran Co Ltd Vs Commr. - 2021 (2) TMI 155 wherein, it is held that all activities related/ ancillary to transmission of electricity are to be considered as single service of transmission of electricity falling under Negative list and not liable to service tax,
g) Kailash Devbuild India P. Ltd v CCE- 2023 (12) TMI 1010 wherein, demand of service tax under "Erection, Commissioning and installations service" for erection of transmission lines was set aside in view of Notifications No.45/2010 and No.11/2010.
h) Purvanchal Vidyut Vitran Nigam Ltd v CCE - 2013 (30) STR 259 wherein, it is held that "Erection, Commissioning and Installation" undertaken in relation to transmission of electricity is not liable to service tax.
i) Noida Power Co.Ltd v CCE- 2014 (33) STR 383 wherein, it is held that Erection, installation and commission of transmission towers and connectors for transmission of electricity is not liable to service tax.
j) U.P. Rajkiya Nirman Nigam Ltd v CCE - 2016 (41) STR 967 wherein, it is held that "Erection, Commissioning and Installation" undertaken in relation to transmission of electricity is not liable to service tax.
6. In view of the above, we remand the matter to the Adjudicating Authority to re-compute service tax liability after getting the requisite details/ 13 ST/10866/2020-DB data from the appellant on material cost and Contingency Charges. Regarding invocation of extended period, we agree with the contention of the appellant that entire facts were in the knowledge of the department which had issued similar show cause notices to other units of the appellant and therefore, invoking extended period of limitation in this case is not justified. Accordingly, we hold that the demand if any, arising out of re-computation as per the directions contained in this order shall be limited to the normal period. Needless to say, interest and penalty on the appellant shall be redetermined in the light of observations made above.
7. The appeal is allowed by way of remand.
(Pronounced in the open court on 09.01.2026) (DR. AJAYA KRISHNA VISHVESHA) MEMBER ( JUDICIAL ) (SATENDRA VIKRAM SINGH) MEMBER ( TECHNICAL ) Bharvi