Goods and Services Tax

Operational Energy Group India Private Ltd. Versus Commissioner of GST & Central Excise, Chennai South Commissionerate

2019 (1) TMI 1236 – CESTAT CHENNAI – TMI – Classification of services – Management, Maintenance or Repair service or otherwise? – appellants had entered into an agreement with various clients like M/s.Thermax India Ltd., Tidel Park, JCT, Tamil Nadu Petroleum Ltd. etc for operation and maintenance of power plants – Department was of the view that charges collected on operation of the plants have got nexus with the Management, Maintenance or Repair of Power Plants and above charges are liable to service tax w.e.f. 16.06.2005 under MMRS – Held that:- The issue as to whether activity of production of electricity in power plant would amount to management of immovable property or otherwise, has been analyzed and discussed by this Bench in the case of Shapoorji Pallonji Infrastructure [2017 (6) TMI 225 – CESTAT CHENNAI] and held in favor of assessee. It was held in the case that management of immovable property does not include operation activities. In addition, it cannot be said that the ap

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el Park, JCT, Tamil Nadu Petroleum Ltd. etc for operation and maintenance of power plants. In terms of the agreements with their clients, appellants were responsible inter alia, for monitoring plant equipment performance, operation planning, coordinating with the State Electricity Board, breakdown maintenance and repairs of all transformers, switchgears, breakages, motor control centres, etc. that may be used in the operation of the power plant in an effective and timely manner. The aforesaid activities are performed by appellants with their group of experienced and office and management personnel. In consideration of rendering the above, appellant collected maintenance charge and operation charges from their clients. Department was of the view that charges collected on operation of the plants as mentioned above, have got nexus with the Management, Maintenance or Repair of Power Plants and above charges are liable to service tax w.e.f. 16.06.2005 under MMRS under the category of Manage

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e of Shapporji Pallonji Infrastructure Capital Co. Ltd. Vs CST Chennai in favour of appellant. He prays that following the ratio of the decision of CESTAT Chennai appeal may be allowed. 3. On the other hand, Ld. A.R supports the impugned order. 4. After hearing both sides, we find that Ld. Advocate is correct in his assertion. The issue as to whether activity of production of electricity in power plant would amount to management of immovable property or otherwise, has been analyzed and discussed by this Bench in the case of Shapoorji Pallonji Infrastructure (supra) and held in favour of assessee. The relevant portion of the order is reproduced below : 10.1 The learned counsel for the appellant has countered this allegation stating that the activity would not fall under management of immovable property . That it will get covered under the definition of Business Auxiliary Service; the dominant activity carried out in the power plant being generation of electricity and maintenance of the

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or the sole purpose of management of the immovable property. In the present case, the sole purpose is not management of immovable property. Further, the management, if any, of the power plant is done by the appellants and is only incidental to the activity of generation of electricity. The activity carried out in the power plant is not solely management of power plant, but operation of the same. The word operation is not used in the definition of Maintenance and repair services which is relied by department as amended with effect from 16-6-2005. The said word is seen used in the definition of Business Support Services ( Operational assistance ). Thus it is very much clear that management of immovable property does not include operation activities. In addition, it cannot be said that the appellants are doing management service for the reason that the management service is done by appellants to themselves and not to any other person. The appellants are operating the power plant to genera

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performance target referring to which it becomes entitled to any reward or incurs penalties. Such provisions in the O&M contract fortify our finding that the appellants were not rendering any advisory services and were engaged in activities which could be measured such as generation of power in the instant case. We have seen that in generating power, the 31. appellant did not render any advice to improve the functioning of the working system of another organization. They ruin the facility and organized the required materials through the owner and services of their own staff. These activities did not constitute services to any other person/organisation. These impugned functions were incidental to their main activity of producing power. The O&M contract is a works contract and it is bad in law to vivisect it and tax certain activities covered by the contract. A reading of the whole contract makes it plain that the same was intended to ensure generation and supply of power as per

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n to the lump sum payment, it also provides for bonus and penalty. The terms of the contract do not envisage or involve providing any consulting or engineering help to the owner. The operator is fully autonomous and responsible for the performance of operation and maintenance. Whatever engineering issues are involved, it is for the operator to find solutions for, and attend to in the course of operation and maintenance. He is not required to render any advice or to take any orders from the owner. He cannot pass on the responsibility for operating the plant in any manner to the owner. Thus, there are no two parties, one giving advise and the other accepting it. Service tax is attracted only in a case involving rendering of service, in this case, engineering consultancy. That situation does not take place in the present case. Therefore, we are of the opinion that the duty demand raised is not sustainable. The learned SDR s contention about the 46th Amendment and the Apex Court s decision

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