Held - Providing 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. 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 service of transmission and distribution of electricity which gives the bundle its essential character.Paragraph 4 (1) of the impugned circular No.34/8/2018-GST dated 1.3.2018 to the extent the same reads as under is hereby struck down as being ultra vires the provisions of section 8 of the Central Goods and Services Tax Act, 2017 as well as Notification No.12/2017- CT (R ) serial No.25:4.(1) Whether the activities carried out by DISCOMS against recovery of charges from consumers under the State Electricity Act are exempt from the GST(1) Service by way of transmission or distribution of electricity by an electricity transmission or distribution utility is exempt from GST under notification No.12/2017-CT (R ), Sl. No.25. The other services such as,-i. Application fee for releasing connection of electricity;ii. Rental Charges against metering equipment;iii. Testing fee for meters/transformers, capacitors etc.;iv. Labour charges from customers for shifting meters or shifting of service lines;v. charges for duplicate bill; provided by DISCOMS to consumer are taxable.

Held - As per Circular no. 34/8/2018-GST dated 1st March, 2018 issued by Ministry of Finance, Government of India, it was clarified that the services by way of transmission or distribution of electricity by an electricity transmission or distribution utility is only exempted as per entry number 25 of notification No. 12/2017- CT (R) dated 28.06.2017 and other services provided by the applicant to consumer are taxable. Further it is was clarified in the circular that the other services such as meter rent, application fees, testing fees for meters etc. provided by these companies to their consumers are taxable. Subsequently vide Judgment rendered by the Honorable High Court of Gujarat in the case of M/s Torrent Power Limited of, Gujarat High Court vide Special Civil Application NO. 5343 of 2018 dated 05-04-2018 = 2018 (5) TMI 1391 - GUJARAT HIGH COURT stating that Vide Circular No. 34/8/2018-GST dated 01.03.2018 was quashed. The facts of the judgment is narrated that the ancillary charges collected by Electricity Distribution Company towards application fee, meter rent, other pre and post connection charges for shifting of lines, etc are covered by entry 25 of exemption notification number 12/2017-Central Tax (Rate) dated 28-06-2017 relating to transmission and distribution of electricity. Hence the same would constitute composite supply as per section 8 of the GST Act. It is pertinent to note that the department has filed special leave petition vide Diary No(s). 24733/2019 dated 09-08-2019 = 2019 (8) TMI 779 - SC ORDER in the Honourable Supreme Court against the order passed by Honourable High court of Karnataka in the case of M/s Torrent Power Limited of, Gujarat High Court vide Special Civil Application NO. 5343 of 2018 dated 05-04-2018 = 2018 (5) TMI 1391 - GUJARAT HIGH COURT is at present pending for the decision.

Held - we observe that, for a supply to be consider as a composite supply, its constituent supplies should be so integrated with each other that one is not supplied in the ordinary course of business without or independent of the other. In other words they are naturally bundled. The concept of the "Naturally Bundled", used in Section 2(30) of the CGST Act, 2017, lays emphasis on the fact that the different element in a composite supply are integral to the overall supply and if one of the element is removed the nature of supply will be affected. However here it is seen that the deposit work undertaken by the appellant are not directly related with the transmission of electricity and transmission of electricity may take place with or without depositary work. Further the appellant, in its submission, have also submitted that the amount for the depositary work is collected only from those customers who have availed the said service and the said amount is recovered as non-tariff charge. This itself shows that the transmission of electricity is independent of depository work under taken by the appellant.Further, vide the Circular No. 34/8/2018-GST, dated 1-3-2018, issued vide F. No. 354/17/2018, as regard to the activities carried by the DISCOMS against recovery of charges from consumers under State Electricity Act.Therefore, in view of the clarification issued under the Circular No. 34/8/2018-GST, dated 1-3-2018, issued vide F. No. 354/17/2018, and as discussed in the above para, it is. observed that the deposit work undertaken by the applicant are not an integral part of the supply of services of transmission or distribution of electricity and the applicant is not eligible to avail the exemption from levy of GST under Entry No. 25 of Notification 12/2017-Central Tax (Rate), dated 28-6-2017 bearing description "Transmission or distribution of electricity by an electricity transmission or distribution utility" with respect to the non-tariff charges recovered from their customers.

Held - Supply of Electricity is a continuous supply while the other service required for development of transmission facilities, supervision charges etc. are not continuous supplies. Supply of electricity can also be made without provisions of these services. These services are provided by the appellant on specific request of the customers and not provided in its normal course of business to all the consumers. Therefore, I am of the opinion that these services, referred as “Deposit work” by the appellant, are not naturally bundled with the supply of electricity. These are independent supplies, supplied and paid for only if consumed by the customers.Moreover I also observe that the Circular No. 34/8/2018-GST dated 01.03.2018, issued vide F. No. 354/17/2018, has categorically clarified that the other services such as application fee for releasing connection of electricity, rental Charges against metering equipment, testing fee for meters/transformers, capacitors etc., labour charges from customers for shifting of meters for shifting of service lines and charges for duplicate bill provided by DISCOMS to consumers are taxable. In view of this I observe that the “Deposit Work” undertaken by appellant is not an integral part of supply of services of transmission or distribution of electricity and exemption given under Entry No. 25 of the exemption notification for services by way of transmission or distribution of electricity by an electricity transmission or distribution utility will not be applicable on applicant.I observe that the works regarding extension of electric line, electric plant, commissioning of new sub- station etc. are part and parcel of the activity of “Transmission of Electricity”.Moreover in the Circular No. 131/13/2010-ST dated 7th December 2010 issued by the Central Board of Excise & Customs, it has been categorically clarified that “Supply of electricity meters for hire to the 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 the relevant notification”.In view of this, I am of the opinion that the deposit work undertaken by the appellant is part and parcel of the transmission and distribution of electricity and the same cannot be completed without the said deposit work. Accordingly I observe that the service provided by the appellant are in nature of composite supply in terms of Section 8 of the CGST Act, 2017 and Transmission and distribution of electricity being the principal supply.

Held - Consideration for both services are charged separately and, hence, the value of “Construction Services” cannot form part of the value of service of “Transmission of Electricity” in terms of Section 15 of the Central Goods and Service Tax Act, 2017. Consequently, the said construction services cannot be treated as supply of the “Transmission of Electricity” service. In view of the above, we find that the construction services provided by the applicant are not in the nature of composite supply and, therefore, the tax liability thereof has to be determined by treating the same different from the supply of transmission and distribution of electricity.We find that by virtue of the Entry No.25 of the Notification No.12/2017Central Tax (Rate) dated 28.06.2017, only the service of “transmission and distribution by an electricity transmission or distribution utility” was exempted from tax under the GST Acts. A comparison with regulation 3 of the Notification No.9 dated 31.03.2005 issued by the Gujarat Electricity Regulatory Commission (GERC), shows that the charges are for “any expenses that the Distribution Licensee shall be required to reasonably incurred to provide any electric line or electrical plant specifically for the purpose of giving such supply to the applicant”. Thus, the nature of services provided by GETCO in the present case is not covered under the above exemption entry of the Notification No.12/2017-Central Tax (Rate) dated 28.06.2017. Said amounts are recovered from consumers for providing of their electric line or electrical plant or other facilities for the purpose of giving the supply of electricity to them, which are ancillary services provided in relation to service of the transmission of electricity. Electricity charges recovered for consumption of electricity are only exempted under above entry. Amount collected towards other ancillary services are taxable under GST. These services are, therefore, taxable under GST under the residual category of services i.e. “999799- Other services n.e.c.” and, hence, GETCO is liable to pay GST @ 18% (CGST @9% and SGST@9%) on aforesaid other charges recovered from its consumers.

Held - The issue as per Revenue pertains to the non-payment of service tax towards services related to ‘Business Auxiliary Service’, ‘Consulting Engineering Service’, ‘Renting of Immovable Property Service’ and ‘Commercial Training or Coaching Service’ rendered by the appellant. The appellant while not specifically denying the activities has stated that all services have been rendered in connection with transmission or distribution of electricity and were not liable for the levy of service tax during the entire period of the demand, which by the impugned orders covers the period from 2008-09 to 2017 i.e. both under the negative list regime and prior to it.The guiding factor would be to examine it in conjunction with the real nature and substance of the main activity i.e transmission and distribution. It has hence to be ascertained whether the activity sought to be classified is an essential activity which is having a direct and close nexus with transmission and distribution of electricity. If so, all these services would be eligible for the exemption otherwise not.It is clear that all taxable services provided for the transmission and distribution of electrical energy are exempt from the liability to service tax during the impugned period. The sole purpose of the impugned activities as described above are ‘for’ ensuring the transmission and distribution of electricity. These services are not provided independently and are part of the appellant’s statutory functions and are hence done ‘for’ transmission and distribution of electric power to various consumers located within the state of Tamil Nadu in terms of the provisions of the Electricity Act, 2003. Without the said services being rendered transmission and distribution of electricity would be impaired.This being so the activities though being taxable services are covered by the exemption notifications stated above prior to 1.7.2012, and from the said date they figure in the negative list as per Section 66D(k) of the Finance Act 1994. Hence the appeal succeeds.

Held - 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 is exempted. It is also clear from aforesaid decision that all services related to transmission and distribution of electricity are bundled 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. 29. Thus, for all the reasons stated above, it is not possible to sustain the levy of service tax on the amount collected by the appellant for late payment surcharge, meter rent and supervision charges.