Sangeetha Prathap

The Allahabad Bench of the Customs, Excise and Service Tax Appellate Tribunal (CESTAT) has held that services such as meter reading, billing, connection and disconnection of electricity, and other miscellaneous field-level activities are ancillary to the transmission and distribution of electricity and are therefore exempt from service tax under Section 66D(k) of the Finance Act, 1994. The decision was delivered on December 3, 2025, by Judicial Member P.K. Choudhary in an appeal filed by Chauhan Enterprises.

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The appeal arose from a demand of service tax amounting to ₹2,66,683 with an equivalent penalty under Section 78, which had been confirmed by the adjudicating authority and upheld by the Commissioner (Appeals). The appellant had been engaged by the Superintending Engineer, Electricity Distribution Circle, Madhyanchal Vidyut Vitaran Nigam Ltd. (MVVNL), Unnao, for collection of electricity bills, connection and disconnection of supply, mounting and commissioning of LT distribution boxes, erection of electricity poles and collection of revenue, among other tasks. The Commissioner (Appeals) treated these activities as franchisee services and held the appellant liable to pay service tax.

Before the Tribunal, the appellant argued that these activities were essential public utility functions directly connected with transmission and distribution of electricity and were carried out purely on behalf of MVVNL, which is an electricity distribution utility. It was submitted that the services fall within the exemption provided in Section 66D(k) of the Finance Act, 1994, which specifies that “transmission or distribution of electricity by an electricity transmission or distribution utility” shall remain in the negative list. The appellant also relied on earlier decisions of the Tribunal involving similar activities performed for electricity utilities, wherein such services were held to be exempt.

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The Tribunal examined whether the appellant’s services would fall within the scope of transmission and distribution of electricity under the negative list. It noted that neither the adjudicating authority nor the Commissioner (Appeals) had examined the nature of the services in light of Section 66D. Referring to the CBEC’s Education Guide, the Tribunal reiterated that the expression “transmission or distribution of electricity” encompasses various ancillary and supportive activities undertaken for the effective supply of electricity. It then considered Section 66F, which explains the taxability of bundled services, and observed that meter reading, revenue collection and connection/disconnection of electricity are naturally bundled with the core activity of electricity distribution. The Tribunal recorded that such miscellaneous services “are in the nature of bundled service which would be treated as if provided by the appellant on behalf of MVVNL.”

The Bench held that since the primary service of supply and distribution of electricity by MVVNL is exempt under Section 66D(k), the ancillary services performed by the appellant on its behalf must receive the same treatment. It relied on earlier CESTAT decisions involving Madhya Pradesh Poorva Kshetra Vidyut Vitran Co. Ltd., where similar activities were held exempt as being intrinsically connected to the distribution of electricity. The Tribunal concluded that the commissioner’s classification of the services as franchisee services was erroneous, as the true nature of the activities was that of operational support to an electricity distribution utility.

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In conclusion, the Tribunal set aside the demand and the penalty, holding that the appellant’s miscellaneous services were related and ancillary to the transmission and distribution of electricity and therefore qualified for exemption under Section 66D(k). As a result, the appeal was allowed with consequential relief as per law.

Appearance

Counsel for Appellant/ Assessee: Dushyant Kumar and Vipnesh Kumar

Counsel for Respondent/ Department: A. K. Choudhary

Cause Title: M/s Chauhan Enterprises v. Commissioner, Central Excise & Service Tax, Lucknow

Case No: Service Tax Appeal No.70427 of 2025

Coram: P.K. Choudhary (Judicial Member)