2025-VIL-1940-CESTAT-CHE-ST
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SERVICE TAX CESTAT Cases

Service Tax – Taxability of activity of installation, operation and maintenance of Fly Ash Collection System - Appellant entered into MOU with Tamil Nadu Electricity Board (TNEB) for setting up a "Pressurised Dense Fly Ash Collection System" at Mettur Thermal Power Station (MTPS) at their own cost. As per the MOU, the appellant was allocated 80% of the fly ash generated at MTPS, while TNEB retained 20%. The appellant sub-contracted the operation and maintenance of the fly ash collection system and discharged service tax on the value of the service under the category 'repair and maintenance'. The appellant also collected an amount as 'operation and maintenance charges' from M/s. The India Cements Ltd. towards the supply of fly ash and discharged service tax on the same under the category 'Business Auxiliary Service' - Whether the activity of installation, operation and maintenance of the fly ash collection system at MTPS is taxable as a service under service tax law - HELD – Revenue is of the opinion that the agreement pertains to the supply of service while the appellant has submitted that the agreement is for procurement of fly ash and does not involve any service - The entire agreement between the appellant and TNEB has to be understood in the light of the joint intent and expectations of the parties. The appellant had set up the fly ash collection system at its own cost to ensure a steady supply of fly ash, which is an essential raw material for manufacturing cement - The agreement does not involve any service provided by the appellant to TNEB, but is a case of self-supply. The consideration received by the appellant towards the overhead costs incurred for the fly ash collection system cannot be applied to the entire quantity of fly ash generated at MTPS to arrive at the cost of operation and maintenance of the system for the purpose of service tax. Further, the service charges collected by TNEB from the cement companies were for the expenses incurred by TNEB's personnel and cannot be considered as consideration for any service provided by the appellant to TNEB – The impugned order is set aside and the appeal is allowed - Whether the appellant is eligible to avail Cenvat credit on the service tax paid to the sub-contractor - HELD - The appellant has rightly availed the Cenvat credit of the service tax paid to the sub-contractor, as the fly ash collected is an input for the manufacture of cement and the services rendered by the sub-contractor are in connection with the procurement of inputs for the appellant.
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