Classification of service— In the instant case, the appellant is a state-owned company having 'Distribution License' as defined in Electricity Act, 2003, and engaged in transmission of electricity from sub-stations and distribution of electricity to consumers.

The grounds of appeal of the appellant, the main contentions before us to decide are :

1) Whether the activities enlisted by the appellant in the queries such as connection, re-connection, supervision of the works, erection of poles, sub-stations, transmission lines and supply of meters etc., to the consumers for the purpose and during the course of supply of electricity to them are naturally bundled and thus form part of the composite supply of principal activity of supply of electrical energy or not.

2) Whether all the activities enlisted above can be treated as part of principal supply of "transmission or distribution of electricity", which is exempted.

3) Whether supplies made to the consumers through contractors and third parties for the purpose of transmission or distribution of electricity or sale of electrical energy are also exempted.

It is to be noted that the supply of electricity is a continuous supply whereas the ancillary services provided by the appellant are made at the specific request of the consumer. It is the same principle that guides in the determination of the question whether the ancillary activities form part of the composite supply or not. 

The exemption is applicable only to the 'electricity distribution utilities' i.e., the appellant alone and it being a exemption notification cannot be interpreted or extended to the contractors who carry out the above mentioned works on behalf of the appellant and therefore the works taken up by contractors are exigible to tax.

Held that—the Ruling of the AAR is in tune with legal position and it needs no interference and the appeal is accordingly dismissed.