2018 (4) TMI 1503 - AT - Service Tax

Liability of service tax - sale or service - sale of electricity - whether the appellants are liable to pay service tax on the sale of electricity by way of sub seller and also whether they are liable to pay service tax on the sale of electricity originated from DG Set? Held that - admittedly on electricity VAT is charged on the sale of electricity by the Sales Tax Department - Further, distribution of electricity is not a taxable activity under Service Tax, as clarified by N/N. 45/2010 ST. As per the facts noticed in the SCN, it is revenue s case that the appellant have sold electricity and not given the service tax of electricity - the activity is also in the nature of pure agent, being done by the appellant. The appellant is not liable to pay service tax on the sale of electricity either received from the Electricity Department or supplied from its D.G. Sets and also regarding sale of other consumer goods to the tenants. Appeal allowed - decided in favor of appellant.

Summary

Issues:
1. Liability to pay service tax on the sale of electricity by way of sub seller.
2. Liability to pay service tax on the sale of electricity originated from DG Set.

Analysis:
1. The appellant, registered for service tax under BAS and Renting of Immovable Property, faced a discrepancy during audit regarding reimbursement for various charges. The dispute revolved around the levy of service tax on reimbursement received for electricity charges and consumable goods supplied to tenants. The Revenue contended that the appellant sold electricity without paying service tax. However, it was noted that VAT was charged on electricity sales by the Sales Tax Department, and distribution of electricity was not a taxable activity under Service Tax. The appellant acted as a pure agent, receiving electricity from the Electricity Department and distributing it to tenants through sub meters. The Tribunal held that the appellant was not liable to pay service tax on the sale of electricity or other consumer goods to tenants.

2. The Tribunal, after hearing both parties, concluded that the appellant's activities regarding the sale of electricity, whether received from the Electricity Department or supplied from DG Sets, did not attract service tax. The appellant's role as a distributor, using a common meter provided by the Electricity Department for the entire building and subsequently collecting payments from tenants, was akin to that of a pure agent. Therefore, the Tribunal allowed both appeals, setting aside the orders related to the levy of service tax on reimbursement of electric charges and consumable goods. The appellant was granted consequential benefits as per the law.

This judgment by the Appellate Tribunal CESTAT ALLAHABAD clarified the liability of the appellants regarding service tax on the sale of electricity and other related activities. The decision highlighted the distinction between taxable and non-taxable activities under Service Tax law, emphasizing the appellant's role as a distributor and pure agent in the electricity supply chain to tenants.