2023 (8) TMI 1143 - AT - Service Tax

CENVAT Credit - classification of input service - raising bills on the occupant towards the realization of electricity consumption charges - HELD THAT - The submission of Learned Counsel for the respondent cannot be accepted that raising bills on the occupant with service tax component against realization of electricity charges are valid under the Service Tax Laws for the reason that in SRIJAN REALTY (P) LTD. VERSUS COMMISSIONER OF SERVICE TAX SERVICE TAX COMMISSIONERATE-II KOLKATA AND ORS. 2019 (3) TMI 821 - CALCUTTA HIGH COURT it was categorically held that electricity was defined as goods and thus capable of being traded for which it cannot be covered under the category of service tax nor appellant had any licence to supply electricity under the Electricity Act 2003 but while such an order was passed treating the activity as the appellant therein had converted high tension electricity supply to low tension electricity supply for the purpose of supplying domestically consumable electric power to the occupant against which it had raised the bill that was being treated as service and accordingly appellant s plea therein was allowed - This case stands completely on a different footing and this can only be treated as an erroneous payment of service tax since no extra amount was collected towards its service component other than the electricity consumption dues. However the classification or legality of such payment of tax could have been done at the owner s end but it can never be a ground for denial for CENVAT credit at receiver s end since payment of service tax was accepted by the Appellant. The appeal is dismissed and the order passed by the Commissioner of Central Tax (Appeals-I) Pune is hereby confirmed.

Summary

Issues:
The legality of denial of CENVAT credit for service tax paid on electricity consumption by the tenant.

Summary:
The appeal was filed by the Revenue Department against the order-in-appeal that set aside the denial of CENVAT credit along with interest and penalty against the respondent. The respondent, a tenant of property owners, had paid service tax on electricity consumption, which was denied as electricity was exempt from service tax. The Commissioner (Appeals) allowed the appeal, stating that credit availed against incorrectly paid service tax was admissible. The Department challenged this decision.

During the appeal hearing, it was argued that the respondent, without the authority to supply electricity, raised invoices with service tax, which is not admissible as electricity is not considered a service. The Respondent argued that the credit was valid based on a decision of the Calcutta High Court.

The Tribunal reviewed the case records and previous decisions, including the Bajaj Allianz case, where incorrectly paid service tax credits were deemed admissible. The Tribunal confirmed the Commissioner's order, stating that CENVAT credit cannot be denied at the receiver's end if the legality is not questioned at the service provider's end. However, the Tribunal disagreed with the argument that raising bills with service tax on electricity charges was valid under Service Tax Laws, as electricity was considered goods and not a service.

The appeal was dismissed, confirming the Commissioner's order, and the cross-objection was deemed not maintainable.

(Order Pronounced in Open Court on 22/08/2023)