2023 (10) TMI 504 - AT - Service Tax

Levy of Service tax - amount of electricity charges and water charges collected by the Appellant from its tenants/concessionaires - Cenvat credit on Outdoor Catering services and Club Membership - period of dispute is from 2008-09 to 30.06.2010. HELD THAT - On going through the concessionaire agreement it appears that this is mainly in relation to renting of space/premises within the Airport to independent concessionaire with whom they have different revenue sharing agreement, etc., in lieu of rent. The actual consumption of electricity and water by these concessionaires is part of the same agreement but the same cannot be treated as part of MMRS, in view of the fact that it is an independent activity which they have to provide within the Airport premises, as they have no other option to get the water and electricity from somebody else. The Revenue has tried to classify this as MMRS, however, mere supply of water and electricity cannot become in itself MMRS in the facts of the case, when the entire agreement is seen in totality. There is also force in the argument by the Appellant that Department has mainly relied on Notification No. 31/2010-ST dated 22.06.2010, which, inter alia, provided for exemption of services relating to supply of water and electricity, in support that prior to this, the same was liable to service tax - if the Government felt that supply of water and supply of electricity were not chargeable to service tax, either under some exemption or interpretation, they have continued to give that exemption by virtue of Notification No. 31/2010-ST. There is another aspect of Notification No. 12/2003 dated 20.06.2003, which provided for exemption to the extent of value of goods and materials sold by the service provider to the recipients of service subject to certain conditions. Therefore, under this notification also, even if the entire contract is to be treated as MMRS, the value of goods sold would have to be excluded, meaning, there won t be any service tax liability to that extent - supply of water and electricity is essentially a sale of goods and therefore not chargeable under provisions of service tax. By virtue of this interpretation also, there was no liability for payment of service tax on supply of water and electricity in view of the Notification No. 12/2003 dated 20.06.2003. Thus, appellant are not required to discharge any service tax on supply of water and electricity to their concessionaires, who were paying for these two utility services on actual basis plus markup of 10%. Denial of credit on account of Outdoor Catering service - HELD THAT - It is service in relation to business and not excluded as such for period prior to 01.07.2011. Denial of CENVAT Credit in the case of Club Membership - HELD THAT - In the case of Club Membership, also admittedly is for membership of the Appellant, with various professional associations/bodies and not for individual club membership, therefore, it is again to be considered as relating to business. Therefore, both these services were eligible for Cenvat credit during the relevant period. The impugned order set aside - appeal allowed.

Summary

Issues involved:
The appeal concerns the demand of service tax on electricity and water charges collected by the Appellant from tenants/concessionaires, as well as the availability of Cenvat credit on Outdoor Catering services and Club Membership.

Electricity and Water Charges:
The Appellant collected electricity and water charges from concessionaires in addition to consideration for space usage at the Airport. The Revenue claimed these charges fell under taxable "Management, Maintenance & Repair service" before 01.07.2010, demanding service tax for the period 01.10.2008 to 30.06.2010. The Appellant argued that the charges were for goods and not liable to service tax, citing exemption notifications and case law supporting the classification of electricity and water as goods. The Tribunal found that the charges for electricity and water were essentially a sale of goods, not subject to service tax.

Cenvat Credit on Outdoor Catering and Club Membership:
The Revenue proposed to disallow Cenvat credit on Outdoor Catering and Club Membership services. The Appellant contended that both services were eligible for Cenvat credit based on settled law. The Tribunal agreed, stating that both services were in relation to business and not excluded for the relevant period. Therefore, the Appellant was entitled to Cenvat credit for these services during the relevant period.

Conclusion:
The Tribunal allowed the appeal, setting aside the Impugned Order. The Appellant was deemed not liable to pay service tax on electricity and water charges to concessionaires, and was entitled to Cenvat credit on Outdoor Catering and Club Membership services. The consequential benefits were granted to the Appellant, and the issue of limitation was left open.