2013 (12) TMI 854 - AT - Service Tax

Demand of service tax - Renting of immovable property - Receipt of reimbursement of electricity charges from the tenants - Adjudicating authority confirmed the demand by adding the amounts which are as reimbursement of electricity charges from the tenants in the assessable value for the purpose of service tax as provider of renting of immovable property - Held that - As per the terms and conditions of the Lease Agreements, the tenants have to pay electricity charges directly to the MSEB and the appellants are also providing electricity through generator set in case there is a power failure and the appellants are charging for the same. Electricity is goods chargeable to duty under Central Excise Tariff as well as under the Maharashtra Value Added Tax Act, 2002. Therefore, the supply of electricity to tenant amounts to sale of goods and not supply of service. Further the Notification No.12/03 ST dated 20/6/2003 exempt from service tax, any value of goods supplied by service provider to service recipient. Further we find that the Commissioner of Central Excise Pune.III vide Order-in-Original dated 28.11.2011 relied upon by the appellants dropped the proceedings which were initiated on the same ground in the case of M/s. Panchshil Tech Park Ltd. The Commissioner of Central Excise in the adjudication order held that electricity is goods and chargeable to Nil excise duty - Electricity charges collected from the tenants cannot be formed part of the assessable value for the purpose of service tax as provider of renting of immovable properties - Decided in favour of assessee.

Summary

Issues:
1. Whether reimbursement of electricity charges from tenants should be included in the assessable value for the purpose of service tax as a provider of renting of immovable property.

Analysis:
The appellants were engaged in providing services of renting immovable property and were paying appropriate service tax on rent received from tenants. Show-cause notices were issued alleging that certain amounts received as reimbursement of electricity charges from tenants should be included in the assessable value for service tax. The adjudicating authority confirmed the demand, considering the reimbursement amounts as part of the assessable value.

The appellants contended that the electricity charges recovered were not related to the service of renting immovable property. They argued that tenants were supposed to pay electricity charges directly to the Electricity Board, and any charges collected by the appellants were based on actual consumption or for providing backup services. They also highlighted instances where they had to pay electricity charges on behalf of defaulting tenants and subsequently recover the amount.

The appellants further argued that electricity should be considered as goods, not a service, as per the Central Excise Tariff Act and the Maharashtra Value Added Tax Act. They relied on a previous order by the Commissioner of Central Excise, Pune III, which held that electricity is goods and not subject to excise duty. The appellants emphasized that the charges collected for electricity should not be included in the assessable value for service tax, citing exemptions under Notification No.12/03 ST dated 20/6/2003.

After reviewing the Lease Agreements and relevant laws, the Tribunal found merit in the appellants' contentions. The Tribunal concluded that the electricity charges collected from tenants should not be considered part of the assessable value for service tax as a provider of renting of immovable properties. Consequently, the impugned orders were set aside, and the appeals were allowed.