2013 (2) TMI 408 - Commissioner - Service Tax

'Pure Agent' excludes electricity & air conditioning charges from taxable value

IN RE : TICEL BIO PARK LTD.

The Biotechnology Park, acting as a 'Pure Agent,' successfully argued against including electricity and air conditioning charges in the taxable value for ... Renting of Immovable Property Services – Whether Electricity Charges and Air conditioning charges collected from the lessee should be included in the taxable value of “Renting of Immovable Property Service” – Assessee was registered for rendering Renting of Immovable Property Services – He had not included the electricity and air conditioning charges in the taxable value while paying Service tax on the charges collected towards ‘Renting of Immovable Property Services’ – Held that:- Electricity Charges collected from their client and paid towards TNEB is nothing but an incidental reimbursable expense. Further incidental reimbursable expense, which the assessee had incurred as a “Pure Agent” need not be included in the taxable value as per Rule 5(2) of the Service Tax (Determination of Value) Rules, 2006. Thus the tax already paid by the appellant is in order. – In favour of assessee. Maintenance & Repair Service – Whether ‘Operation & Maintenance’ Charges collected from the lessee are chargeable to Service tax under “Maintenance & Repair Service” – Assesse not paid any Service tax on ‘Operation & Maintenance charges under ‘Maintenance & Repair Services’ from 16-6-2005 to 31-5-2007 – Held that:- Assessee started paying Service tax from 1-6-2007 onwards on the “Operation & Maintenance Charges”, the day ‘Renting of Immovable Property Service’ became taxable. Demand for payment of Service tax on the amount collected as “Operation & Maintenance Charges” under the heading “Management, Maintenance and Repair Service” was made with effect from 16-6-2005 to 31-5-2007 i.e. before the principal service became taxable, which seems to be irrational. Show Cause Notice in this regard was dated 23-6-2009 invoking the period from 16-6-2005 to 31-5-2007, which is clearly time-barred as none of the ingredients to invoke the extended period under Section 73(1) of the FA. 1994 is present – Demand fails – In favour of assessee. Issues:1. Whether Electricity Charges and Air conditioning charges are included in the taxable value of Renting of Immovable Property Service.2. Whether Operation & Maintenance Charges are chargeable to Service tax under 'Maintenance & Repair Service'.Analysis:Issue 1:The appellant, a Biotechnology Park, was under scrutiny for not including electricity and air conditioning charges in the taxable value while paying Service tax. The Department alleged suppression of facts to evade tax. The appellant argued that they acted as a 'Pure Agent' for the government in promoting research and development in biotechnology. They provided detailed explanations regarding electricity charges collection and maintenance of records. The Commissioner found merit in the appellant's argument, stating that the electricity charges were incidental reimbursable expenses and need not be included in the taxable value. The tax already paid by the appellant was deemed in order.Issue 2:Regarding Operation & Maintenance Charges, the appellant started paying Service tax when Renting of Immovable Property Service became taxable. However, the demand for Service tax on these charges was made before the principal service became taxable, which was deemed irrational. The Show Cause Notice was also found to be time-barred, lacking the necessary elements to invoke the extended period under the Finance Act, 1994. Consequently, the demand for Service tax on Operation & Maintenance Charges was dismissed on both counts.In conclusion, the Commissioner set aside the impugned Order-in-Original and allowed the appeal, ruling in favor of the appellant.