Electricity charges recovered from tenants were excluded from service tax value as goods supplied separately under the rental arrangement.

Electricity charges recovered from tenants under a renting of immovable property arrangement were not part of the assessable value for service tax where the lease terms showed that such charges were payable directly to the electricity board or recovered on an actual basis, and generator backup charges were separately identifiable. Electricity was treated as goods under the Central Excise Tariff and the Maharashtra Value Added Tax Act, and the value of goods supplied by a service provider was excluded from tax under Notification No. 12/03-ST. The electricity charges therefore could not be treated as consideration for the renting service, and the demand was unsustainable.

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Issues: Whether electricity charges recovered from tenants by a provider of renting of immovable property service formed part of the assessable value for service tax.

Analysis: The lease terms showed that electricity charges were payable directly to the electricity board or recovered on actual basis, and that generator backup charges were separately attributable to supply of electricity. Electricity was treated as goods under the Central Excise Tariff and under the Maharashtra Value Added Tax Act, 2002. The value of goods supplied by a service provider is excluded from service tax under Notification No. 12/03-ST dated 20.6.2003. On that basis, the electricity charges could not be characterised as consideration for the renting service so as to be added to its taxable value.

Conclusion: The electricity charges recovered from tenants did not form part of the assessable value for service tax and the demand was unsustainable.

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