2018 (2) TMI 1257 - AT - Service Tax

Tribunal rules against including tenant electricity charges in service tax assessable value

The tribunal upheld the First Appellate Authority's decision, ruling that reimbursable electricity charges collected from tenants should not be included ... Valuation - reimbursement of electricity charges - Whether during the 01.06.2007 to 30.09.2011, the respondent herein required to pav service tax amount collected from their tenants as reimbursable electricity charges or otherwise? Held that: - there no dispute as to the fact that the demand of service tax for the period question is in respect of an amount collected toward electricity charges of the conveyor belt hired on rent - similar issue in respect of inclusion of amounts collected from the respondents towards certain common services i.e. electricity charges was considered by the Bench in the case of ICC Realty (India) Pvt. Ltd. [2013 (12) TMI 854 - CESTAT MUMBAI], where it was held that 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. Appeal dismissed - decided against Revenue. Issues Involved:Interpretation of service tax liability on reimbursable electricity charges collected from tenants during a specific period.Analysis:The appellate tribunal considered the issue of whether the respondent was liable to pay service tax on electricity charges collected from tenants as reimbursable amounts during the period from 01.06.2007 to 30.09.2011. The Adjudicating Authority had confirmed the demands, but the First Appellate Authority set aside the Order-in-Original regarding the inclusion of electricity charges in the taxable value. The tribunal analyzed the agreements between the parties and found that the electricity charges were being reimbursed on an actual basis, maintaining a nexus with the service charges. The First Appellate Authority concluded that providing electricity for running the conveyor was connected to the service of 'renting of conveyor,' and not a separate service by the respondent as one of the tenants. This decision was supported by a similar case precedent where it was held that electricity charges collected from tenants cannot be included in the assessable value for service tax purposes.In the detailed analysis, the tribunal highlighted the specific terms of the agreements, emphasizing that the electricity charges were reimbursed between the parties based on actual consumption. It was noted that the electricity supplied for running the conveyor was integral to the service of renting the conveyor, establishing a direct connection between the two services. The tribunal also referenced legal provisions related to the classification of electricity as goods chargeable to duty under Central Excise Tariff and the Maharashtra Value Added Tax Act, supporting the conclusion that supplying electricity to tenants constituted a sale of goods, not a service. Moreover, the tribunal cited a previous decision where similar issues were resolved in favor of excluding electricity charges from the assessable value for service tax. Based on these considerations and precedents, the tribunal upheld the First Appellate Authority's decision, rejecting the appeal and affirming the legality of the impugned order.In conclusion, the tribunal's judgment clarified the service tax liability regarding reimbursable electricity charges collected from tenants, emphasizing the nexus between providing electricity and the service of renting the conveyor. By analyzing relevant agreements, legal provisions, and precedent cases, the tribunal established that such electricity charges should not be included in the assessable value for service tax purposes, ultimately rejecting the appeal and upholding the First Appellate Authority's decision.