Appellate Tribunal rules distributor not liable for service tax on electricity sales

The Appellate Tribunal CESTAT ALLAHABAD ruled that the appellant, acting as a distributor of electricity to tenants, was not liable to pay service tax on the sale of electricity or other consumer goods. The Tribunal considered the appellant's role as a pure agent in receiving electricity from the Electricity Department and distributing it to tenants, whether sourced from the Electricity Department or DG Sets. The decision clarified the non-taxable nature of the appellant's activities in the electricity supply chain, ultimately setting aside the orders related to the levy of service tax on reimbursement of electric charges and consumable goods.

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Issues:
1. Liability to pay service tax on the sale of electricity by way of sub seller.
2. Liability to pay service tax on the sale of electricity originated from DG Set.

Analysis:
1. The appellant, registered for service tax under BAS and Renting of Immovable Property, faced a discrepancy during audit regarding reimbursement for various charges. The dispute revolved around the levy of service tax on reimbursement received for electricity charges and consumable goods supplied to tenants. The Revenue contended that the appellant sold electricity without paying service tax. However, it was noted that VAT was charged on electricity sales by the Sales Tax Department, and distribution of electricity was not a taxable activity under Service Tax. The appellant acted as a pure agent, receiving electricity from the Electricity Department and distributing it to tenants through sub meters. The Tribunal held that the appellant was not liable to pay service tax on the sale of electricity or other consumer goods to tenants.

2. The Tribunal, after hearing both parties, concluded that the appellant's activities regarding the sale of electricity, whether received from the Electricity Department or supplied from DG Sets, did not attract service tax. The appellant's role as a distributor, using a common meter provided by the Electricity Department for the entire building and subsequently collecting payments from tenants, was akin to that of a pure agent. Therefore, the Tribunal allowed both appeals, setting aside the orders related to the levy of service tax on reimbursement of electric charges and consumable goods. The appellant was granted consequential benefits as per the law.

This judgment by the Appellate Tribunal CESTAT ALLAHABAD clarified the liability of the appellants regarding service tax on the sale of electricity and other related activities. The decision highlighted the distinction between taxable and non-taxable activities under Service Tax law, emphasizing the appellant's role as a distributor and pure agent in the electricity supply chain to tenants.

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