Electricity charge reimbursements treated as goods value, not taxable service, and therefore kept outside service tax.

Amounts recovered from tenants towards electricity charges were treated as consideration for goods, not for a taxable service, so they fell outside the service tax net. The reimbursement was paid upfront to the electricity board for convenience and then recovered with a small margin, but that did not change the character of the amount. The analysis also relied on the exemption for the value of goods supplied by a service provider under Notification No. 12/2003-ST. Accordingly, reimbursement of electricity charges was held not taxable under service tax, and the demand was unsustainable.

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Issues: Whether reimbursement of electricity charges collected at 2% over and above the actual electricity bill from tenants was liable to service tax.

Analysis: The appellant was already paying service tax on renting of immovable property. The electricity amount was paid upfront to the State Electricity Board for convenience and recovered from tenants with a small margin. The Tribunal followed the view that electricity is goods and not a service, and that the amount representing electricity charges, including the reimbursed value, could not be brought within the service tax net. It also noted the exemption for the value of goods supplied by a service provider under Notification No. 12/2003-ST.

Conclusion: The reimbursement of electricity charges was not taxable under service tax and the demand was unsustainable.

Ratio Decidendi: Amounts recovered towards electricity charges, being consideration for goods and not for a taxable service, fall outside the ambit of service tax, particularly where the value of goods supplied is exempt.

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