2021 (11) TMI 660 - AT - Service Tax

Tribunal excludes electricity charges from service value for taxation, aligning with legal precedents.

The Tribunal allowed the appeal, setting aside the impugned order, ruling that electricity charges reimbursed on an actual basis under the contract should ... Valuation - Business Auxiliary Service - inclusion of Electricity Charges reimbursed to the appellant by the Service Recipient M/s. Gujarat Gas Company Limited for providing the service Namely Business Auxiliary Service in the gross value of output service, or not - HELD THAT:- This issue involving identically placed service provider and the same service recipient M/s. Gujarat Gas Company Limited under the identical contract has been decided by this Tribunal in the case of VV BROTHERS VERSUS C.C.E. & S.T. - SURAT-I [2020 (1) TMI 986 - CESTAT AHMEDABAD] wherein this Tribunal has held that electricity charges reimbursed to the service provider by the service recipient are not includable in gross value of renting of immovable property service. Thus, the electricity charges which is reimbursed on actual basis in terms of the contract is not includible in the gross value of service provided by the appellant to Gujarat Gas Company Limited - appeal allowed - decided in favor of appellant. Issues Involved:Whether electricity charges reimbursed to the appellant by the service recipient for providing Business Auxiliary Service should be included in the gross value of output service.Analysis:Issue 1: Inclusion of Electricity Charges in Gross ValueThe appellant argued that under the contractual agreement, they are entitled to reimbursement of electricity charges from the service recipient, and thus, these charges should not be considered part of the gross value of their output service. They relied on various judgments to support their claim, including V V Brothers case where a similar issue was decided in favor of the appellant. The appellant contended that the identical contractual arrangement in the present case should lead to a similar outcome.Issue 1.1: Judicial PrecedentsThe appellant cited judicial precedents such as Kiran Gems Pvt. Ltd. and ICC Reality (India) Pvt. Ltd., where the exclusion of electricity charges reimbursed to the service provider was upheld by the tribunal. The appellant emphasized that these precedents supported their argument that such reimbursements should not be included in the assessable value for taxation purposes.Issue 2: Revenue's ArgumentThe Revenue, represented by the Authorized Representative, reiterated the findings of the impugned order. They argued that the amount reimbursed for electricity charges should be included in the assessable value, citing a decision by a larger bench in the case of Sri Bhagwathy Traders, which emphasized the inclusion of amounts not paid in the capacity of a pure agent.Issue 3: Tribunal's DecisionAfter considering the submissions from both sides and examining the contractual provisions, the Tribunal referred to the V V Brothers case where a similar issue was resolved in favor of the appellant. The Tribunal noted that the contract clearly placed the liability of electricity charges on the service recipient and that a separate meter was installed for assessing actual electricity consumption. Relying on precedents like ICC Reality (India) Pvt. Ltd. and Intercontinental Consultants and Technocrats Pvt. Ltd., the Tribunal concluded that the electricity charges reimbursed on an actual basis should not be included in the gross value of the service provided by the appellant.ConclusionBased on the precedents and the specific contractual terms in the present case, the Tribunal allowed the appeal, setting aside the impugned order. The Tribunal established that the electricity charges reimbursed on an actual basis under the contract were not to be included in the gross value of the service provided by the appellant to the service recipient. This decision reaffirmed the principle established in previous cases and resolved the issue definitively.This detailed analysis of the judgment provides a comprehensive overview of the issues involved, the arguments presented by both parties, and the Tribunal's decision based on legal precedents and contractual interpretations.