Revenue Department's Appeal Denied for CENVAT Credit on Electricity Tax

The appeal by the Revenue Department against the denial of CENVAT credit for service tax paid on electricity consumption by the tenant was dismissed. The Commissioner's order allowing the credit was upheld by the Tribunal, emphasizing that the credit cannot be denied if the legality is not questioned at the service provider's end. However, it was clarified that raising bills with service tax on electricity charges was not valid under Service Tax Laws as electricity was considered goods and not a service. The cross-objection was deemed not maintainable.

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Issues:
The legality of denial of CENVAT credit for service tax paid on electricity consumption by the tenant.

Summary:
The appeal was filed by the Revenue Department against the order-in-appeal that set aside the denial of CENVAT credit along with interest and penalty against the respondent. The respondent, a tenant of property owners, had paid service tax on electricity consumption, which was denied as electricity was exempt from service tax. The Commissioner (Appeals) allowed the appeal, stating that credit availed against incorrectly paid service tax was admissible. The Department challenged this decision.

During the appeal hearing, it was argued that the respondent, without the authority to supply electricity, raised invoices with service tax, which is not admissible as electricity is not considered a service. The Respondent argued that the credit was valid based on a decision of the Calcutta High Court.

The Tribunal reviewed the case records and previous decisions, including the Bajaj Allianz case, where incorrectly paid service tax credits were deemed admissible. The Tribunal confirmed the Commissioner's order, stating that CENVAT credit cannot be denied at the receiver's end if the legality is not questioned at the service provider's end. However, the Tribunal disagreed with the argument that raising bills with service tax on electricity charges was valid under Service Tax Laws, as electricity was considered goods and not a service.

The appeal was dismissed, confirming the Commissioner's order, and the cross-objection was deemed not maintainable.

(Order Pronounced in Open Court on 22/08/2023)

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