Electricity charges and transformer recoveries treated as non-taxable sale and reimbursement, defeating service tax liability.

Electricity charges separately billed on actual consumption were treated as a sale of goods, so they fell outside the taxable value of Management, Maintenance or Repair Service. Transformer installation recoveries were likewise excluded because the amounts were less than actual cost and were merely reimbursed as conduit expenses connected with electricity supply. On that reasoning, service tax on both components was unsustainable, and the connected penalty could not survive.

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Issues: Whether electricity charges recovered from occupants and amounts collected towards transformer installation were liable to service tax under the category of Management, Maintenance or Repair Service.

Analysis: The supply of electricity to tenants was treated as a sale of goods, since electricity is goods and the charges were separately billed on actual consumption. Once the transaction was in the nature of sale of goods, the amounts realised for electricity could not be brought within the taxable value of a service. The same principle applied to the transformer installation charges, as the appellant recovered less than the actual cost and acted only as a conduit for recovering expenses connected with supply of electricity. In view of the nature of the transaction, no service tax could be sustained on either component, and the penalty followed the same fate.

Conclusion: The demand of service tax on electricity charges and transformer installation charges was unsustainable and was set aside. The appellant was held not liable to service tax under Management, Maintenance or Repair Service, and no penalty survived.

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