No Service Tax Payable On Facility Charges Attributable To Electricity Expenses: CESTAT

The Delhi Bench of the Customs, Excise, and Service Tax Appellate Tribunal (CESTAT) has held that service tax is not payable on the amount received as facility charges as it was wholly attributable to electricity expenses, which have been shared proportionately by the assessee and its sister concerns.

The bench of Anil Choudhary (judicial member) has observed that electricity is a good and not a service. Thus, it is outside the scope of service tax.

The appellant/assessee are the publishers and printers of newspapers and are registered with the Service Tax Department for providing a taxable service of renting out immovable property. Under the same group/management, there are other companies. All the companies are located in the same office building or factory premises.

The issue raised was whether the facility sharing charges amounting to Rs. 1,73,50,000 were reimbursement of electricity expenses and not includible in the taxable value.

The commissioner (appeal) held that part of the facility-sharing charges was as per the agreement. There was a fixed charge per month for sharing all the facilities or the electricity charges, which were charged separately because they were variable according to usage. But still, it remained part of the facility-sharing agreement. It was held that the recovery/reimbursement of electricity charges would be part of the provision of service.

The appellant argued that the total amount received as per the Profit & Loss Account from 2008–2009 to 2011–2012 was the sharing of electricity charges or reimbursement of proportional electricity expenses to the appellant because the electric supply metre is in the appellant's name.

The appellant contended that, on the basis of the sub-meter, the electricity bill is bifurcated between the various entities under the same management. There was no element of service involved. Electricity is a good chargeable to central excise under CETA. The appellant has also urged that an extended period of limitation is not invokable, as all transactions are properly recorded in the books of accounts maintained in the normal course of business. The issue is wholly interpretational, and hence, an extended period is not invokable.

The CESTAT noted that the appellant paid the amount of electricity consumption on the basis of the bill generated by the Madhya Pradesh Electricity Board. The appellant, in the name of the facility sharing, also shared the electricity. Thus, the appellant acted on behalf of their tenant and paid the electricity charges to a third party. The appellant is providing "Renting of Immovable Property Service" along with "Facility Sharing Service."

The CESTAT allowed the assessee's appeal.

Case Title: Nai Dunia Media Pvt. Ltd. Versus Commissioner of Central Goods & Service Tax and Central Excise

Citation: Service Tax Appeal No.52034 of 2018 (SM)

Date: 02.11.2022

Counsel For Appellant: Advocate Ankur Upadhyay

Counsel For Respondent: Authorised Representative Tamanna Alam

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