The Mumbai CESTAT has held realizing electricity consumption charges from the occupant is a service.
The Respondent was a tenant of property owners M/s MTDCCL and WARPL. Property owners were receiving lease rental of the premises rented out to the respondent and also the proportionate amount of the electricity consumption by the occupants against raising of two distinct invoices every month.
The service tax paid against proportionate electricity consumption amount was charged under ‘Business Auxiliary Service’ but electricity being in the nature of sale being exempted from the purview of service tax, credit availed by the respondent in respect of service tax paid towards payment of electricity was denied to the respondent for the period 2013-14 and 2014-15.
Show cause-cum-demand notice was raised against the respondent, adjudicated and confirmed against it, who preferred an appeal before the Commissioner (Appeals). Commissioner (Appeals), vide his detailed order dated 11/10/2008, allowed the appeal by holding that such credit availed even against incorrectly paid service tax was admissible credit.
During the course of hearing Badhe Piyush Barasu submitted that going by the definition of CENVAT Credit Rules, only admissible credits were allowed to be refunded to reduce the cascading effect but respondent, having no licence or authority to supply electricity, had raised invoices against supply of electricity and charged service tax which is not admissible for the reason that electricity is not covered under the definition of service and the Respondent is not entitled for any refund and, therefore, the order passed by the Commissioner is not sustainable in law and the same is required to set aside.
The tribunal noted that where CENVAT credit taken on incorrectly paid service tax were held to be admissible for the reason that it was otherwise refundable that would attract revenue neutral situation. But he had not gone into the present proposition of law that CENVAT credit cannot be denied at receiver’s end when the legality of the same is not questioned at the service provider’s end in view of the consistent decisions emerged during the relevant time, as has been referred in the preceding paragraph. This being the position of the law, we have got no hesitation to confirm the order passed by the Commissioner (Appeals).
“The classification or legality of such payment of tax could have been done at the owner’s end but it can never be a ground for denial for CENVAT credit at receiver’s end, since payment of service tax was accepted by the Appellant. Hence the order,” the CESTAT said.
Commissioner of CGST V/s Avaya India Pvt Ltd.