CESTAT Rules Electricity Charges Recovered by Builders on Actuals as Pure Agent Not Taxable as Service

The Kolkata Bench of the Customs, Excise, and Service Tax Appellate Tribunal (CESTAT) has ruled that electricity charges recovered by builders from tenants on an actual consumption basis, acting as pure agents, are not taxable as services. The appellant, Parvati Resource Pvt. Ltd., was engaged in real estate and renting activities. The department had demanded service tax on electricity charges collected from tenants, treating them as part of the value of renting of immovable property. The appellant's counsel argued that electricity charges were collected strictly on the basis of actual consumption recorded in sub-meters installed for tenants, proportionately covering fixed charges, and were deposited with the state electricity licensee. The tribunal observed that the department had not shown that the appellant collected more than the actual consumption recorded in meters. Since the appellant functioned as a pure agent in respect of electricity supply, such recoveries could not be included in the value of taxable services. The tribunal explained that reimbursable expenses recovered on actuals are not liable to service tax, and the service tax demand on electricity charges was set aside.