No Service Tax Leviable on Supply of Water and Electricity which is Essentially a Sale of Goods: CESTAT [Read Order]

The Hyderabad bench of the Customs, Excise and Service Tax Appellate Tribunal (CESTAT) held that the service of water supply and electricity which was essentially a sale of goods was not subjected to Service Tax. 

GMR Hyderabad International Airport Ltd, the appellant assessee registered with the Service Tax Department for providing various services viz., Airport Service, Renting of Immovable Property Services, Management Consultancy service, Consulting Engineer service, Business Support, Business Auxiliary services, and others. 

The assessee appealed against the order passed by the Commissioner (Appeals) for confirming the service tax demand on the amount of electricity charges and water charges collected by the assessee from its tenants/concessionaires and also the availability of CENVAT credit on Outdoor Catering services and Club Membership. 

Anil Kathuria, the counsel for the assessee contended that the Central Government, in its wisdom, provided for exemption from the levy of service tax on various services provided in the Port or Airport, inter alia, including supply of water and supply of electricity and the Revenue before the issue of this notification believed that amount collected by the assessee for these two activities, which are like the sale of goods, was not liable to service tax. Thus, the Impugned Order was fit to be set aside for invocation of an extended period of limitation. 

Chittaranjan W. Prakash, the counsel for the department relied on the decisions made by the lower authorities and contended that the demand raised by the revenue was as per the law and liable to be sustained. 

The Bench observed that in the case of Intercontinental Consultants and Technocrats Pvt Ltd, the court held that the electricity and water, are to be treated as goods. Therefore, the supply of water and electricity was essentially a sale of goods and therefore not chargeable under provisions of service tax. 

The two-member bench comprising Anil Choudhary (Judicial) and Jyothishi (Technical) held that the assessee was eligible to avail of the CENVAT credit and quashed the demand for service tax while allowing the appeal filed by the assessee. 

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