The Customs, Excise, and Service Tax Appellate Tribunal (CESTAT), Ahmedabad bench has held that service tax cannot be levied on reimbursement of electricity charges received from the service recipient M/s Gujarat Gas Company Ltd.
The assessee is providing ‘Business Auxiliary Service” to M/s Gujarat Gas Co. Ltd. in the form of infrastructural Support by way of providing land, building & equipment, manpower, electricity connection, and selling and billing of CNG gas, collection of bills, etc. They are receiving Service Charges from M/s Gujarat Gas Co. Ltd. fixed at the rate of per Kg. CNG gas sold in a month subject to a minimum amount of CNG Gas to be sold by them as entered into a contract with M/s Gujarat Gas Co. Ltd. On further verification of Bank Statement & ST-3 returns, it was noticed that there was a huge difference in taxable value shown in ST-3 returns and the amount of service charge received in the Bank account. The Appellants submit the reason for the difference that the difference is due to reimbursement of electricity charges.
The department was of the view that the cost incurred on reimbursement of expenses, if any, needs to be included in the gross value of the taxable services rendered.
Member (Judicial), Mr. Ramesh Nair, and Member (Technical), Mr. Raju found that the identical issue involving the identical contract has been decided by this Tribunal in the case of Pragati CNG by relying on the decision of the Tribunal in the case of VV Brothers.
Relying on the decision of the Tribunal, the Tribunal held that the electricity charges which are reimbursed on an actual basis in terms of the contract are not includible in the gross value of service provided by the appellant to Gujarat Gas Company Limited.
Concluding the order in favor of the assessee, the Tribunal held that “In view of the above judgments, the issue involved herein has been settled inasmuch as the electricity charges reimbursed to the service provider by the service recipient not includible in gross value of service. Following the ratio of the above judgment, we are of the view that the demand is not sustainable.”
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