Electricity Charges Collected by Maintenance Firm Not Taxable Under Service Tax: CESTAT [Read Order]
CESTAT held that electricity charges collected by a maintenance firm from residents are reimbursements for goods and not taxable under service tax.
![Electricity Charges Collected by Maintenance Firm Not Taxable Under Service Tax: CESTAT [Read Order]](https://images.taxscan.in/h-upload/2025/11/05/2102421-electricity-charges-maintenance-firm-taxable-under-service-tax-cestat-taxscan.webp "Electricity Charges Collected by Maintenance Firm Not Taxable Under Service Tax: CESTAT [Read Order]")
The Chennai Bench of the Customs, Excise, and Service Tax Appellate Tribunal (CESTAT) held that electricity charges collected by a maintenance firm from residents cannot be included in the taxable value for service tax.
Promags, the appellant, which provided maintenance and housekeeping services to residential complexes, had collected electricity charges from residents and paid them to the Tamil Nadu Electricity Board.
Based on investigations by the Directorate General of Central Excise Intelligence (DGCEI), the department alleged that the appellant had neither obtained service tax registration nor paid service tax under “Management, Maintenance and Repair Services (MMR)” and “Business Auxiliary Services (BAS)” during 2004-2009.
The adjudicating authority confirmed the demand along with penalties, and the Commissioner (Appeals) upheld the order. The appellant approached the CESTAT.
The appellant’s counsel argued that electricity is a supply of goods, not a service, and the charges collected were mere reimbursements, not part of the taxable consideration. The revenue counsel argued that all amounts received formed part of the gross taxable value.
The two-member bench comprising P. Dinesha (Judicial Member) and Vasa Seshagiri Rao (Technical Member) observed that electricity charges represented payments for goods and not services and could not be taxed.
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The tribunal explained that there was no legal basis to treat reimbursement of electricity as part of the taxable value. It also observed that issuing multiple show cause notices for the same period and activity was not legally sustainable.
The tribunal held that the electricity reimbursements should be excluded from the taxable value and that overlapping demands under different categories were invalid. It directed recomputation of the tax liability after exclusion of electricity charges and set aside penalties where suppression was not established. The appeal was partly allowed.
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