By TIOL News Service

MUMBAI, SEPT 13, 2018: REVENUE has filed three appeals against the order of the CESTAT - 2013-TIOL-1751-CESTAT-MUM and has urged the following identical questions of law -

"(a) Whether the Tribunal is correct in holding that the supply of electricity by the Respondent herein to their tenants/clients amounts to "sale of goods" and "not supply of service"?

(b) Whether the supply of electricity by the Respondent herein to their tenants/clients is an essential and integral part of the service namely "Renting of Immovable Property Services", as provided under Section 65 (105) (zzzz) of Finance Act, 1994"?

The facts are that SCNs were issued to the Appellants invoking Rule 5 of the Service Tax (Determination of Value) Rules, 2006 seeking to include the electricity charges received by the Respondents as reimbursements from its tenants in the assessable value of the service of ‘Renting of Immovable Property'.

The impugned order of the Tribunal accepted the Respondent's claim and held that electricity is goods and, therefore, cannot form a part of the assessable value for the purpose of payment of service tax on providing service of ‘renting of immovable properties'.

The High Court viewed that since the issue related to valuation of service, the appropriate remedy to challenge the common impugned order would be before the Apex Court in view of Section 35G(1) and 35L(1)(b) of the CEA, 1944 as made applicable to the Finance Act, 1994.

The counsel for the Revenue submitted that insofar as the first question is concerned, the issue whether it is sale of goods or supply of services is a question which touches taxability of the consideration received for supply of electricity. Reliance is placed in support upon the decision of Bombay High Court in   Global Vectra Helicorp Ltd. Vs. C.S.T., Mumbai CEA No. 66 of 2014 decided on 23rd March, 2015.

The High Court remarked that its jurisdiction is determined by the nature of the order passed by the Tribunal and not by the manner in which the question is proposed.

Observing that it is in agreement with the decision in Raja Dyeing - 2017-TIOL-552-HC-P&H-CX, the Bench viewed that the issue decided by the Tribunal is in respect of valuation of services and not with regard to taxability of the service.

Adverting to the apex court decision in   Navin Chemicals Mfg. & Trading Co. Ltd. - 2002-TIOL-460-SC-CUS, the High Court further observed -

++ The questions raised by the Revenue whether the sale of goods would amount to supply of service for purpose of valuation is an issue which directly relates to valuation of goods.

++ It is relevant to note that the Central Government had issued a Notification No. 12/2003-ST dated 20th June, 2003 exempting supply of goods from service tax. This prima facie would suggest that otherwise the value of goods supplied by a service provider may be included in the valuation of the services, in the absence of the Notification. However, these are all issues relating to valuation and not within the jurisdiction of this Court.

After distinguishing the decision in Global Vectra Helicop Ltd. (supra) relied upon by the counsel for the Revenue, the High Court emphasised that in the present case the issue arising is one with regard to valuation of service provided while renting of immovable property; that the question is one relating to valuation and not relating to taxability.

Relying on the decision in   Greatship India Ltd. - 2015-TIOL-1100-HC-MUM-ST, the High Court concluded that the challenge to the impugned order of CESTAT cannot be entertained and the appeal, if any, would be before the Supreme Court.

The Revenue appeal was disposed of as not maintainable with liberty to the Revenue to approach the Apex Court.

(See 2018-TIOL-1892-HC-MUM-ST)