QUESTION

SCN received in Service tax matter for FY 2015-2016. Can the limitation of time be extended? Service tax on `Reimbursement of Electricity` is demanded by the officer. How that can be challenged.

ANSWER

In the SCN attached with your mail, it is nowhere mentioned that the service amount on which tax is demanded is related to supply (distribution) of electricity. It is mentioned in your mail that the services are related to supply (distribution) of electricity.

In Service tax the service of distribution of electricity is covered. But you are not a Company engaged in Distribution (logistic) of Electricity. Distribution of Electricity is done by the Undertakings like: Tata Power Company Ltd, NHPC Ltd, Reliance Power Ltd.etc with the special provisions framed for them under the relevant Law.

For giving our reply we have assumed that you have given certain premises on rental basis with installed sub-meters. You are providing electricity to these tenants. The electricity may be produced by you or may be received by you from State Electricity Board and then channeled to the tenant.

If it is manufactured (generated on generators) by you and given to the tenant then it is a sale of goods not service. If it is purchased by you and given to tenant then it is trading of goods (since you can't do trading of electricity) so it is sharing of electricity expenses. In both the way it is not Service.

Electricity (electrical energy) is classified under chapter heading 2716 of HSN. During the year (2015-16) the manufacturing of electricity was subjected to Excise. Since it was subjected to Excise and classified as goods, therefore it cannot be classified as a service. If it cannot be classified as service, then how can the service tax be demanded on it.  (Reply dt. 29/06/2021)