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2025 Supreme(Online)(Del) 7749
IN THE HIGH COURT OF DELHI AT NEW DELHI
Prathiba M. Singh, Shail Jain, JJ
TARC PROJECTS LIMITED – Appellant
Versus
UNION OF INDIA & ORS. – Respondent
W.P.(C) 948/2018
For the Appellants/Petitioners: Mr. J. K. Mittal, Ms. Vandana Mittal, Mr. Mukesh Choudhary
For the Respondents: Mr. Harpreet Singh, SSC with Mr. Jai Ahuja
Electricity, considered as goods, is not subject to service tax; its sale is exempt if only costs are reimbursed without additional service fees.
Headnote:(A) Constitution of India - Article 226 - Finance Act, 1994 - Section 66D(k) - Notification No. 32/2010-Service Tax - Quashing of provisions and impugned order regarding service tax on electricity charges - Petitioner challenged levy of service tax on electricity charges contending it is subject to state tax under VII Schedule - Audits revealed non-payment of service tax on electricity charges recovered from tenants - Court held that petitioner's agreement necessitated detailed factual examination regarding service tax applicability; remanded to Adjudicating Authority for determination of service tax on electricity charges, based on evidence. (Paras 22, 27, 43, 44)
(B) Service Tax - Applicability - Electricity considered as 'goods' exempt from service tax when sold - No service tax on electricity charges if only reimbursed cost passed to tenants - Requirement of delineating service and sale of electricity. (Paras 15, 36, 40)
Facts of the case:
The Petitioner, managing a shopping mall, contended that electricity supplied to tenants is exempt from service tax as it is classified as goods and the applicable charges were similar to those levied by distribution companies. The department issued show cause notices for service tax, claiming Petitioner liable under maintenance services.
Findings of Court:
The question of service tax applicability on electricity charges required factual investigations into agreements with tenants and comparable distribution company charges.
Issues: The fundamental issue was whether the service tax could be levied on the electricity charges recovered as reimbursement or if it constituted a sale exempt from service tax.
Ratio Decidendi: The court ruled provisions concerning service tax on electricity required careful judicial assessment, emphasizing the High Court's limited jurisdiction in matters requiring examination of evidence and factual determinations.
Result: Petition remanded to Adjudicating Authority for further proceedings.
1. This hearing has been done through hybrid mode.
2. The present petition has been filed on behalf of the Petitioner- M/s TARC Projects Ltd., earlier known as Anant Raj Projects Ltd. under
3. The Petitioner vide the present petition further seeks a direction that the collection of service tax on the supply of electricity by the Petitioner is not liable to be taxed under the Act as the same is under the purview of the State List as per the VII Schedule of The Constitution of India .
Facts
4. The Petitioner owns a shopping mall by the name ‘MOMENTS’ at Kirti Nagar, New Delhi. The said mall was developed during the years 2008-2011 on approximately 6.18 acres of land having approximately 5,00,000 sq. ft. of leasable area. Various commercial spaces in the said mall are given on lease to tenants for running their showrooms/outlets.
5. According to the Petitioner, it is registered with the Service Tax Department (hereinafter, ‘Department’) and is providing services of renting of immovable properties. It is stated that the Petitioner has duly paid the applicable service tax and files returns regularly. Apart from the rental amount that it collects, the Petitioner also provides certain maintenance services as also common-area facilities to its tenants. In respect of these facilities, service tax is also paid by the Petitioner on monthly billing basis.
6. An agreement dated 4th June, 2012 has been entered into between the Petitioner and the North Delhi Power Ltd. (hereinafter, ‘NDPL’) for supply of 4000kW of electrical energy on Non-Domestic High-Tension basis. The Petitioner has also entered into various agreements with the tenants who have taken the space on lease in the mall of the Petitioner. In the said agreements, one of the clauses relates to supply of electricity. The said clause is a standard clause in the said agreements, mostly entered into with all the tenants. By way of example, the said clause in the agreement dated 21st May, 2014 entered by the Petitioner with M/s. V S Foods is extracted below:
““8. Electricity and Demand charges
i. Use of Electricity/ Power Back-up by the Licensee
a. The Licensor shall procure and make provision for the electricity requirements of the Food Court, and shall permit the use of such electricity in the Licensed Space, on a metered basis and upon payment of electricity charges, as shall be computed by the Licensor and/or MMA from time to time. The Licensee undertakes not to source electricity through any other means except as distributed by the Licensor. The Licensee hereby agrees and undertakes to sign and execute the necessary documents/authorizations as may be required by the Licensor to get electric connection or load on its own and/or on their behalf.
b. The Licensee, as a prior requisite, shall submit to the Licensor its requirement of electricity load of 10 KVA in the Licensed Space and the same may be provided to the Licensee subject to availability of such load in Moments Mall and upon payment of Demand Charges for Utilities on pro rate basis in addition to the charges levied by the electricity provider. These Demand Charges for Utilities shall be paid by the Licensee to the Licensor.
c. The Licensee undertakes not to exceed the usage of electricity beyond their total permissible load, as that may cause short circuits or malfunctioning of equipments in the Moments Mall/ Food Court. If the Licensee exceeds the usage of electricity beyond their total permissible load then the Lice
