The Delhi High Court has remanded back to the Adjudicating Authority a long-running dispute involving TARC Projects Limited (formerly Anant Raj Projects Ltd.) over whether service tax can be levied on electricity charges recovered from tenants in its Kirti Nagar-based ‘Moments Mall’.
A Bench comprising Justice Prathiba M. Singh and Justice Shail Jain held that while electricity is recognized as “goods” and not a service, the question of whether TARC Projects added any service component or markup over actual electricity costs must be established on facts by the tax authorities.
The case stems from two show-cause notices issued by the Service Tax Department in 2016 and 2017, alleging that the company had failed to pay service tax on “electricity charges income” recovered from mall tenants. The Department argued that the supply of electricity formed part of “management, maintenance and repair services”, taxable under the Finance Act, 1994.
The Department’s investigation revealed that TARC Projects had billed tenants for power supplied through sub-meters. It concluded that these recoveries—amounting to over ₹1.75 crore across four financial years—were taxable, as the company was not a licensed electricity distributor under the Electricity Act, 2003.
The Order-in-Original dated November 30, 2017, confirmed the service tax demand, interest, and penalties, finding that TARC Projects “intended to evade tax.”
TARC Projects, represented by advocate J.K. Mittal, argued that electricity is a “good” under Article 366(12) of the Constitution and that its sale or supply is outside the scope of service tax. The company maintained that it merely collected from tenants the same per-unit rate charged by the distribution utility—North Delhi Power Limited (NDPL)—without any addition or profit component.
The company sought quashing of the service tax demand, the underlying show-cause notices, and Section 66D(k) of the Finance Act, along with Notification No. 32/2010-ST, which limited exemption from service tax to “distribution utilities.”
Citing the Supreme Court’s rulings in State of A.P. v. NTPC (2002) and CST v. M.P. Electricity Board (1969), the petitioner emphasized that electricity qualifies as movable goods capable of sale and purchase, and therefore, taxing its supply as a service is unconstitutional.
The government, represented by Standing Counsel Harpreet Singh, contended that TARC Projects was not a licensed distributor, and the continuous supply of electricity formed an inseparable part of maintenance and common area services provided to tenants. Hence, service tax was rightly levied under the “maintenance service” category.
The Court noted that the Finance Act’s negative list [Section 66D(k)] exempts transmission or distribution of electricity by a distribution utility, but does not automatically extend the exemption to intermediaries like landlords redistributing power to tenants.
However, Justice Singh observed that if TARC merely recovered actual electricity costs from tenants without markup or profit, such amounts may not attract service tax. Determining this required factual scrutiny—such as matching the utility’s per-unit rate with what tenants were charged.
“The petitioner has prima facie shown that the charges collected were the same as those billed by the distribution company. However, this must be factually verified by the Adjudicating Authority,” the Court said.
Since the Commissioner (Appeals) had already remanded the matter for fresh adjudication in April 2018, and TARC’s writ petition was pending before the High Court, the Bench directed that the adjudicating authority now complete the process within three months.
The authority has been instructed to issue a personal hearing notice to the company, ensuring communication through both phone and email.
The Court emphasized that it had not decided the issue on merits, reiterating that disputes involving factual verification are best handled by statutory authorities rather than under writ jurisdiction.
Case Details
Case Title: Tarc Projects Limited versus UOI
Case No.: W.P.(C) 948/2018
Date: 06/10/2025
Counsel For Petitioner: J. K. Mittal
Counsel For Respondent: Harpreet Singh
