CESTAT Upholds Service Tax Demand, Citing Validity of Levy on Renting of Immovable Property [Read Order]

The Customs, Excise, and Service Tax Appellate Tribunal (CESTAT) has upheld a service tax demand on income earned from renting immovable property, dismissing an appeal filed by Satnam Kaur. The tribunal ruled that the levy was valid during the relevant period and rejected the appellant’s argument that renting property did not qualify as a taxable service.

Satnam Kaur had challenged an order dated August 29, 2013, passed by the Commissioner (Appeals), Meerut, which confirmed a service tax demand on rental income received from commercial entities, Koutons Retails India Ltd. and Bharti Retails India Ltd. The appellant had argued that renting immovable property should not be subject to service tax, relying on a stay granted by the Supreme Court in a similar case involving the Retailers Association of India (2011). However, the tribunal noted that multiple High Courts had already upheld the constitutional validity of the levy.

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The case originated from scrutiny of the appellant’s service tax returns, which revealed non-payment of tax on rental income between October 2009 and September 2011. A show-cause notice was issued in September 2011, but the appellant neither submitted a written reply nor attended personal hearings. The Assistant Commissioner confirmed the demand in February 2013, imposing tax, interest, and a penalty under Section 78 of the Finance Act, 1994. The Commissioner (Appeals) later reduced the penalty to Rs. 10,000 under Section 77 while upholding the tax and interest demands.

During the proceedings, the Revenue cited several High Court judgments, including Home Solution Retails (India) Ltd. vs. Union of India (2011), Retailers Association of India vs. Union of India (2011), and Shubh Timb Steels Limited vs. Union of India (2010), where the levy was upheld. The tribunal emphasized that unless a constitutional court strikes down the provision, the tax remains valid.

The bench, comprising Dr. Rachna Gupta (Judicial Member) and P.V. Subba Rao (Technical Member), dismissed the appeal, stating that the impugned order was legally sound. The tribunal upheld the service tax demand, interest, and the reduced penalty, concluding that no interference was warranted. The stay application was also disposed of accordingly.

To Read the full text of the Order CLICK HERE

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