The New Delhi Bench of Customs, Excise, and Service Tax Appellate Tribunal ( CESTAT ) has has held that service tax not leviable for the rental agreements in name of individual partners for jointly owned property.
Sidhi Vinayak Associates, the assessee/appellant is a partnership firm with four partners, provides “Renting of Immovable Property Services” under Section 65 of the Finance Act, 1994. Following an intelligence report regarding non-payment of service tax on these services, an enquiry was initiated by Central Excise officers in Dehradun. It was found that the assessee had not paid the required service tax. Consequently, a show cause notice was issued, demanding the payment of ₹16,44,367 in service tax.
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The adjudicating authority confirmed the demand under Section 73(1) of the Finance Act, 1994, and imposed penalties under Sections 78 and 77 of the Finance Act, 1994. The assessee filed an appeal before the Commissioner (Appeals) who rejected their appeal by upholding the order of the adjudicating authority. The assessee has challenged the order passed by the Commissioner (Appeals) before the Tribunal.
The assessee contended that the property was purchased by partners in their name separately. The rent was received separately by all the partners, for which the tenant deducted TDS and the rent agreement was jointly signed but having separate mention of their portion in the property.
The department submitted that since the rent agreement was jointly entered with tenant, the rent amount to be considered as one. Since there was a clause in partnership deed that if any deduction of tax on account of property in question related to the firm in partners name/firm name, deduction will be stands in the name of firm. It was on this basis that the department formed an opinion that tax liability was on the firm.
The Tribunal agreed with the contention of the department that the demand for the post negative list period is within normal period of limitation. For the period 1.7.2012 to 31.03.2013, the due date for payment of service tax was 05/06.04.2013. Since the last date for issuing a show cause notice is 05/06.10.2014 whereas the said notice was issued on 15.04.2014, the said demand is within the normal time period.
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The two member bench of Dr. Rachna Gupta (Judicial Member) and Hemambika R. Priya (Technical Member) has observed that as the rental agreements are in the name of the individual partner, with regard to the property held by them jointly, there cannot be a case of service to oneself.
Section 73(1A) of Finance Act, 1994 provides that the Central Excise Officer may serve, subsequent to any notice or notices served under that sub-section, a statement, containing the details of service tax not levied or paid or short levied or short paid or erroneously refunded for the subsequent period, on the person chargeable to service tax.
The Tribunal allowed the appeal.
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