Tenant’s SVLDRS Payment Satisfies 7.5% Pre-Deposit Requirement for Service Tax on Rental Income: CESTAT Remands Appeal [Read Order]

The Hyderabad Bench of Customs, Excise and Service Tax Appellate Tribunal ( CESTAT ) remanded the appeal and held that the tenant’s payment under the Sabka Vishwas (Legacy Dispute Resolution) Scheme, 2019 (SVLDRS) scheme satisfied the 7.5% pre-deposit requirement for service tax on rental income.

Bommidala Trading Company Pvt Ltd, appellant-assessee, had filed an appeal against the OIA dated 08.01.2015, which the Commissioner (Appeals) dismissed solely for non-payment of the mandatory pre-deposit, without considering the merits of the case.

The assessee counsel contended that they had rented their commercial building to M/s Spencer’s Retail Ltd, Chennai, and had not paid service tax due to ongoing court disputes. After the retrospective amendment in the Finance Act, 2010, and the Delhi High Court’s decision in Home Solution Retail India Ltd Vs UOI [2011 (24) STR 129 (Del)], they became liable to pay service tax, which was not disputed.

The counsel highlighted that the tenant had raised the issue before the Hon’ble Supreme Court in SLP No. 27636 of 2011, which was disposed of with directions allowing the tenant to use the SVLDRS scheme in Retailers Association of India Vs UOI [2012 (26) STR J118 (SC)]. Therefore, the counsel argued that dismissing the appeal for non-payment of the 7.5% pre-deposit was not justified.

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The departmental counsel however, supported the findings of the Commissioner (Appeals).

The two member bench comprising Angad Prasad (Judicial Member) and A.K.Jyotishi (Technical Member) heard both parties and examined the records. It observed that the key issue was whether the appellant had made the 7.5% pre-deposit for the appeal before the Commissioner (Appeals).

The tribunal noted that the Hon’ble Supreme Court had allowed petitioners to settle the disputed service tax under the SVLDRS scheme. M/s Spencer’s Retail Ltd had utilized this scheme and paid part of the service tax on rentals, including those paid to the appellant. This payment effectively satisfied the pre-deposit requirement.

Accordingly, the appellate tribunal held that the Commissioner (Appeals) erred in dismissing the appeal for non-payment of pre-deposit. The matter was remanded to the Commissioner (Appeals) to decide the appeal on merits, with the assessee directed to submit SVLDRS documents and evidence of service tax paid by the tenant. The appeal was allowed by remand.

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