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OIO No. 11/STC-AHD/ADC(MKR)/2011-12 of 29

BRIEF FACTS OF THE CASE

M/s, Sarojben Khusalchand & Others situated at C-301, Shiromani Flats, Near Nehrunagar Char Rasta, Satellite Road, Ahmedabad (herein-after referred to as ‘the said Service Provider’) is engaged in the business of Leasing / Renting of Immovable property owned by them, which is located at 1st floor, Balleshwar Sqaure, Opp. Iscon Mandir, S. G. Highway, Ahmedabad, and the said activity is taxable under ‘Renting of Immovable Property Service’ as defined under Section 65 of the Finance Act 1994 (as amended) w.e.f 01.06.2007. The above referred property has been rented / leased by the said Service provider’s to M/s Qatar Airways, who are running / managing Office since January’ 2008.

2. Potential commercial properties like malls, shopping centers, commercial complexes, etc. were identified by the Service Tax, Ahmedabad and a survey of all such identified commercial properties located in the city of Ahmedabad was carried out. During the course of the survey of Balleshwar Sqaure located Opp. Iscon Mandir, Sarkhej – Gandhinagar Highway, Ahmedabad, it was found that the Shop / showroom / office located at No.1, 1st floor of the said Balleshwar Sqaure building, has been rented to M/s Qatar Airways, who are carrying out the business of Office in the said showroom / shop / office and the monthly rent of it is Rs.4,89,000/-. On further inquiry, it was found that the said premises is owned by above mentioned Service provider’s individually / jointly and the rent is paid by the rental / lessee to six joint owners.

3. Whereas, the monthly rent of the said property is Rs.4,89,000/-, and considering it from the date of applicability from 01.06.2007, the annual rent for the financial year 2007-08, crosses the exemption limit of Rs. 10 Lakhs provided under Notification No. 08/2008-ST dtd. 01.03.2008, the said Service provider were required to obtain Service Tax registration on receiving the rent of Rs. 9 Lakhs, as per the provisions of Section 69 of the Finance Act, 1994 and pay Service Tax at the applicable rate. However, during the course of survey, it was found that the said Service provider has not obtained Service Tax registration and they have failed to pay the amount of Service Tax payable by them at the applicable rate on the grounds that the above mentioned property owned by them jointly and the rent is collected by them equally or on share of ownership basis and the rent received by them individually is below the value based exemption limit as provided under Notification No. 06/2005-ST dtd. 01.03.2005 as amended.


4. It appeared that, the service of ‘Renting of Immovable Property Service’ is an indivisible service and the fact that the immovable property is owned by more than one individual does not mean that the indivisible service is also to be treated as more than one service depending upon the number of persons who own the immovable property. In case where the property is collectively own, the service provider is to be treated as a single person for the purpose of levy of Service Tax, since service provided is a single service and the recipient of service is also treated as single person. In case the recipient of such service divides the total consideration and makes separate payments to individual owners does not obviate the fact that the service provided is a single service. In all such cases the Service provider is treated as a single person and the turner limit of Rs. 10 Lakhs is only applicable by treating the total amount received as taxable value. Where the immovable property is collectively owned, for the purpose of service tax the association of persons is treated as a single service provider.

5. Therefore, in view of the above provisions, the Service Tax liability of the said Service provider is as under:

Financial Year

Taxable value i.e total

rent collected

Service Tax payable

Edu. Cess

payable

H. Edu. Cess

payable

Total Service Tax

Payable01.06.07 to 31.03.08 14,67,000/- 1,76,040/- 3,521/- 1,760/- 1,81,321/-2008-09 (Upto Sept. 08)

29,34,000/- 3,52,080/- 7,042/- 3,521/- 3,62,643/-

TOTAL 44,01,000/- 5,28,120/- 10,563/- 5,281/- 5,43,964/-

From the details given in the above table, it appeared that the said Service provider has received total rent of Rs.14,67,000/- from its clients during the period from 01.06.2007 to 31.03.2008. On the said taxable value of Rs.14,67,000/-, the Service tax payable @ 12.36 % comes to Rs.1,81,321/-. Further, during the financial year 2008-09, for the period from 01.04.2008 to 30.09.2008, the amount of rent received by the Service Provider is Rs.29,34,000/- and during the said year the Service provider is not eligible for value-based exemption, so, the amount of Service Tax payable on the taxable value of Rs.29,34,000/-@ 12.36 % comes to Rs.3,62,643/-. The said Service provider is required to pay the same along with interest. Further, apart from the commercial property mentioned in this Show cause notice, if the Service provider owns any other commercial property and the same has been rented by the Service provider, the amount of rent received by them is required to be included in the taxable value for the respective years.


6. In view of the discussion above, it appeared that M/s Sarojben Khusalchand & Others, Ahmedabad, engaged in providing ‘Renting of Immovable Property Service’ without discharging their proper tax liability on the rent collected in respect of commercial property rented by them and they were not registered with Service Tax department and nor paying Service Tax on the value of the Service provided. As per the provisions of the Finance Act, 1994 and rules made thereunder, the Service Provider was required to assess correct value for the service provided by them as well as to pay service tax on the amount received by them for rendering Renting of Immovable property service on due time as prescribed and to follow all the procedure laid down in the Act and Rules. From the above, it appeared that the said service defined under “Renting of Immovable Property Service” under Section 65 (90a) of Chapter V of the Finance Act, 1994 and the service provided to various clients by the said service provider is taxable service as provided under Section 65(105)(zzzz) of the Finance Act, 1994. It is further observed that the said service provider has not obtained service tax registration as required under Section 69 of the Finance Act, 1994 and they have not discharged their service tax liability and hence evaded service tax total amounting to Rs.5,43,964/-for the period from 01.06.2007 to 30.09.2008 as mentioned in para supra.

6. Thus it appeared that the said service provider has contravened the provisions of : (i) Section 69 of the Finance Act, 1994 readwith Rule 4 of the

Service Tax Rules, 1994 in as much as they failed to take registration from the department as Service provider for payment of Service Tax and have thereby rendered themselves liable to penalty as provided under Section 76 of Finance Act, 1994;

(ii) Section 68 of the Finance Act, 1994 read with Rule 6 of the Service Tax Rules, 1994 in as much as they have failed to pay the service tax amounting to Rs.5,43,964/-as mentioned in para supra for the period from 01.06.2007 to 30.09.2008 to the credit of the Government within the stipulated time limit;

(iii) Sec. 70(1) & 70(2) of the Finance Act, 1994 as amended read with Rule 7 of the Service Tax Rules, 1994 in as much as they have failed to self assess the Service Tax on the taxable value received by them and to file ST-3 returns for the said service providing firm during the period from 01.06.2007 to 30.09.2008.


7. All these acts of contravention of the provisions of Section 68, Section 69, and Section 70 of the Finance Act, 1994 read with Rule 4, Rule 6 and Rule 7 of the Service Tax Rules, 1994 appeared to be punishable under the provisions of Section 76, Section 77 and Section 78 of the Finance Act, 1994 as amended time to time.

8. Accordingly, M/s Sarojben Khusalchand & Others were issued a show cause notice bearing F.No. STC/502/Demand/Sarojben/Div. III/08-09 dated 22.10.2008 asking them as to why ;

(i) Services rendered by them should not be considered as taxable service under the category of Renting of Immovable property Service as defined under Section 65 of the Finance Act 1994, as amended, and the amount of taxable value of Rs.44,01,000/- received as payment / recovered by them from their customers should not be considered as taxable value and Service Tax amounting to Rs.5,43,964/-for the period from 01.06.2007 to 30.09.2008 should not be demanded from them under Section 73 (1) of the Finance Act, 1994;

(ii) Interest as applicable on the amount of service tax liability of Rs.5,43,964/- should not be paid by them for the delay in making the payment, under Section 75 of the Finance Act, 1994 as amended;

(iii) Penalty should not be imposed upon them under Section 76 of the Finance Act, 1994 as amended for the failure to make the payment of service tax payable by them;

(iv) Penalty should not be imposed upon them under Section 77 of the Finance Act, 1994 as amended for the failure to file prescribed service tax return within the stipulated time;

(v) Penalty should not be imposed upon them under Section 78 of the Finance Act, 1994 as amended for suppressing the value of taxable services provided by them before the Department with intent to evade payment of service tax amounting to Rs.5,43,964/-.

DEFENCE REPLY

9.1 The service provider filed their defence reply vide their letter dated 13.01.2009 and 29.03.2011, wherein at the very out set, they denied all the allegations and averments made vide the subject notice as if they all are individually and specifically dealt with and traversed save and except what has been admitted by them herein below; that they particularly denied that they have contravened the provisions of Section 65, 68 & 70 of the said Act and thereby are liable for penal action.


9.2 They further submitted that before proceeding to deal with the allegation leveled against them for imposition of penalty, it would be profitable to appraise some of the basic and vital factual details, which would enable to adjudicate the case judiciously; that the proposal for imposition of SERVICE TAX under the category of “Renting of Immovable Properties Service” proposed w.e.f. 01.06.2007, thus empowering the Government to levy and collect service tax on “Renting of immovable properties Service”.

Meaning of Renting of Immovable Property [Section 65(90a)]

Renting of immovable property has been defined as under “renting of immovable property” includes renting, letting, leasing, licensing or other similar arrangements of immovable property for use in the course or furtherance of arrangements of immovable property for use in the course or furtherance of business or commerce but does not include --

(i) renting of immovable property by a religious body or to a religious body; or

(ii) renting of immovable property to an educational body, importing skill or knowledge or lessons on any subject or field, other than a commercial training or coaching centre;

Explanation ;- For the purposes of this clause, “for use in the course or furtherance of business or commerce includes use of immovable properly as factories, office buildings, warehouses, theatres, exhibition halls and multiple use buildings”, Renting of immovable property has been defined by way of an inclusive definition, it would include the following acts or transactions in relation to immovable properties ;

a. renting,b. letting,c. leasing,d. licensing, ore. other similar arrangement (e.g right to use, temporary possession,

sub-contracting or sub-leasing, space sharing etc.)

9.3 They further submitted that taxable service has been defined in Section 65 (105)(zzzz) as under ;- “Any service provided or to be provided to any person, by any other person in relation to renting of immovable property for use in the course or furtherance of business or commerce.”


9.4 They further submitted that before deciding applicability of service tax they wants to reiterate the basic provision of service tax, who are the service provider, which defines as under ; “person liable for paying the service tax means” – (i) in relation to any taxable service provided or to be provided

by any person from a country other than India and received by any person in India under Section 66A of the Act, the recipient of such service : Exempts taxable services of aggregate value not exceeding four lakhs rupees (eight lakhs rupees) in any financial year from the whole of the service tax leviable thereon under section 66 of the said Finance Act: Provided that nothing contained in this notification shall apply to ;-

(i) taxable services provided by a person under a brand name or trade name, whether registered or not, of another person; or

(ii) such value of taxable services in respect of which service tax shall be paid by such person and in such manner as specified under sub- section (2) of section 68 of the said Financial Act read with Service Tax Rules, 1994”.

;that from the above it is clear that service provider is liable for service tax, service divisible or indivisible does not make difference; that above applicability of service tax read with basic exemption notification 6/2005 dated 01.03.2006 & as amended from time to time as under; that so service provider are eligible for basic exemption up to Rs 8 lacs or 10 lacs as applicable in the respective year 2007-08 & 2008-09; that so they are eligible for the basic exemption of service tax, due to their total receipt from the renting of immovable properties below basic exemption limit; that so they have not obtained service tax registration & discharge service tax liabilities.

9.5 They further submitted that the department’s contention in SCN para 3 that, “03. Whereas, it appears that, the service of ‘Renting of Immovable Property Service” is an indivisible service and the fact that the immovable property is owned by more then one individual does not mean that the indivisible service is also to be treated as more than one service depending upon the number of persons who own the immovable property. In case where the property is collectively own, the service provider is to be treated as a single person for the purpose of levy of service tax since service provided is a single service and the recipient of service is also treated as


single person. In case the recipient of such service divides the total consideration and makes separate payments to individual owners does not obviate the fact that the service provided is a single person and the turner limit of Rs. 10 Lakhs is only applicable by treating the total amount received as taxable value. Where the immovable property is collectively owned, for the purpose of service tax the association of persons is treated as a single service provider”; that the above contention are untenable & unauthorized, which has been claimed on the wrong assumption of treating group of individual, who gives properties to the one person (service recipient), as an association of person are baseless. (i) They are holding immovable properties in the individual

capacity. (ii) They have defined marked area as an ownership. (iii) They have given above properties to the service recipient in

the individual capacity. (iv) Service recipient have entered in one contract as per their

policy. It does not mean that they are entered in agreement of Association of person, but it is on the individual capacity based.

(v) They are in receipt of payment of service value in their individual name & as per provisions of I.T Act also they are treated as an individual one.

;that from the above it is clear that they are not the part & parcel of any association of person; that they have given properties in the individual capacity and their gross receipt is below exemption limit of service tax under not no.6/2005; that they are rightly eligible for basic exemption & not liable for service tax & consequently penalty also.

9.6 They further submitted that a perusal of the show case notice shows that the initiation of investigation in this case was the road survey by the Superintendent of Central Excise, as this fact is made clear in the very first sentence of the show cause notice ;

a. That they were providing service and thus, it is not that they have started rendering this service recently i.e. after imposition of service tax on ;

b. That the receipt of rent income were always received by them from their client through cheques and all such payments were duly accounted for by depositing the cheques in their bank account, and also crediting the amount in their accounts thereby signifying the fact that there has not been any clandestine activity on their part;

c. That they have filed income tax return year after year and they have


always prepared balance sheet for all years and submitted the same with their income tax returns showing therein all receipt from their client; that thus, amounts received from their clients have not only been accounted for in their books but they have also been disclosed in their balance-sheets and to the Income Tax department for paying Income Tax thereon;

9.7 They further submitted that the above referred facts are not in any dispute and therefore, these facts would show that the action of invoking larger period of limitation in this case unjustified and unauthorized; that if they wanted to suppress the facts about their activities or the payments received by them from the clients, they would not have accounted for all such payments in their books of accounts, and they would also not have disclosed such payments to the Income Tax authorities for paying taxes thereon; that there is no transaction of any cash payments received by them and therefore, their bonafide cannot be doubted in this case, and accordingly, it cannot be alleged against them that they had deliberately suppressed any facts from the statutory authorities; that for invoking the larger period of 5 years, it is suggested in alleging failure / omission on their part in this regard, larger period of 5 years is invoked alleging escaped assessment under Section 73 of the said Act; that the payments received by them were shown in the books of accounts and also in the balance sheet which is a public document; that it is also held by the Appellate Tribunal in the cases like Hindalco Industries reported in 2003 (161) ELT 346 and Hariss Laboratories Ltd. V /s Commissioner reported in 2005 (185) ELT 421 that balance sheet being a public document, any demand raised on the basis of information appearing in the balance-sheet after invoking extended period of limitation was illegal because the allegation of suppression of facts cannot be made when some information was appearing in a public document like the balance sheet of the assesses; that when aforesaid information about charges and recoveries made by them from their clients were disclosed in other statutory records like balance-sheet and income tax returns and thus this information was “available” to any Government Agency; that therefore invocation of larger period of 5 years is without jurisdiction in the present case.

9.8 They further submitted that the cases where no return may have been filed by an assesses are also cases of escape assessment; that a similar provision occurring under the Income Tax Act has been interpreted by the Hon'ble Supreme Court in the case of Tax Officer Vs. Drug Transport Company Pvt. Ltd. reported in 1972 (85) ITR 156 to hold that while


considering the meaning to be given to the expression “escaped assessment”, the Supreme Court had even in a previous case of Regional Assistant Commissioner of Sales Tax Vs Malva Vanaspati & Chemicals Co. Ltd. held that where a dealer had a case of “escaped assessment”. The Hon'ble Supreme Court had negatived the contention of the Department in these cases that when there was no assessment as the assesses had not filed any return at all, it would not be a case of “escaped assessment”; that in the present case also, they were not liable for service tax on rent of immovable properties, so they have not obtained registration & filed Service tax return; that it would be a case covered under Section 73(b) of the Finance Act, as it is cease of “escaped assessment” and the Central Excise Officer has escaped assessment by virtue of the retrospective amendment of law; that a notice as prescribed under Section 73 would therefore have to be served within six months and that time limit has already expired long book; that the present one is therefore, not a case where the extended period of five years would be available to the Excise Officer and therefore, the demand now raised against them is time barred.

9.9 They further submitted that regarding contention of the demand that the assesses has “Suppressed the material facts of realization of value service and also discharging the service liability in respect to the service provider” are untenable; that suppression of facts means as per supreme court, in the case of Pushpam Pharmaceutical Company v. Collector of Central Excise Bombay [1995 Supp (3) SCC 462], while dealing with the meaning of the expression “suppression of facts” in proviso to Section 11A of the Act held that the term must be construed strictly, it does not mean any omission and the act must be deliberate and willful to evade payment of duty. The Court further held that:- “in taxation (Suppression of facts) can have only one meaning that the correct information was not disclosed deliberately to escape payment of duty where facts are known to both the parties the omission by one to do what he might have done and not that he must have done, does not render it suppression”. Relying on the aforesaid observations of this court in the case of Pushpam Pharmaceutical Co. Vs Collector of Central Excise, Bombay [1995 Suppl * 3] SCC 462) further stated that, “we find that suppression of facts can have only one meaning that the correct information was not disclosed deliberately to evade payment of duty when fact were known to both the parties, by one to do what he is settled, law that mere failure to declare does not amount to willful suppression. There must be some positive act from the side of the assesses to find willful suppression”; that in view of above fact that there


was no deliberate intention on the part of the assessee, not to disclose the correct information or to evade payment of duty.

9.10 They reproduced the provision of Section 73 & 78 of Finance Act, 1994 ; Section 73:-Recovery of service tax not levied or paid or short levied or short paid or erroneously refunded. (i) where any service tax has not been levied or paid or has

been short- levied or short-paid or erroneously refunded, the [Central Excise officer] may within one year from the relevant date, serve noticed on the person chargeable with service tax which has not been levied or paid or which has been short-levied or short-paid or the person to whom such tax refund has erroneously been made, requiring them to show case why he should not pay the amount specified in the notice.

Provided where any service tax has been levied or paid or has been short levied or short-paid - levied or short paid or erroneously refunded by reasons of-

a. Fraud ; orb. Collusion ; orc. Willful misstatement ; ord. Suppression of fact ; ore. Contravention of any of the provisions of this chapter or of the rule

made thereunder with intent to evade payment of service tax.

Section 78 : Penalty for suppressing value of taxable service

Where any service tax has not been levied or paid or has been short-levied or short paid or erroneously refunded by reason of –

a. Fraud ; orb. Collusion ; orc. Wilful mis statement ; or d. Contravention of any of the provisions of this chapter or of the rules

made there under with under intent to evade payment of service tax. The person liable to pay such service tax erroneous refund as determined under person, liable under sub-section (2) of section 73 shall also be liable to pay a penalty in addition to such service tax and interest thereon, if any payable by him which shall not be less than, but which shall not exceed twice the amount of service tax so not levied or paid or short-levied or short paid or erroneously refundable”.


9.11 They further submitted that there was no requirement to invoke Sec.73 (1) (a) of. the finance Act, consequently there are no applicability of penalty under Sec. 78 of the finance Act; that from the above it is clear that they have not paid service tax claimed in SCN on the basis of their above submission, it is reasonable cause of not discharging their statutory liability as mention above due to interpretation of law & general trade practice; that there was no requirement to invoke Sec.73 (1) (a) of the finance Act, for the period 01.04.2003 to 31.03.2005 so consequently there are no applicability of penalty under Section 78 of the Finance Act for that period; that the demand is therefore barred by limitation; that there was no deliberate definance on their part; that in view of the above they requested to take a lenient view and requested to drop the proceedings in the interest of justice; that deciding the similar type of cases of service tax and central excise law have mentioned below the honorable CEGAT as well as commissioner (appeal) has taken lenient view and has not impose any penalty under Section 76, 77 & 78 of Finance Act, 1994 and has given relief of Section 80 ibid of Finance Act, 1994 of Service; that they also relied on such judgment in support of their case:

in the case of George Thomas vs. Comm. Of C Ex. Kanpur reported in 2006 (1) STR 116 (Tri-Bang) held that, “Penalty (Service Tax) - Delay of service tax - Penalty equal to demand imposed under Section 76 of Finance Act. 1994, Rs.1,000/- under Section 77 ibid and Rs.36,000/- under Section 78 ibid - No reason given by lower authorities for imposing such a heavy penalty - Finance hardship claimed by appellant, also not considered - Appellant new to the field - Nominal penalty to be imposed - Penalty reduced to Rs.1,000/- each under Sections 76,77 and 78 ibid.”

In the case of Shree Jayant Maruti Shinde vs. CCE, Pune-II reported in (2007) 8 STJ 468 (CESTAT-Mumbai) held that, “Penalty - For failure to pay service tax - Quantum of penalties imposed under Sections 76 and 77 was much beyond service tax payable though service tax involved had been paid along with interest-Held, there was no justification for imposition of more than 100 per cent penalty and, thus same was to be reduced to 50 percent of service tax payable.”

If service tax amount is paid by assessee before issuance of show cause there is no need to issue any show-cause notice to assessee-CCE Vs HAZI ABDUL RAZZAQE [2006] 5 STT 307 (KOL. - CESTAT). Assessee had paid service tax amount before issuance of


show-cause notice, penalty imposed on him under section 76 was to be set aside - CCE Vs HAZI ABDUL RAZZAQE [2006] 5 STT 307 (KOL. CESTAT).

Where assessee was a small service provider and had already paid service tax along with interest, penalty imposed on it was to be reduced - CELLULAR TECHNOLOGIES v. CCE [2006] 5 STT 306 (MUM.- CESTAT).

Prior to issue of notice proposing penalties, assessee had paid service tax with interest, requirement of pre-deposit was to be waived and its recovery was to be stayed - IAB PHOTOES (CBE) (P.) LTD. Vs CCE [2006] 5 STT 305 (CHHENAI- CESTAT).

Where assessee had paid entire amount of service tax along with interest before issuance of show-cause notice, he had a prima facie case against imposition of penalty - SOUTH INDIA CORPN. (P) LTD Vs CCE [2006] 5 STT 303 (CHHENAI- CESTAT).

Where penalties imposed on assessee were much higher than service tax amount and he had already paid service tax along with interest, penalty amount was to be dispensed with - DANGER SERVICE (I). Vs CCE [2006] 5 STT 302 (MUM.- CESTAT).

Where service tax amount had been deposited before issuance of show- cause notice, no penalty was to be imposed under Section 76 - HEERA METALS LTD Vs CST [2006] 5 STT 300 (KOl. - CESTAT).The delay if at all was due to the fact that it was a new provision, interpretation of statue to which the office at the assesses was not fully acquainted and here the delay was bonafied where no penalty could be levied due to technical breach of provision of law.

9.12 They further submitted that proceeding for imposing penalty is a proceeding which is quasi - criminal in nature; that the question of imposition of penalty in ordinary course came for scrutiny before Hon’ble Supreme Court in the case of Hindustan Steel Vs State of Orissa reported in AIR 1970 SC 253. The Hon’ble Supreme Court observed that penalty should not be imposed in ordinary course unless the party acted in deliberately in definance of law. Penalty will not also be imposed merely because it is lawful to do so; that applying the ratio, of the above decision in the present case, it would be seen there is no allegation of deliberate definance on them as such, no penalty may be imposed and the proceedings initiated vide the subject notice may be dropped.

9.13 Lastly, they requested to give benefit of Section 80 ibid to them


and requested to drop the proceedings initiated against the impugned show cause notice.

PERSONAL HEARING

10. Vide this office letter dated 17.06.2010, the service provider was requested to appear for personal hearing on 07.07.2010, but the service provider did not appear for personal hearing. Again Vide this office letter dated 28.02.2011, the service provider was requested to appear for personal hearing on 16.03.2011. Shri Vipul Kandhar, CA appeared for personal hearing and reiterated their argument communicated vide their letter dated 13.01.2009 and also requested to submit their further reply.

DISCUSSION & FINDINGS11. Before discussing the case, I observe that till date the service provider did not submit any further reply except submitting the Xerox copies of Form 16A and the copies of cheques they have received from M/s Qatar Airways. I can not wait for the same for indefinite period and decide the case in public interest.

12. The proceeding contemplated under the impugned Show Cause Notice is that Smt. Sarojben Khusalchand & Others are engaged in the business of Renting of Immovable property falling under the category of ‘Renting of Immovable property Service’ without discharging their proper tax liability on the income collected in respect of rent earned towards providing ‘Renting of Immovable property Service’. 13. I find that the impugned Show Cause Notice has been issued to the service providers under the category of “Renting of Immovable Property Service”. The said service has been made taxable service vide Section 65 (90a) w.e.f 01.06.2007.

14.1 I find that “Renting of Immovable Property Service” as defined under Section 65 (90a) is as under:“renting of immovable property” includes renting, letting, leasing, licensing or other similar arrangements of immovable property for use in the course or furtherance of business or commerce but does not include —

(i) renting of immovable property by a religious body or to a religious body; or


(ii) renting of immovable property to an educational body, imparting skill or knowledge or lessons on any subject or field, other than a commercial training or coaching centre;

Explanation 1.— For the purposes of this clause, “for use in the course or furtherance of business or commerce” includes use of immovable property as factories, office buildings, warehouses, theatres, exhibition halls and multiple-use buildings;]

Explanation 2.— For the removal of doubts, it is hereby declared that for the purposes of this clause “renting of immovable property” includes allowing or permitting the use of space in an immovable property, irrespective of the transfer of possession or control of the said immovable property;

14.2 The service of “Renting of immovable Property” was taxable service under Section 65(105) (zzzz) of the Finance Act, 1994 as amended by the Finance Act 2010 with the retrospective effect from 1st June 2007, according to which, the “taxable service” means any service provided or to be provided-

“to any person, by any other person, by renting of immovable property or any other service in relation to such renting, for use in the course of or, for furtherance of, business or commerce.”;

Explanation-1- for the purposes of this sub-clause, “immovable property” includes-(i) Building and part of a building, and the land appurtenant

thereto; (ii) land incidental to the use of such building or part of a

building; (iii) the common or shared areas and facilities relating thereto;

and (iv) in case of a building located in a complex or an industrial

estate, all common areas and facilities relating thereto, within such complex or estate,

(v) Vacant land, given on lease or license for construction of building or temporary structure at a later stage to be used for furtherance of business or commerce][clause (v) inserted with effect from 01.07.2010 vide Finance Act, 2010]but does not include-

a) vacant land solely used for agriculture, aquaculture, farming, forestry, animal husbandry, mining purposes;


b) vacant land, whether or not having facilities clearly incidental to the use of such vacant land;

c) land used for educational, sports, circus, entertainment and parking purposes; and

d) building used solely for residential purposes and buildings used for the purposes of accommodation, including hotels, hostels, boarding houses, holiday accommodation, tents, camping facilities.

Explanation 2.—For the purposes of this sub-clause, an immovable property partly for use in the course or furtherance of business or commerce and partly for residential or any other purposes shall be deemed to be immovable property for use in the course or furtherance of business or commerce;

14.3. From the above definition, it is very much clear that the service provided by the noticees falls under “Renting of Immovable Property Services” and it is a very much taxable service. It is also not a disputed facts that they have provided the said service to M/s Qatar Airways by giving their immovable property on lease.

14.4 I further find that the impugned show cause notice was issued prior to retrospective amendment effective from 01.06.2007, taken place vide Section 75 and 76 of the Finance Act., 2010. These retrospective amendment and its validations with effect from 01.06.2007, substantiated the content of the impugned show cause notice as, the period covered in the impugned show cause notice is 01.06.2007 to 30.09.2008. In this regard, I further find that M/s Home Solution Retail India Ltd had moved to Delhi High Court when the department have demanded service tax based on the earlier definition of taxable service i.e. prior to retrospective amendment have taken place. The Hon’ble Delhi High Court had given interim injunction to M/s Home Solution Retail India Ltd. However, against the said injunction order, the department had filed an appeal before the Apex Court against the judgment of Delhi High Court in the matter of Home Solution Retail India Ltd. and Ors. Vs. UOI (2009-PIOI-196-HC- DEL-ST). The aforesaid appeal came up for hearing before the Hon’ble Supreme Court on 04.02.2011. The Hon’ble Supreme Court has passed an order to the effect that the High Court of Delhi will hear and dispose off all the writ petitions as expeditiously as possible. Before the aforesaid hearing, the Hon’ble Supreme Court while hearing the appeal on 10.01.2011 filed by the department the Supreme Court has ordered that “interim stay of the operation of


the impugned judgment till the next date”. Therefore, the order which was passed by the Supreme Court on 10.01.2011 would continue to operate till the disposal of the writ petitions in the High Court (post amendments), staying the levy of service tax on renting of immovable property has been nullified.

14.5 Thus, I find that the basis of Stay granted in the case of M/s Home Solution … by the Hon’ble Delhi Court does not come to their rescue for non payment of service tax taken.

14.6 Further, also I find that, the hon’ble Punjab and Haryana High Court has in CWP No.11597 of 2010, in the case of M/s Shubh Timb Steels Ltd. Vs UOI passed an order dated 22.11.2010 reported at 2010 (20) STR 737 (P&H), upheld the validity of levy of service tax on Renting of Immoveable Property and upheld Parliament legislative competence to levy Service Tax on Renting, with retrospective amendment. This view has been further followed by the hon’ble High Court of Orissa in the case of Utkal Builders Ltd., Vs UOI reported at 2011 (22) STR 257 (Ori.).

14.7 I find that all the noticees have objected proposal made in the show cause notice to the effect that where the immovable property was collectively owned, for the purpose of Service Tax, the association of person was treated as a single service provider.

14.8 It is the defense of all the notices that they were not an association of person and not were all collectively owned the combined property. It has been pleaded that, in fact, they all have a specific share and different shares in the said property and that not collectively owned the property, therefore, tax can be levied on the association of person only when individual share of the member of collective property was indeterminate or unknown at the inception of the association.

14.9 I find that in this case, the property located at 1st floor, Balleshwar Square, Opp. Iscom Mandir, S.G Highway, Ahmedabad had been rented out to M/s Qatar Airways for use in the course or furtherance of business or commerce. The said property is jointly owned by Smt. Sarojben Khusalchand & Others which was purchased jointly with the individual share / investment. Moreover, in terms of the conditions in the lease deed, the monthly specific percentage of rent has also been agreed upon to be payable to each of the joint owner of the subject property as can be seen from the defence reply dated 29.03.2011. I also find that a single lease deed


has been executed by all the notices i.e. joint owners as the ‘Lessors’ and the tenant M/s Qatar Airways as the ‘Lessee’.

14.10 I find that in terms of Section 68 ibid every ‘person’ providing taxable service to any person has been made responsible to pay service tax. However, the term ‘person’ has not been found defined in the context of service tax. I find that it has been found defined vide clause (42) of section 3 of the General Clauses Act, 1897, as “person shall include any company or association of body of individual, whether incorporated or not”.

14.11 As regards to scope of ‘includes’, the Apex Court in the case of Doypack System (Pvt.) Ltd. V/s UOI reported at 1988(36) ELT 201 (SC), has held that it is well settled that the word ‘includes’ is an inclusive definition and expands the meaning. In this context, it would be of benefit to extract the Judgment of the Hon’ble Supreme Court of India in the case of Karnataka Power Transmission Corporation Ltd Vs Ashok Iron Works Pvt. Ltd., reported in 2009 AIR SCW 1502 at paras 12, 15 & 16 which reads as follows :

“12. Lord Watson in Dilworth v. Commissioner of Stamps (1899) AC 99 made the following classic statement :

“The word “include” is very generally used in interpretation clauses in order to enlarge the meaning of words or phrases occurring in the body of the statute; end when it is so used these words or phrases must be construed as comprehending, not only such things as they signify according to their natural import, but also those things, which the interpretation clause-declares that they shall include. But the word “include” is susceptible of another construction, which may become imperative, if the context of the Act is sufficient to show that it was not merely employed for the purpose of adding to the natural significance of the words or expressions defined, It may be equivalent to “mean and include”, and in that case it may afford an exhaustive explanation of the meaning which, for the purposes of the Act, must invariably be attached to these words or expressions.”

15. Dilworth (supra) and few other decisions came up for consideration in Peerless General Finance and Investment Co. Ltd. and this Court summarized the legal position that inclusive definition by the Legislature is used; (one) to enlarge the meaning of words or phrases so as to take in the ordinary, popular and natural sense of the words and also the sense which the statute wishes to attribute to it; (two) to include meaning about which there might be some dispute; (three) to bring under one nomenclature all transactions possessing certain similar features but going under different names.


16. It goes without saying that interpretation of a word of expression must depend on the text and the context. The resort to the word ‘includes’ by the Legislature often shows the intention of the Legislature that it wanted to give extensive and enlarged meaning to such expression. Sometimes, however, the context may suggest that word “includes” may have been designed to mean “means” The setting, context and object of an enactment may provide sufficient guidance for interpretation of word “includes” for the purposes of such enactment.”

14.12 Further, as held in the case of Arunachal Forests Products Ltd. V/s UOI reported at 1993 (66) ELT 345 (Gau), inclusive definition may enlarge the scope or include something which may be disputed. Further, also in the case of Tata Consultancy Service V/s State of Andhra Pradesh reported at 2004(178) ELT 22(SC), the Apex Court held that ‘includes’ used in a clause will include all those which are sought to be included.

15.1 Accordingly, in the facts and circumstances of the case, I find that all the noticees acted as the association of individuals in relation to providing the subject service to the ‘Lessee’. The service has been provided jointly i.e. by a single lease deed to a single person i.e. the lessee namely M/s Qatar Airways. The service provided is a taxable service falling in the category of Renting of Immovable Property. The recipient of the service has received a single service. It is immaterial whether the recipient of the service has made payment by a single Cheque or multiple Cheques as per the directions of the said noticees i.e. the joint owners of the property.

15.2 It is the plea of the notices that renting of immovable property service provided by each person was to be treated as indivisible service and rent receipt by individual person was to be treated as a single service. I do not find any force in their arguments. On one hand they consider that it is ‘indivisible service’ and on other hand it is said that rent receipt by individual should be treated as a ‘single service’. The nature of service provided, in this case, is renting of a premise for business purpose, to a recipient only. Thus an indivisible single service has been provided jointly by individuals, which according to me, can not be considered to be divided into individual services on the ground that such service has been provided jointly by different individuals.

15.3 I find that quoting definition of Association of person, perhaps from Income Tax provisions, it has been attempted to argue that tax can be levied on the association of person only when individual share of the


member of collective property was indeterminate or unknown at the inception of the association.

15.4 I find that there is no force in this argument. Chargeability or liability to Income Tax is on earning where earning / income of the members of collectively owned property is not determinable, obviously income tax will be charged as associations of persons. Whereas, in the case of service tax, it is not on earning or income but on the gross value of service provided. Moreover, unless and until value of service provided with service tax is received from the service recipient, no service tax liability arises. In the instant case, indivisible service has been provided to a single recipient jointly by number of persons i.e. noticees in their capacity as co-owners of the property acting as the association of individuals.

15.5 I conclude that in the facts and circumstances of the case, joint owners of the property should be considered as ‘association of individuals’ which is included in the definition of ‘person’ in terms of the clause (42) of section 3 of the General Clauses Act, 1897.

16.1 I also find that all the noticees have pleaded that since all the persons who have received rent separately should be considered an individual service provider and exemption of Rs.10 lakhs is available to each person.

16.2 I find that there is no force in the plea advanced by the noticees. They perhaps seek threshold exemption limit prescribed vide Noti. No.06/ 2005-S.T., dated 01.03.2005 as amended. The noticees contention that when the immovable property is collectively or jointly owned with specific shares therein, it can not be treated as association of persons & Law no where prescribed that they should be treated as association of persons and should be taxed as single unit is neither proper nor acceptable.

16.3 I find that the service of “Renting of Immovable Property” is an indivisible service where the service is being provided by renting out the immovable property, which, in this case, is owned by more than one individual jointly and thus the service to the recipient namely M/s Qatar Airways has been provided jointly by all the noticees acting as the ‘association of persons’ irrespective of the fact whether or not gross amount of taxable service provided received from the recipient by a single Cheque or by separate Cheques issued to all the joint owners in terms of the condition incorporated in the Lease Deed. In such a situation, by no stretch of


imagination, it can be considered that since separate payments have been made by the recipient of service, such service provided to the recipient should be considered separate service provided by all the individuals i.e. the noticees.

16.4 Accordingly, I am of the firm opinion that the threshold exemption limit (Rs.8 lakhs during 2007-08 and Rs.10 lakhs during 2008-09) should not be applicable taking into consideration the total gross amount received as taxable value by all the noticees in their capacity as the ‘association of persons’ and not the taxable value received by an individual noticee.

16.5 In view of the above discussion, I conclude that benefit of threshold exemption vide Noti. No. 06/2005-S.T., dated 01.03.2005 as amended, as claimed by all the noticees, is not admissible to them and that the total gross amount received as taxable value from the service recipient should be considered as the taxable value for discharging service tax liability considering the ‘association of persons’ as the ‘person’, as a single service provider.

17.1 Further, I observe that the assessee has strongly pleaded that the show cause notice is time barred. To support their view, they have also cited several decisions.

17.2 In this regard, I observe that the assessee has been providing services under the category of “Renting of immovable property service” but not depositing the tax to the government.

17.3 The detection of evasion of service tax was un-earthed during the time of survey by the department and this fact was revealed as a consequence. Had the department not conducted survey, the evasion of service tax would have been escaped.

17.4 Accordingly, the case law relied upon by the assessee in this regard are not relevant to facts and circumstances of the present case. In such circumstances, no case law will come in help to the assessee to mitigate their offence. Secondly, the service of Renting of immovable property under Section 65(105) (zzzz) of the Finance Act, 1994 has also been amended by the Finance Act, 2010 with the retrospective effect from 1st

June, 2007.


17.5 In view of the above discussion, I am convinced and of the opinion that in this case, Smt. Sarojben Khusalchand & Others have resorted to willful mis-declaration and suppression of facts with an intention to evade payment of service tax, as demanded in the notice. Accordingly, I conclude that, in the facts and circumstances of the case, extended period invoked in issuance of the impugned show cause notice is proper and correct.

17.6 Further, extended period how to be computed has been clarified by the Hon’ble Supreme Court and Tribunal in the following decisions ;

Mathania Fabrics Vs CCE, Jaipur reported at 2008 (221) ELT 481 (SC) CCE, Ahmedabad – I Vs M Square Chemicals reported at 2008 (231)

ELT 194 (SC) Salasar Dyg. & Ptg. Mills (P) Ltd Vs CCE, Surat reported at 2009

(235) ELT 93 (Tri – Ahmd.) Associated Cement Companies Ltd. Vs CC reported at 2001 (128) ELT

21 (SC).

17.7 Hon’ble High Court of Gujarat in the case of CCE, Surat – I Vs Neminath Fabrics Pvt. Ltd., reported at 2010 (256) ELT 369 (Guj), while deciding the similar issue in Central Excise, has held that proviso can not be read to mean that because there is knowledge, suppression which stands established disappears – concept of knowledge, by no stretch of imagination, can be read into provisions – suppression not obliterated, merely because department acquired knowledge of irregularities. The relevant para is reproduced below ;

“20. Thus, what has been prescribed under the statute is that upon the reasons stipulated under the proviso being satisfied, the period of limitation for service of show cause notice under sub-section (1) of Section 11A, stands extended to five years from the relevant date. The period cannot by reason of any decision of a Court or even by subordinate legislation be either curtailed or enhanced. In the present case as well as in the decisions on which reliance has been placed by the learned advocate for the respondent, the Tribunal has introduced a novel concept of date of knowledge and has imported into the proviso a new period of limitation of six months from the date of knowledge. The reasoning appears to be that once knowledge has been acquired by the department there is no suppression and as such the ordinary statutory period of limitation prescribed under sub-section (1) of Section 11A would be applicable. However such reasoning appears to be fallacious inasmuch as once the suppression is admitted, merely because the department acquires knowledge of the irregularities the suppression would not be obliterated.”


17.8 From the above discussion, it is concluded that the noticees did not discharge their statutory obligation deliberately. They were well aware of their service tax liability even then they did not pay service tax on the taxable services being provided by them to M/s Qatar Airways and thus, there was suppression of material facts from the department with intent to evade payment of service tax deliberately. The service tax amount not paid by the noticees is therefore, recoverable from them under the provisions of sub-section (2) of Section 73 read with Section 68 of the Finance Act, 1994.

18.1 I find that the noticees have contravened the provisions of Section 67 and Section 68 of the Finance Act, 1994 read with Rule 6 of the Service Tax Rules, 1994, in as much as they have suppressed the taxable value and also failed to make payment of service tax of Rs.5,43,964/- on such suppressed value under the category of ‘Renting of Immovable Property’ service, such amount of service tax is required to be paid by them along with applicable interest in terms of the provisions of Section 73 and Section 75 of the Finance Act, 1994.

18.2 Since the said noticees have not discharged service tax liability on the amount of taxable service received and therefore, they have contravened the provisions of Section 67 and 68 of the Finance Act, 1994 and thereby rendered themselves for penal action under the provisions of Sections 76, 77 and 78 of the Finance Act 1994.

Penalty under Section 76:

19.1 I further observe that during the relevant period Smt. Sarojben Khusalchand & Others have defaulted in payment of service tax which has been established as not paid, in accordance with the provisions of Section 68 of the Finance Act, 1994 read with Rule 6 of the Service Tax Rules, 1994, and thereby rendered liable to pay mandatory penalty under the provisions of Section 76 of the Finance Act, 1994 for default in payment of service tax on time till the final payment. It has come to my notice that till date Smt. Sarojben Khusalchand & Others have not paid the service tax, hence imposition of mandatory penalty under Section 76 is once again justified.

19.2 Accordingly, I hold that Smt. Sarojben Khusalchand & Others are liable to imposition of penalty under Section 76 of the Finance Act, 1944. My conclusion is also based on various decisions of Hon’ble High Courts & Tribunals as mentioned below ;


CCE & ST Vs First Flight Couriers Ltd reported at 2007(8) STR 225 (Kar.)

UOI Vs Aakar Advertising, reported at 2008 (11) STR.5 (Raj.) UOI Vs Shiv Ratan Advertisers reported at 2008 (12) STR 690

(Raj.) Shiv Network Vs CCE, Daman reported at 2009 (14) STR 680

(Tri-Ahmd) CCE, Vapi Vs Ajay Sales Agencies reported at 2009 (13) STR 40

(Tri–Ahmd) Siddhi Motors Vs CCE, Rajkot reported at 2009 (15) STR 422

(Tri-Ahmd)

19.3 I further observe that the Hon’ble CESTAT in a recent judgment in the case of M/s Gujarat Industrial Security Force Society Vs CST, Ahmedabad, vide order No. A/1110/WZB/AHD/2010 dated 05.08.2010, has held that no lenient view can be taken under Section 76 of the Finance Act, 1994. The relevant paras are reproduced below ;

“2. After hearing both the sides, I find that in this case, the assessee was registered more than 6 years back and no explanation has been given by them for delayed filing of return and delayed payment of service tax. Under these circumstances, I am not finding fault in stand taken by the lower authority that penalty is imposable under section 76 and once it is held that penalty is imposable under section 76, the amount fixed as per the provision of section 76 is required to be imposed. Under these circumstances, even though the Ld. Advocate submitted that the appellant is a non profit organization, no lenient view can be taken in view of the provisions of law.3. Accordingly, the appeal is rejected.”

19.4 Hon’ble High Court of Gujarat in the case of CCE & Cus. Vs Port Officer, reported at 2010 (19) STR 641 (Guj) has now settled the issue of penalty under Section 76. The relevant para is reproduced below ;

“10. A plain reading of Section 76 of the Act indicates that a person who is liable to pay service tax and who has failed to pay such tax is under an obligation to pay, in addition to the tax so payable and interest on such tax, a penalty for such failure. The quantum of penalty has been specified in the provision by laying down the minimum and the maximum limits with a further cap in so far as the maximum limit is concerned. The provision stipulates that the person, who has failed to pay service tax, shall pay, in


addition to the tax and interest, a penalty which shall not be less than one hundred rupees per day but which may extend to two hundred rupees for everyday during which the failure continues, subject to the maximum penalty not exceeding the amount of service tax which was not paid. So far as Section 76 of the Act is concerned, it is not possible to read any further discretion, further than the discretion provided by the legislature when legislature has prescribed the minimum and the maximum limits. The discretion vested in the authority is to levy minimum penalty commencing from one hundred rupees per day on default, which is extendable to two hundred rupees per day, subject to a cap of not exceeding the amount of service tax payable. From this discretion it is not possible to read a further discretion being vested in the authority so as to entitle the authority to levy a penalty below the stipulated limit of one hundred rupees per day. The moment one reads such further discretion in the provision it would amount to re-writing the provision which, as per settled canon of interpretation, is not permissible. It is not as if the provision is couched in a manner so as to lead to absurdity if it is read in a plain manner. Nor is it possible to state that the provision does not further the object of the Statute or violates the legislative intent when read as it stands. Hence, Section 76 of the Act as it stands does not give any discretion to the authority to reduce the penalty below the minimum prescribed.”

19.5 The Hon’ble High Court of Gujarat has further confirmed the above view in the case of CCE Vs S J Mehta & Co., reported at 2011 (21) STR 105 (Guj.) and CCE Vs Bhavani Enterprises reported at 2011 (21) STR 107 (Guj.).

Penalty under Section 77 :

20. I further find that the service provider has failed to take registration and failed to file returns & hence they are liable for penalty under Section 77 for not taking service tax registration and not filing service tax returns.

Penalty under Section 78 :

21.1 I further observe that the show cause notice also proposes imposition of penalty under Section 78 of the Finance Act, 1994. I find that fraud, suppression of facts and wilful mis-statement on the part of Smt. Sarojben Khusalchand & Others has been established beyond doubt as discussed and concluded in the earlier part of this order. Accordingly, I hold


that Smt. Sarojben Khusalchand & Others are also liable to penalty under the provisions of Section 78 of the Finance Act, 1994.

21.2 As it is already proved that the service provider had suppressed the facts, the consequences shall automatically follow. Hon’ble Supreme Court has settled this issue in the case of U.O.I Vs Dharmendra Textile Processors reported in 2008 (231) ELT 3 (S.C) and further clarified in the case of U.O.I Vs R S W M reported in 2009 (238) ELT 3 (S.C). Hon’ble Supreme Court has said that the presence of malafide intention is not relevant for imposing penalty and mens rea is not an essential ingredient for penalty for tax delinquency which is a civil obligation.

21.3 I, therefore, hold that they have rendered themselves liable to penalty under Section 78 of the Finance Act, 1994. My above view gets support from below mentioned case laws ;

Shiv Network Vs CCE, Daman reported in 2009 (14) STR 680 (Tri.Ahmd.)

CCE, Vapi Vs Ajay Sales Agencies reported in 2009 (13) STR 40 (Tri. Ahmd.)

Order No. A/754/WZB/AHD/2010 dt. 09.06.2010 / 23.06.2010 in the case of M/s Bajrang Security Services Vs CST, Ahmedabad.

Order No. A/1937/WZB/AHD/2010 dated 08.10.2010 / 20.12.2010 in the case of M/s Dhaval Corporation Vs CST, Ahmedabad.

21.4 I further observe that recently hon’ble High Court of Punjab & Haryana, in the case of CCE Vs Haryana Industrial Security Services reported at 2011 (21) STR 210 (P&H), has also upheld the penalty equal to service tax imposed under Section 78 of the Finance Act, 1994. Hon’ble Karnataka High Court has also taken similar view in the case of CCE, Mangalore Vs K Vijaya C Rai reported at 2011 (21) STR 224 (Kar.)

Both Penalty under Section 76 & 78 – Justified:

22.1 I also find that penalty under Section 76 ibid is provided for failure to pay service tax whereas penalty under Section 78 ibid is for suppressing value of taxable service. In the instant case, service tax liable to be paid in terms of Section 68 read with Rule 6 of the Service tax Rules, 1994, have not been found paid as well as service tax has not been paid / short paid by suppressing value of taxable service by reason of wilful mis-statement and suppression of facts. Of course these two offences may arise in the course of same transaction, or from the same action of the person


concerned. But the incidents of imposition of penalty are distinct and separate and even if the offences are committed in the course of same transaction or arises out of the same act the penalty is imposable for ingredients of both offences, this aspect was also considered by the Hon’ble High Court of Kerala in the case of Assistant Commissioner, C.Ex. Vs Krishna Poduval – 2006 (1) STR 185 (Ker). I also find that the Hon’ble Mumbai Tribunal in the case of Golden Horn Container Services Pvt. Ltd. v/s Commr. of C. Ex., Raipur reported at 2009 (16) S.T.R. 422 (Tri.-Mumbai), has held that Section 76 provides for a penalty who commits default simpliciter in payment of the tax whereas Section 78 is a more stringent penal provision, which provides harsher penalty who commits default with mens rea. Since in this case also, Smt. Sarojben Khusalchand & Others has committed default with mens rea, the decision of the tribunal is squarely applicable.

22.2 Therefore, I am of the view that in the facts and circumstances of the case, it is justifiable, if the penalty is imposed under the provisions of Section 76 and 78 of the Finance Act, 1994, separately, following the decisions of Hon’ble Kerala High Court and Mumbai tribunal (supra). My views are also further supported by various decisions of tribunals in the cases of ;

a) Shiv Network v/s Commissioner of Central Excise & Customs, Daman reported at 2009 (14) S.T.R. 680 (Tri.-Ahmd.)

b) Commissioner of Central Excise, Vapi v/s Ajay Sales Agencies reported at 2009 (13) S.T.R. 40 (Tri.-Ahmd.), and

c) Mett Macdonald Ltd. v/s Commissioner of Central Excise, Jaipur reported at 2001 (134) E.L.T. 799 (Tri.-Del.).

d) M S Shah & Co., Vs CST, Ahmedabad – Order No. A/1328/ WZB/ Ahd/ 2010 dated 30.06.2010 / 26.08.2010.

e) Bajarang Security Services Vs CST, Ahmedabad – Order No. A/745/ WZB/Ahd/2010 dated 09.06.2010 / 23.06.2010.

f) CESTAT, Principal Bench, New Delhi in the case of Bajaj Travels Ltd., Vs CCE, Chandigarh – 2009 (16) STR 183 (Tri.Del.)

23. I observe that the service provider has cited some judgments in support of their defence. On examination of the same, I find that the same are not relevant and misplaced due to two reasons ; (i) either they are old, which have been made outdated and irrelevant after pronouncement of recent and relevant judgments as cited by the undersigned in the above paras of findings (ii) or their facts are different from the facts of this case. For example, for not imposing penalty under Section 78, most of the cases deal


with such situation where tax was deposited prior to issue of SCN, whereas in the present case till date, tax has not been deposited. It appears that citations have been quoted by applying copy-paste technique. 24. In view of the above discussions and findings, I pass the following order:

-: O R D E R :-

(i) I deny the exemption vide Noti. No. 06/2005-S.T., dated 01.03.2005 as amended, on the ground that the indivisible service falling in the category of Renting of Immovable Property Service, has been provided to a recipient jointly and collectively by all the noticees acting as ‘association of individuals’ ;

(ii) I consider the Services rendered by them as taxable service under the category of “Renting of Immovable Property Service” as defined under Section 65 (90a) of the Finance Act 1994, as amended, and consider the amount of taxable value of Rs.44,01,000/- received as payment / recovered by them from their service recipient as taxable value and accordingly, confirm the Service Tax amounting to Rs.5,43,964/- (Rupees Five Lakhs Forty Three Thousand Nine Hundred Sixty Four Only) for the period from 01.06.2007 to 30.09.2008 under Section 73(2) of the Finance Act, 1994 ;

(iii) I direct Smt. Sarojben Khusalchand & Others to pay the interest as applicable on the amount of their service tax liability for the delay in making the payment under Section 75 of the Finance Act, 1994.

(iv) I impose a penalty of Rs.200/- (Rupees Two Hundreds Only) upon them, per day or at the rate of 2% of the service tax amount per month, whichever is higher, under the provisions of Section 76 of the Finance Act, 1994, as amended, for failure to pay Service Tax and Education Cess within the stipulated period as required under the provisions of Section 68(1) of the Finance Act, 1994 read with Rule 6 of the Service Tax Rules, 1944, as amended. The penalty under the Section 76 should be calculated upto 10.05.2008 in view of amendment under Finance Act, 2008. As the actual amount of penalty could be depending on actual date of payment of service tax, however, as per Section 76 of the Finance Act, 1994, penalty will be restricted to the above confirmed amount of


service tax liability.

(v) I impose a penalty of Rs.6,000/- (Rupees Six Thousand Only) upon them, for their failure to file prescribed S.T.-3 half yearly returns, under Rule 7C of the Service Tax Rules, 1994 read with section 70 & 77 of the Finance Act, 1994.

(vi) I also impose a penalty of Rs.5,43,964/- (Rupees Five Lakhs Forty Three Thousand Nine Hundred Sixty Four Only) upon them under Section 78 of the Finance Act, 1994 for suppressing the value of taxable services provided by them before the Department with intent to evade payment of service tax. If the service tax amount is paid along with appropriate interest as applicable, within 30 days from the date of receipt of this order, then the amount of penalty under Section 78 shall be reduced to 25% of the service tax amount, provided if such penalty is also paid within such period of 30 days.

(vii) It is expected that Smt. Sarojben Khusalchand & Others may divide their tax liability including interest and amount of penalty imposed on them as per their share in the rent income. However, any of them is free to contribute towards payment of tax, interest and penalty more than his / her own liability on behalf of other(s) and the same would be appreciated as well.

The show cause notice bearing No. STC/502/Demand/Sarojben/ Div.III/08-09 dated 22.10.2008 is disposed of accordingly.

-Sd-

( Dr. Manoj Kumar Rajak)Additional Commissioner,

Service Tax :Ahmedabad.

F.No.STC/502/Demand/Saroj/D-III/08 Date : 06/06/2011

BY REGISTERED AD

ToSmt. Sarojben Khusalchand & Others,C-301, Shiromani Flats,Near Nehrunagar Char Rasta,Satellite Road,Ahmedabad.

Copy to:

1. The Commissioner of Service Tax, Ahmedabad. (Att. Review Cell)


2. The Assistant Commissioner, Service Tax, Div-III, A’bad. 3. The Supdt. AR-XV, Service Tax Division III, Ahmedabad with extra

copy of the OIO to be delivered to the assessee and submit the acknowledgement to this office.

4. Guard File.

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