The Delhi Bench of Customs, Excise and Service Tax Appellate Tribunal (CESTAT) has held that the appellant company cannot be saddled with the liability of service tax under Reverse Charge Mechanism (RCM) when the service of ‘renting of immovable property’ has been provided not in the capacity of the directors of the company but in their personal capacity.
The bench of Binu Tamta (Judicial Member) and Hemambika R. Priya (Technical Member) has observed that the directors in that case were providing service of “renting of immovable property” not as directors of the appellant company but in their individual capacity as owners of the premises and as the directors of the appellant and in such a situation, the appellant could not have been asked to pay the service tax on RCM.
Background
The appellant/assessee is a coaching institute having centralised registration under “Commercial Coaching” and “Renting of Immovable Property” Service. On the basis of internal audit of the records conducted for the financial years 2012-13 and 2013-14, it was found that the appellant has wrongly availed the cenvat credit as the same related to the exempted services provided by the appellant in the state of Jammu & Kashmir. The appellant, during the course of the audit itself reversed the cenvat credit amount in their input credit register.
Show cause notice was issued for recovery of cenvat credit and also for demanding service tax on the rent of immovable property along with interest and penalty under Section 75 and 78 of the Finance Act, 1994. The show cause notice was adjudicated confirming the demand under the show cause notice. On appeal filed by the appellant, the Commissioner (Appeals) confirmed the demand by the order.
The assessee has challenged the levy of service tax on the rental amount paid to the directors of the company on account of “renting of immovable property” and the levy of penalty under Section 78.
Arguments
The assessee contended that the provisions of Entry 5A of Notification No.30/2012-ST dated 20.06.2012, as amended, by Notification No.45/2012-ST dated 07.08.2012 has been mis-interpreted. The appellant, “renting of immovable property” service provided by the Director of the company is not in his capacity as a director but such service has been provided in his individual capacity, which is not covered under the provisions of Reverse Charge Mechanism in terms of Notification No.30/2012-ST dated 20.06.2012. The RCM provided under Section 68(2) of Finance Act, 1994 read with Notification No.30/2012-ST only covers services provided by directors of the company in such capacity only. The service tax, if any, payable is to be paid by the director only and not by the appellant.
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Conclusion
The tribunal held that the applicability of service tax on the company only when the services have been provided by way of “renting of immovable property” in the company by the directors in their capacity as directors and not in their personal capacity.
Case Title: M/s. Bansal Classes Pvt. Ltd. Versus Commissioner of Central Excise
Case No.: Service Tax Appeal No.50426 of 2019
Date: 12.09.2024
Counsel For Appellant: Neha Somani
Counsel For Respondent: Prashant Sinha
