The tribunal clarified that individual rental payments should be analyzed separately for service tax liability, exempting collective liability under the Finance Act.

PER: C J MATHEW

A very peculiar set of appeals from individual members of West Dadar Co-Operative Housing Society Ltd, the collective entity in appeal too, is before us. The period of dispute is between April 2007 to October 2012. The Society, formed in the year 1967-68, put up the building, including the ground floor and basement, in 1971 which was, then leased to State Bank of India; rental thereon subsidized the periodical maintenance cost of the appellants herein, as compensation for contributing to the construction, with the possession of rented premises jointly held by all of them. A trust, registered in 2001 under the name and style of West Dadar Premises Trust, and with the then Chairman of the Society as trustee, obtained allotment of the impugned premises following which lease deed was entered into between the Trust and State Bank of India for the period from March 2001 and February 2006. Owing to internal dispute, which was finally litigated with the ownership of the impugned premises confirmed in the name of the seventeen original owners, rent was also ordered to be transferred pro-rata to the individual co-owners which continued thereafter.

2. On the premise that the rent had been unbundled to avoid levy under Finance Act, 1994 , service tax authorities initiated proceedings for recovery of tax on the monthly rental amount as provider of ‘renting of immovable property’ service. It is against the affirmation of fastening of the tax liability in the impugned orders1 2 of Commissioner of GST & Central Excise (Appeals – II), Mumbai that the appellants are before us.

3. We have heard Learned Counsel for the appellants and Learned Authorized Representative.

4. Learned Counsel for the appellants drew our attention to the decision of the Tribunal in Commissioner of Central Excise, Nashik v. Deoram Vishrambahi Patel [2015 (9) TMI 790 CESTAT-MUMBAI]

5. It is also seen from the facts that the dispute pertaining to receipt of rent had been litigated over a long period of time and that it was on the direction of the judicial determination that State Bank of India paid rent directly to the individuals. There was, thus, no reason for the service tax authorities to conclude that subterfuge, with intent to evade tax, motivated this abnormal scheme of rent payment. In re Deoram Vishrambahi Patel, the Tribunal affirmed the findings of the first appellate authority thus:

‘8. On deeper perusal of impugned order, we find that the first appellate authority has considered all the angles in the dispute and came to the correct conclusion. The findings of first appellate authority is as under.

“6.2 On mere reading of the Order-in-Original, it is evident that the adjudicating officer has considered above named four persons as one person for determining tax liability and imposition of penalties without telling any legal basis for doing so. The appellants have contested the Order in Original mainly on the grounds that rented property belongs to four separate persons (all brothers) but the service tax has been demanded wrongly by the department from the appellants by clubbing the rent received by all the co-owners and, therefore, the demand off tax is not maintainable on this ground alone. In support they have produced a City Survey Extract as evidence regarding ownership of the rented property which shows that the said property was purchased in 2003 and is owned jointly by all the four co-owners. Further, the lease agreements with M/s. Max New York Life Insurance Co. Ltd., Oriental Bank of Commerce, Axis Bank, Kotak Mahindra Bank and HDFC Standard Life Insurance Ltd. are also entered into by the appellants in their individual capacity, as per SCN also, a