PER : R. BHAGYA DEVI

The appellant Shri Karinje Sripathi Bhat had registered under the category of ‘Renting of Immovable Property Services’. The appellant had constructed a multistorey building containing five floors with 129 rooms and had rented the same to Alvas Educational Foundation, for the purpose of residential accommodation of the students and staff for the period from 01.06.2014 to 30.05.2015. They had inadvertently declared the total value of service under the category of ‘Renting of Immovable Property Services’ but on realising that this income was exempt from service tax as per Section 66D(m) and in terms of Notification No.33/2012 dated 20.06.2012 filed a refund claim on 27.04.2015 claiming refund of Rs.6,47,490/- and interest of Rs.17,401/-. However, show-cause notice was issued proposing rejection of the refund claim. On adjudication, the original authority referring to Section 66D(m) of the Finance Act, 1994 and referring to the rental agreement dated 12.02.2014 observed that the service rendered by the appellant does not come under the negative list. The Commissioner (Appeals) also held that the refund claim was based on wrong interpretation that the service provider was exempted under Section 66D(m) and also rejected on the ground that the building was hired for running hostel and not for residential purpose. Aggrieved by this order, the appellant is in appeal before the Bench.

2. The Learned Counsel appearing for the appellant submits that the Revenue holding that renting of the premises to the Educational Foundation for use as a hostel does not qualify as renting of residential dwelling for use as residence, is erroneous. She submits that Section 66D(m) exempts services by way of renting of residential dwelling for use as residents and the statute does not carve out any exception. She submits that the rental agreement expressly stated that the premises was let-out for the purpose of residential dwelling unit solely for use as residence and students reside in the premises on a long-term basis. She submits that there is no condition in the statute that the residence must be by the tenant himself, or that the residence must not be through students or employees. Referring to the decision of the Hon’ble Apex Court in the case of ‘The State of Karnataka and Anr. Versus Taghar Vasudeva Ambrish in civil appeal No.7847/2023, she submits that the contention of the Revenue cannot be sustained. It is her submission that the ultimate use of the property remained unchanged that it was used for residence by students/working women. Applying the ratio of the above judgement, it is submitted that the exemption under Section 66D(m) of the Finance Act, 1994 is an activity specific exemption and not dependent on the identity of the lessee or the manner in which the premises is occupied. Referring to 4.12.2 of the Education Guide, she submits that renting of the premises to the educational institution is covered under the negative list. Also relies on para 4.13.1 of TRU letter D.O.F. No. 334/1/2012-TRU dated 16.03.2012.

2.1 She further submits that even if it is considered that they are liable to pay tax, the appellant is entitled to the exemption under Notification No.33/2012 dated 20.06.2012 which was applicable during the relevant period. The authorities below denied the benefit of the Notification on the ground that ledger extracts, financial statements and income tax returns were not submitted, which is contrary to the provisions of the Notification under which the refund is being claimed. In view of the above, she submits that the appellant is eligible for the refund of the amount erroneously paid by them.

3. The learned Authorised Representative for the Revenue submits that appellant is seeking refund based on the judgment in someone else’s case. The appellant having self-assessed and paid the tax and the assessment being final, the appellant should have challenged the assessment first and then preferred the refund of tax