2018 (11) TMI 1155 - AT - Service Tax

Renting of immovable property - Joint property rented to tenants - scope of SCN - Held that - SCN not having been issued to joint owners nonetheless proceedings have been confirmed against four joint owners. Hence we have no hesitation in holding that orders of the lower authorities have gone beyond the scope of the SCN and even on these technical grounds the impugned order cannot be sustained. The issue is settled in the case of SAROJBEN KHUSALCHAND & OTHERS VERSUS C.S.T. -SERVICE TAX - AHMEDABAD 2017 (5) TMI 240 - CESTAT AHMEDABAD where it was held that Conceptually service tax is levied on the service provided which is an intangible thing and hence it is not necessary to be identified with physical demarcation of the immovable property given on rent against individual co-owners. Once the value of service provided by a service provider is ascertainable service tax is accordingly charged. Appeal allowed - decided in favor of appellant.

Summary

Issues Involved:
Service tax liability on renting of immovable property by joint owners without individual show cause notices.

Analysis:
The case involved a commercial complex jointly owned by four individuals, where the property was rented out to various tenants. The Department contended that the total monthly rent received was liable to service tax for a specific period. The original authority confirmed the tax liability, interest, and penalties on the four co-owners. In the appeal, the Commissioner upheld the order. The main issues raised were the absence of individual show cause notices to the co-owners and the treatment of co-owners as a 'body of individuals' for tax purposes. The appellant argued that the proceedings against individual co-owners without separate notices were flawed. Additionally, they relied on various case laws to support their contention that co-owners cannot be treated as an association of persons for service tax purposes.

The Tribunal, after hearing both sides, found merit in the appellant's contentions. They held that the absence of show cause notices to joint owners rendered the orders of the lower authorities beyond the scope of the notices. Moreover, the Tribunal agreed with the appellant's argument that co-owners receiving rent proportionate to their shares should not be considered as an association of persons for service tax assessment. They referred to previous decisions supporting this view and emphasized that service tax should be charged based on the service provided, not the indivisibility of the property. The Tribunal cited relevant case laws and previous judgments to support their decision.

The Tribunal ultimately set aside the impugned order, ruling in favor of the appellant on both technical and merit-based grounds. They highlighted that the impugned order could not be sustained and needed to be overturned. The decision was based on the principles established in previous cases and the legal interpretation of service tax liability on renting of immovable property by joint owners. The appeal was allowed with consequential benefits as per the law, providing relief to the appellant in the case. The judgment reiterated the importance of individual assessments for co-owners and the correct application of service tax laws in such scenarios.