The case pertains to the levy of service tax under the reverse ...

Company Not Liable for Service Tax on Director Rentals, Faces Penalty for CENVAT Credit Misuse and Interest for Delays.

September 14, 2024

Case Laws     Service Tax     AT

The case pertains to the levy of service tax under the reverse charge mechanism (RCM) on rental payments made by a company to its directors for renting immovable property. The key points are: 1) The service of renting immovable property provided by the directors was in their individual capacity, not as directors of the company. 2) Imposing service tax liability under RCM on the company for services rendered by directors in their individual capacity would lead to unwarranted liability. 3) Following the Cords Cable Industries Ltd. case, the Tribunal held that the company cannot be saddled with service tax liability under RCM when the service of renting immovable property was provided by directors in their personal capacity, not as directors. 4) Regarding the penalty u/s 78, the Tribunal upheld the imposition of a 25% penalty for wrongly availing CENVAT credit on exempted services, as the appellant had reversed the credit only after an audit. 5) The appellant is liable to pay the balance interest u/s 75 for delayed payment of service tax. 6) The impugned order was partially set aside, allowing the appeal partially.

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