CESTAT Sets Aside ₹3.47 Lakh Service-Tax Demand On Landlord’s Hostel Rent, Applying Its Earlier Ruling On Her Residential Letting

Following information received from the Income Tax Department, the Department alleged that the appellant had failed to pay service tax on receipts during 1 April 2016 to 30 June 2017.

The show-cause notice demanded Rs. 4,65,750, and the adjudicating authority confirmed Rs. 3,47,625 while dropping the balance; the Commissioner (Appeals) upheld that order.

The appellant argued, among other things, that part of the receipts related to residential property let for use as a residence and was not taxable. She also claimed CENVAT credit of Rs. 1,48,714 paid through two challans.

The Tribunal noted that it had previously decided the residential-rent issue for the same appellant and an earlier period.

Section 66D(m) of the Finance Act, 1994 placed services by way of renting a residential dwelling for use as a residence outside the scope of taxable services under Section 65B(44).

The Tribunal’s earlier decision also relied on the CBIC Education Guide dated 20 June 2012 and Bandu Ravgi N. v. Acharya Ratna Desh Bhushan Shikshan Prasark Mandal, 2003 (3) MLJ 472 (Bom), in considering whether a hostel could qualify as a residential dwelling.

For CENVAT credit, the Tribunal applied Rules 9(2) and 9(6) of the CENVAT Credit Rules, 2011, requiring prescribed supporting documents and maintenance of records.

Applying its earlier decision concerning the same appellant, the Tribunal held that rent from the relevant residential property was not taxable where the property was rented for use as a residence; it therefore set aside the confirmed demand.

By contrast, the appellant had produced no evidence establishing that the requirements for claiming CENVAT credit were met, including the applicable documentary and record-keeping requirements. The Tribunal accordingly declined to disturb the denial of that credit.

The impugned order was modified accordingly, and the appeal was allowed to that extent.