Service Tax – Cestat New Delhi: No Service tax liability under RCM when premises is taken on rent from Director for residential purpose - Appeal allowed [Order attached]

Order Date: 18 July 2022

Facts-

• The Appellant, M/s Mec Shot Blasting Equipment Ltd has registered with the Service tax Department and deposits Service tax regularly.
• The show cause notice was issued, invoking the extended period of limitation.
• A demand of Rs. 70,140/- was raised by the respondent Commissioner under Reverse Charge Mechanism (RCM) for residential premises, taken on rent by the Appellant from the Director and have been used by the Appellant as residence for its directors.
• Further, there was another demand for Rs. 29,209/- for non-payment of Service tax, which was not paid due to over site, as there are several transactions and otherwise, they were regularly paying Service tax.

Issue-

• Whether the Appellant was liable to pay Service tax under RCM of Rs. 70,140/- for residential premises, taken on rent by the Appellant from the Director and have been used by the Appellant as residence for its directors?

Order-

• The Tribunal observed that the demand of tax of Rs. 70,140/- have been wrongly raised as the premises are residential premises and being used for residence of the director, for other demand the situation is wholly revenue neutral and accordingly, invocation of extended period of limitation is not available to the revenue in the facts and circumstances.
• The Tribunal held that, no Service tax is chargeable, unless the premises are taken and used for commercial purpose. Thus, Service tax is not chargeable.
• The demand along with penalty is set aside and the appeal is allowed.