Individual Co-owners Exempt from Service Tax Liability under Small Scale Industry Rule

The Tribunal found in favor of the appellants in a case concerning service tax liability on individuals co-owning a building rented out collectively. The Tribunal determined that each co-owner should be considered individually for service tax assessment based on the rent received. As the aggregate value of services provided by each appellant did not exceed the threshold limit, they qualified for the Small Scale Industry exemption. Consequently, the Tribunal allowed the waiver of pre-deposit and stayed the recoveries pending appeal disposal.

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Issues:
Service tax liability on individuals as providers of service under the category of renting out of immovable property.

Analysis:
The case involved a dispute regarding the service tax liability on individuals who were co-owners of a building and had rented out the premises. The appellants claimed that the amount received by them fell within the threshold limit of the Small Scale Industry (SSI) exemption as per relevant notifications. The Revenue, on the other hand, argued that since the property was jointly owned and rented out collectively, service tax liability should be assessed individually on each co-owner based on the total amount received.

Upon hearing both sides, the Tribunal considered the provisions of the SSI exemption Notification No. 6/2005-S.T. and its subsequent amendment. The Tribunal noted that the exemption granted under the notification was subject to the condition that the aggregate value of taxable services rendered by the assessee did not exceed the threshold limit of rupees ten lakhs in the preceding financial year. The Tribunal observed that if the rent cheques were received individually by each appellant as per the agreement, it indicated that they were renting out the property individually to a person. Therefore, when considering each appellant as a provider of the service, their aggregate value did not surpass the threshold limit.

Consequently, the Tribunal found that the appellants had made a prima facie case for the waiver of pre-deposit of the amounts involved. Therefore, the applications for waiver of pre-deposit were allowed, and the recoveries were stayed pending the disposal of appeals.

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