Appeal allowed: Rent for residential dwelling exempt from service tax

The Tribunal allowed the appeal, setting aside the demand for service tax, interest, and penalty, as the rent amount received for letting out immovable property for residential dwelling purposes was excluded from service tax levy during the relevant period. The decision was pronounced in open court on 14.11.2019.

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Issues:
Levy of service tax on rent amount received by the appellant from employees for letting out quarters within the factory.

Analysis:
The appellant, engaged in manufacturing jute products, appealed against the demand of service tax on rent received from employees for letting out quarters within the factory. The Show Cause Notice proposed the demand, which was confirmed by the Assistant Commissioner and upheld by the Commissioner (Appeals). The appellant argued that previous Tribunal decisions supported their position that no service tax was payable on such rent. They also presented subsequent orders where similar demands were dropped. The Departmental Representative contended that renting quarters to employees is in the course of business activities, citing a relevant case. The Tribunal considered whether service tax was leviable on the rent amount received by the appellant from employees for letting out quarters.

Upon review of the Show Cause Notice and adjudication order, it was found that the quarters were indeed used for residential purposes, and the nature of usage could not be doubted without proof to the contrary. The Tribunal referred to a previous decision where it was held that rent received for letting out properties for accommodation purposes to employees is not liable to service tax. This decision was based on the law applicable before the introduction of the Negative List service taxation regime. The Tribunal noted that renting residential dwellings for use as residence was excluded from service tax levy during the period in dispute. As the appellant was not liable to pay the demanded service tax due to the exclusion for residential dwelling purposes, the impugned demand, interest, and penalty were set aside. The decision cited by the Departmental Representative regarding transportation services for employees was deemed irrelevant to the case at hand.

In conclusion, the Tribunal allowed the appeal, setting aside the demand for service tax, interest, and penalty, as the rent amount received for letting out immovable property for residential dwelling purposes was excluded from service tax levy during the relevant period. The decision was pronounced in open court on 14.11.2019.

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