Company not liable for service tax under reverse charge when directors provide rental services in individual capacity rather than as directors.

CESTAT New Delhi held that a company cannot be liable for service tax under reverse charge mechanism when directors provide property rental services in their individual capacity rather than as directors. The tribunal distinguished between services rendered as directors versus personal capacity, following precedent from Cords Cable Industries Ltd. While setting aside the service tax demand, CESTAT upheld the 25% penalty under Section 78 for improper cenvat credit utilization, noting the credit was reversed only after audit. The company must pay balance interest under Section 75. Appeal was partially allowed with service tax liability removed but penalty and interest obligations maintained.

---

---

Issues:
1. Challenge to the service tax levied on rent of immovable property paid to directors along with interest and penalty.
2. Reversal of cenvat credit amount on input service attributed to exempted service provided in Jammu & Kashmir with penalty and interest.

Analysis:
1. The appellant, a coaching institute, challenged the service tax levied on rent paid to its directors and the reversal of cenvat credit amount related to exempted services in Jammu & Kashmir. The dispute centered on whether the service tax liability falls on the company under Reverse Charge Mechanism (RCM) or on the directors individually.
2. The appellant argued that the renting of immovable property by directors was in their individual capacity, not as directors, and therefore, the company should not be liable for service tax under RCM. They relied on Notification No.30/2012-ST and Circular No.201/13/2013-GST to support their interpretation.
3. The Tribunal analyzed the relevant provisions and held that service tax under RCM applies when services are provided by directors in their capacity as directors, not in their personal capacity. The Tribunal referred to a previous case for precedent and concluded that the company cannot be held liable for service tax in this scenario.
4. Regarding the penalty on cenvat credit reversal, the Tribunal upheld the penalty imposed as the credit was reversed only after an audit. The appellant's argument that the reversal was before the show cause notice was issued was rejected, and the penalty was maintained at 25%.
5. The Tribunal also noted that the appellant had not paid the full interest amount, and it was liable to pay the balance. The imposition of interest was considered automatic under Section 75 of the Act.
6. In conclusion, the Tribunal partially allowed the appeal, setting aside part of the impugned order while upholding the penalty and interest liabilities on the appellant.

---