In Service Tax Appeal No. 52207 of 2018 - CESTAT – Directors of Cords Cable Industries Limited providing service of renting immovable property in their individual capacity, not liable for service tax on reverse charge mechanism, rules CESTAT (Delhi)
Members Dilip Gupta (President) & P.V. Subba Rao (Technical) [12-04-2023]

Read Order: Cords Cable Industries Limited v. Commissioner, Central Excise Jaipur (Rajasthan)

Chahat Varma

New Delhi, May 31, 2023: The Principal bench of the Customs, Excise and Service Tax Appellate Tribunal has held that Naveen Sawhney and D.K. Prashar, who were directors of Cords Cable Industries Limited (appellant), were providing the service of renting immovable property in their individual capacity as owners of the premises and not as directors of the appellant and therefore, the appellant could not be held liable to pay service tax on a reverse charge mechanism in this situation.

Facts of the case were that the appellant, a manufacturer of instrumentation/power cables, paid rent to Naveen Sawhney and D.K. Prashar for the premises let out by them to the appellant. The premises were used by the appellant for its Registered Office/Corporate Office. Both Naveen Sawhney and D.K. Prashar were also directors of the appellant. The appellant received invoices from the landlords that included service tax amounting to Rs. 27,14,665, which was paid accordingly. A show cause notice was issued to the appellant alleging that they were liable to pay service tax on reverse charge basis for the rent paid to the landlord/owner of the premises during the period from July 2012 to August 2014. The notice invoked the extended period of limitation and claimed that the appellant was liable to pay service tax based on the fact that the landlords were also directors of the appellant, at the relevant time. The appellant submitted a reply to the show cause notice but the Deputy Commissioner, confirmed the demand with interest and penalty. The Commissioner (Appeals) confirmed the demand with interest but had set aside the penalty demanded from the appellant.

Allowing the appeal filed by the appellant, the Tribunal held that the Commissioner (Appeals) wrongly assumed that Naveen Sawhney and D.K. Prashar were providing service of renting of immovable property as Directors of the appellant.