Custom, Excise & Service Tax Tribunal
S Bhupathi vs Coimbatore on 23 September, 2025
CUSTOMS, EXCISE & SERVICE TAX APPELLATE TRIBUNAL
CHENNAI
REGIONAL BENCH - COURT No. I
Service Tax Appeal No.40040 of 2016
(Arising out of Order-in-Appeal No.CMB-CEX-000-APP-135-15 dated 30.09.2015
passed by the Commissioner of Customs, Central Excise & Service Tax (Appeals -
I), 6/7, A.T.D.Street, Race Course Road, Coimbatore)
Shri S. Bhupathi .... Appellant
No.58A, Race Course Road
Coimbatore 641 018
VERSUS
Commissioner of GST & Central Excise ...Respondent
6/7 ATD Street Race Course Road Coimbatore 641 018 WITH Service Tax Appeal No.40539 of 2016 (Arising out of Order-in-Appeal No.CMB-CEX-000-APP-202-15, dated 22.12.2015 passed by the Commissioner of Customs, Central Excise & Service Tax (Appeals - I), 6/7, A.T.D.Street, Race Course Road, Coimbatore) Shri S. Bhupathi .... Appellant S.B. Towers, 262, Pollachi Main Road, Sundarapuram, Coimbatore 641 024.
VERSUS Commissioner of GST & Central Excise ...Respondent 6/7 ATD Street Race Course Road Coimbatore 641 018 WITH Service Tax Appeal No.40759 of 2017 (Arising out of Order-in-Appeal No.CMB-CEX-000-APP-009-17, dated 04.01.2017 passed by the Commissioner of Customs, Central Excise & Service Tax (Appeals - I), 6/7, A.T.D.Street, Race Course Road, Coimbatore) Shri S. Bhupathi .... Appellant No.58A, Race Course Road Coimbatore 641 018 VERSUS Commissioner of GST & Central Excise ...Respondent 6/7 ATD Street Race Course Road Coimbatore 641 018 WITH 2 Service Tax Appeal No.40063 of 2018 (Arising out of Order-in-Appeal No.CMB-CEX-000-APP-279-17, dated 10.10.2017 passed by the Commissioner of GST & Central Excise (Appeals), 6/7, A.T.D.Street, Race Course Road, Coimbatore) Shri S. Bhupathi .... Appellant No.58A, Race Course Road Coimbatore 641 018 VERSUS Commissioner of GST & Central Excise ...Respondent 6/7 ATD Street Race Course Road Coimbatore 641 018 AND Service Tax Appeal No.40625 of 2020 (Arising out of Order-in-Appeal No.CMB-CEX-000-APP-019-20 dated 15.09.2020 passed by the Commissioner of GST & Central Excise (Appeals), 6/7, A.T.D.Street, Race Course Road, Coimbatore) Shri S. Bhupathi .... Appellant S.B. Towers, 262, Pollachi Main Road, Sundarapuram, Coimbatore 641 024.
VERSUS Commissioner of GST & Central Excise ...Respondent 6/7 ATD Street Race Course Road Coimbatore 641 018 APPEARANCE :
Shri S. Durairaj, Advocate for the Appellant Shri. N. Satyanarayana, Authorized Representative for the Respondent CORAM :
HON'BLE MR. VASA SESHAGIRI RAO, MEMBER (TECHNICAL) HON'BLE MR. AJAYAN T.V., MEMBER (JUDICIAL) FINAL ORDER Nos.41037-41041/2025 DATE OF HEARING: 26.06.2025 DATE OF DECISION:23.09.2025 Per: AJAYAN T.V., These five appeals as tabulated below, preferred by the appellant Shri. S. Bhupathi, are having a commonality of law and facts, and are thus decided by this common order.
3 Sl. Period Demand OIA No. & Date CESTAT Appeal No. Amt. (in Rs.) No. 1. Oct. 2007 1,66,652/- 202/2015 ST/40539/2016 to March dtd.22.12.2015 2008 2. April 2008 18,21,492/- 135/2015 dtd. ST/40040/2016 to March 30.09.2015 2013 3 April 2013 4,54,130/- 009/2017 dtd. ST/40759/2017 to March 4.1.2017 2014 4. April 2014 11,17,660/- 279/2017 dtd. ST/40063/2018 to Sep. 9.10.2017 2015 5. Oct 2015 16,15,944/- 019/2020 dtd. ST/40625/2020 to June 15.09.2020 2017
2. The relevant facts, as borne out from the appeal records, are that the Department investigated Shri S. Bhupathi, the appellant herein, since the Department was of the view that the appellant is the owner of the property namely SB Towers, Sundarapuram, Coimbatore and had rendered taxable services under the category of renting of immovable property by leasing out the said property without obtaining necessary service tax registration, without discharging the service tax liability and without filing the statutory returns. Pursuant to the investigation, the department was of the opinion that the property known as SB Towers, though an HUF property belonging to individuals who formed members of the HUF, the appellant being the Karta of the HUF is to be regarded as the legal owner of the property. The department was further of the view that the memorandum of understanding between the members of the HUF, produced during the investigation, was an unregistered document that indicated that the property of the family have not been partitioned and that the titles have not been 4 transferred in the names of the individuals owners. The department was also of the view that the sharing of the rental income among the members of the HUF, as claimed by the appellant, was purely an internal arrangement of such members of the family until partition of the joint family properties, with an intent to avail the undue benefit out of fragmentation of the income derived from the property. It appeared to the department that such fragmentation is an artificial creation done with deliberate intent to evade payment of service tax by unduly availing the benefit of relevant exemption notifications, as applicable for the small service providers.
3. The department therefore issued notices demanding service tax along with applicable interest and proposals for imposition of penalties. After due process of law, the respective adjudicating authorities confirmed the demands of service tax along with interest and imposed penalties. Aggrieved by these orders in original, the appellant preferred appeals before the concerned Appellate Authorities, who have however rejected the appeals and upheld the impugned orders in original. Aggrieved, and dissatisfied with these orders in appeal, the appellants have preferred the appeals as tabulated supra, and are now before this Tribunal.
4. Shri S Durairaj, Ld. Advocate appeared on behalf of the appellant, submitted that the land in which the commercial complex viz. SB Towers was situated is an inherited ancestral property. Through a Memorandum of Understanding dated 27.12.2004, the complex was divided into 5 parts and were given as shares to the Appellant, his wife, his two daughters and his son.
According to the MOU, the parties are entitled to let out the separate items of the property so allotted to each of them on rent without any recourse or consultation with the other parties. All the parties have obtained income tax pan and service tax registrations separately to account for their rental income. Their rental income is less than the threshold exemption limit as per notifications 5 6/2005-ST dated 1.3.2005 and 33/2012-ST dated 20.6.2012 and so, none of them has paid the service tax. However, Show Cause Notice was issued only to the Appellant by clubbing the income of others to demand the service tax by denying the threshold exemption.
5. The Ld. Counsel submits that the impugned orders are to be quashed since there is a violation of natural justice in as much as the rental income of other co-owners was clubbed with that of the Appellant without impleading the other co-owners, especially when the Appellant has furnished the income tax pan and service tax registrations of others in his deposition dated 10.6.2013 and also the unregistered family settlement deed 27.12.2004, which were signed by other co-owners and are relied upon. Reliance is placed on the decision of the Hon'ble Tribunal, Chennai in the Final Order 40390-40403/2018 dated 7.2.2018 wherein the demand of central excise duty by clubbing the value of clearances of others was set aside for the reason that notices were not issued to others, whose value was clubbed with the other person.
6. It is further submitted that the contention of the Revenue that the MOU dated 27.12.2004 is not registered and that therefore the title of the property is still with the Appellant and being the Kartha of the HUF, Appellant is the sole service provider, are not sustainable because by way of family settlement deed dated 27.12.2004, the title of the property was transferred to others for the purpose of renting of such properties. It is only for the collateral purpose of renting and its' efficient management. Remuneration was received by individual co-owners, who filed income tax returns promptly. In the case of Korukonda Chalapathi Rao & Another Vs Korukonda Annapurna & Sampathkumar [Civil Appeal 6141 of 2021 dated 1.10.2021 many judgments were relied, wherein the Hon'ble Supreme Court has held that the family settlement arrangements for collateral purpose need not be registered or stamped. Therefore, all the parties became the co- owners. Under such circumstances, each co-owner must be 6 treated as separate service provider and the thresh hold exemption is eligible for them. Reliance is placed on the decisions of CESTAT in the case of Smt. Rajeswari Vs CCE, Coimbatore - 2019 (2) TMI 862 and also Shri Ashish Jain Vs CCE - 2025 (1) TMI
629. Ld. Counsel also submitted that it is only a question of interpretation and the entire demand in Appeal ST/40539/2016 made by invoking extended period of limitation and the demand upto 30.9.2011 in Appeal No: ST/40040/2016 which was made vide a subsequent notice invoking extended period of limitation yet again, is barred by limitation. Reliance was placed on the decision of CESTAT in the case of Super Electricals Vs CCE - 2025 (4) TMI 968 and it was prayed that the impugned orders be set aside and the appeals with consequential reliefs.
7. Shri N. Satyanarayana, Ld. Authorised Representative appeared on behalf of the Respondent and reiterated the findings of the Appellate Authority in the respective appeals. He emphasized that the Ld. Appellate Authority has correctly held that it is evident from MOU itself that the properties are not physically demarcated in each individual's name and individually they do not own any property. The Ld. AR submits that the records indicate that the tile deed of said property which was given on rent is in the name of the appellant and the property tax assessment is also in the name of the appellant. Th Ld. AR argued that being the owner of the property that has been given on rent the service tax liability is on the appellant. He also submitted that the extended period and penalties imposed are appropriate and the impugned orders are liable to be upheld.
8. We have heard both sides at length, perused the appeal records, and citation submitted as relied upon.
9. We find merits in the submission of the counsel that the Department ought not to have clubbed the income of the other co-owners of the property with that of the appellant without notice to them. Admittedly, the appellant in his statement dated 10-06- 7 2013, had furnished details of the service tax registration of the co-owners as well as the rental income that has been received by them. The income tax pan numbers of these co-owners were also provided, along with their IT returns. It has been the contention of the appellant all along that the rental income derived from the property is shared amongst the co-owners in accordance with the extent of property designated for each such individual and that they were of the belief that the threshold exemption limit of exemption available for the small scale service providers would be available for the individual owners. In such circumstances, it was necessary for the Revenue to controvert these submissions and also incumbent upon Revenue to have put these co-owners to notice of the Revenue's intention to club their income with that of the appellant. These proceedings initiated behind the co-owners back are therefore vitiated on this count.
10. That apart, undisputedly, the appellant has produced a memorandum of understanding which narrates that it is in pursuance to a family arrangement which took place amongst the parties thereto on 27.12.2004. The MOU states that the parties thereto have decided to deal and enjoy the property mentioned therein and the income from the same shall be taken accordingly amongst each of the members irrespective of the joint ownership of the property and to this effect the partiers were allotted various portions of the superstructure so that the income from the respective properties shall be enjoyed by the respective persons. The said MOU also stipulates that the parties are desirous of confirming the arrangement entered into amongst them so as to be accountable between them and hence have reduced the terms of the concluded family arrangement into writing under the said memorandum of understanding.
11. The revenue has refused to countenance the said MOU as well as the family arrangement inter-se the HUF members, on the premise that the MOU is unregistered and the partition of the property is yet to be physically demarcated. It is a settled position 8 in law that family settlements are not approached with the same degree of rigour or strictness as commercial contracts. The Judgements in Kale & Ors. v. Deputy Director of Consolidation & Ors., (1976) 3 SCC 119 and Hari Shankar Singhania v Gaur Hari Sinighania, (2006) 4 SCC 658 refer for the said proposition. From the aforesaid decisions of the Apex Court, it can be seen that even if the family settlement was not registered, it would operate as a complete estoppel against the parties from contending to the contrary. They are considered by the Courts to be governed by a special equity peculiar to themselves and technical considerations would give way to peace and harmony in enforcement of such arrangements or settlements.
12. Thus, when the Revenue has not controverted the appellant's categorical assertion that the co-owners have acted in furtherance of such understanding and the rental income derived from the property is shared amongst the co-owners in accordance with the extent of property designated for each such individual, dehors the admissibility or otherwise of the said memorandum of understanding as evidence of the partition, the factum of their recording the past transaction that has transpired and distribution of rentals amongst the parties stood acknowledged as a collateral transaction and cannot be discounted. In this regard the reliance of the appellant on the decision in Korukonda Chalapathi Rao & Another v Korukonda Annapurna & Sampathkumar (Civil Appeal 6141 of 2021) dated 01-10-2021 is apposite wherein the Apex Court noticed its earlier decision as under:
"31. In Roshan Singh and Others v Zile Singh and Others, AIR 1988 SC 881, the question arose whether Exhibit P 12 in the said case was an instrument of partition and therefore inadmissible for want of registration under Section 49 of the Registration Act or whether it was merely a memorandum of family arrangement. This Court after referring to the document held as follows:
"8. According to the plain terms of thie document Exh. P-12, it is obvious that it was not an instrument of partition but merely a 9 memorandum recording the decision arrived at between the parties as to the manner in which the partition was to be effected. The opening words of the document Exh. P-12 are : 'Today after discussion it has been mutually agreed and decided that....' What follows is a list of properties allotted to the respective parties. From these words, it is quite obvious that the document Exh. P-12 contains the recital of past events and does not itself embody the expression of will necessary to effect the change in the legal relation contemplated. So also the Panch Faisla Exh.P-1 which confirmed the arrangement so arrived at, opens with the words 'Today on 31-1-1971 the following persons assembled to the effect a mutual compromise between Chaudhary Puran Singh and Chaudhary Zile Sinigh and unanimously decided that....' The purport and effect of the decision so arrived at is given thereafter. One of the terms agreed upon was that the gher marked B2 would remain in the share of Zile Singh, representing the Plaintiffs.
9. It is well-settled that while an instrument of partition which operates or is intended to operate as a declared volition constituting or severing ownership and causes a change of legal relation to the property divided amongst the parties to it, requires registration under Section 17(1)(b) of the Act, a writing which merely recites that there has in time past been a partition, is not a declaration of will, but a mere statement of fact, and it does not require registration. The essence of the matter is whether the deed is a part of the partition transaction or contains merely an incidental recital of a previously completed transaction. The use of the past tense does not necessarily indicate that it is merely a recital of a past transaction. It is equally well-settled that a mere list of properties allotted at a partition is not an instrument of partition and does not require registration. Section 17(1)(b) lays down that a document for which registration is compulsory should, by its own force, operate or purport to operate to create or declare some right in immovable property. Therefore, a mere recital of what has already taken place cannot be held to declare any right and there would be no necessity of registering such a document. Two propositions must therefore flow: (1) A partition may be effected orally; but if it is subsequently reduced into a form of a document and that document purports by itself to effect a division and embodies all the terms of bargain, it will be necessary to 10 register it. If it be not registered Section 49 of the Act will prevent its being admitted in evidence. Secondly evidence of the factum of partition will not be admissible by reason of Section 91 of the Evidence Act, 1872. (2) Partition lists which are mere records of a previously completed partition between the parties, will be admitted in evidence even though they are unregistered, to prove the fact of partition: See Mulla's Registration Act, 8th Edn., pp 54-
57." (Emphasis supplied) Thereafter, the Court also approved of the use of the said document for a collateral transaction and observed as follows:
"11 Even otherwise, the document Exh. P12 can be looked into under the proviso to Section 49 which allows documents which would otherwise be excluded, to be used as evidence of 'any collateral transaction not required to be effected by a registered instrument'. In Varada Pillai v. Jeevarathnammal, (1919) 46 Ind App 285 : AIR 1919 PC 44 the Judicial Committee of the Privy Council allowed an unregistered deed of gift which required registration, to be used not to prove a gift 'because no legal title passed' but to prove that the donee thereafter held in her own right. We find no reason why the same rule should not be made applicable to a case like the present." "
(Emphasis Supplied)
13. It is also seen that in the aforesaid decision in Korkonda Chalapthi Rao's case, the Apex Court cited with approval the following observation of the Jurisdictional Madras High Court, in A.C. Lakshmipathy and others v. A.M. Chakrapani Reddiar and others, AIR 2001 Madras 135, "42. To sum up the legal position xxx xxx xxx (V) However, a document in the nature of a Memorandum, evidencing a family arrangement already entered into and had been prepared as a record of what had been agreed upon, in order that there are no hazy notions in future, it need not be stamped or registered."
1114. In light of the aforesaid decision in Korukonda Chalapathi Rao & Another v Korukonda Annapurna & Sampathkumar (Civil Appeal 6141 of 2021) dated 01-10-2021, we are of the considered view that the memorandum of understanding evidences the collateral transaction of the rental income derived from the property being shared amongst the co-owners in accordance with the extent of property designated for each such individual. Thus, when the appellant has already provided the service tax registration of the co-owners together with the respective rental receipts, along with their pan numbers and income tax returns and have contended that the threshold exemption limit of exemption available for the small scale service providers would be available to them; given that Revenue, despite the details furnished, have not controverted their submission that they are below the said threshold limit; the demand of service tax made on the appellant by considering only the appellant as the legal owner of the property and the gross rental amount received in respect of the entire property as the taxable value for the purpose of payment of service tax by the appellant, is decidedly untenable.
15. We find that co-ordinate benches of this Tribunal in somewhat similar circumstances have held in favour of the assessee, as can be seen from the decisions in Shri Ashish Jain v CCE, 2025 (1) TMI 629, and Smt. Rajeswari v CCE, Coimbatore, 2019 (2) TMI 862. That apart, we also find that the view of the Revenue that the distribution of rent amongst the co-owners cannot be acknowledged without the property being physically demarcated and earmarked against the co-owners, is also a contention that has been negatived by a coordinate bench of this Tribunal in Sarojben Kushalchand v CST, Ahmedabad, 2017 (4) GSTL 159 (Tri-Ahmd), wherein it has been held as under:
"9. We find force in the contention of the ld. Advocates representing the respective appellants inasmuch as 'association of persons' has been considered as a separate legal entity under the Income-tax Act for assessment and provided separate PAN number different from the 12 PAN number possessed by individual co-owners; who joined together to form an 'association of persons'. In the present case, the show cause notices were issued in many cases to one person among the Joint owners and in other cases to all the persons who had jointly owned the immovable property provided on rent. Needless to mention, the Service Tax Registration of individual assessees for collection of Service Tax is PAN based, hence, collection of Service Tax from one of the co-owners, against his individual Registration for the total rent received by all co-owners separately, is neither supported by law nor by laid down procedure. Thus, it is difficult to accept the proposition advanced by the Revenue that all the co-owners providing the service of renting of immovable property be considered as an association of persons and the Service Tax on the total rent be collected from one of the co-owners. Another argument of the Revenue is that since the property is indivisible and not earmarked against each of the co- owners, hence the Service Tax is leviable on the total rent received against the said property without apportioning against each of the co- owners in proportion to their share. We find fallacy in the said argument of the Revenue. Conceptually Service Tax is levied on the service provided, which is an intangible thing and hence it is not necessary to be identified with physical demarcation of the immovable property given on rent against individual co-owners. Once the value of service provided by a service provider is ascertainable Service Tax is accordingly charged. This Tribunal in similar facts and circumstances in the cases of Deoram Vishrambhai Patel, Anil Saini & Others and Luxmi Chaurasia (supra) after considering the issues raised, rejected the contention of the Revenue and allowed the benefit of exemption Notification No. 6/2005-S.T., dt.1-3-2005 as amended to individual co- owners who jointly owned the property and provided the service of renting of immovable property, and received the rent in proportion to the shares in the immovable property."
16. We further find merit in the appellant's contention that the dispute in the present case involves interpretational issues and thus extended period of limitation could not have been invoked for the demands made for the period October 2007 to March 2008 and that made for the period from April 2008 to March 2013. This Tribunal, in the decision in Super Electricals v CCE, 2025 (4) 13 TMI 968, has after considering the litigation during the initial stages of introduction of the levy as well as the retrospective legislation introduced vide Finance Act in 2010, held that the demand made on the appellant therein, on 'renting of immovable property' service rendered during the period April 2008 to March 2009, vide SCN dated 04-10-2013, was barred by limitation. Thus the entire demand made in the instant case vide SCN dated 19- 04-2013 for the period from 01.10.2007 to 31.03.2008, which is the subject matter of the Appeal ST/40539/2016, is barred by limitation. For the same reason, the demand made vide the SCN dated 24.10.2013 for the period from April 2008 to March 2013, which is the subject matter of the Appeal ST/40040/2016 is also substantially barred by limitation. An added reason for the demand made vide SCN dated 24.10.2013 to be barred by limitation, is that when the first SCN was issued all the relevant facts were in the knowledge of the authorities and later on, while issuing the second show cause notice the same/similar facts could not be taken as suppression of facts on the part of the assessee as these facts were already in the knowledge of the authorities; as laid down in Nizam Sugar Factory v.CCE, A.P, 2008(9) STR 314 (SC).
17. In view of the discussions and findings above, we find that the demands of duty, appropriate interest and penalties imposed by the original authorities as upheld by the learned appellate authorities, are untenable and the impugned Orders in Appeal cannot sustain. Accordingly, we set aside the impugned Orders in Appeal.
The Appeals are allowed with consequential reliefs in law, if any.
(Order pronounced in the open court on 23.09.2025) (AJAYAN T.V.) (VASA SESHAGIRI RAO) Member (Judicial) Member (Technical) ra