Custom, Excise & Service Tax Tribunal
Ms Ram Singh And Co Owners vs Ludhiana on 14 October, 2025
CUSTOMS, EXCISE AND SERVICE TAX APPELLATE
TRIBUNAL
CHANDIGARH
REGIONAL BENCH - COURT NO. I
Service Tax Appeal No. 61817 of 2018
[Arising out of Order-in-Appeal No. LUD-EXCUS-001-APP-1598-18 dated
20.08.2018 passed by the Commissioner (Appeals), CGST Ludhiana]
M/s Ram Singh and Co Owners ......Appellant
Balamgarh,C/o Shop No. 33,New Grain Market
Ludhiana, Punjab 142026
VERSUS
Commissioner of Central Excise and ......Respondent
Service Tax, Ludhiana
GST Bhawan, F-Block, Rishi Nagar
Ludhiana 141001
APPEARANCE:
Shri Pawan K. Pahwa and Shri Hrithik Chaudhary Advocates and Shri
R.R. Yadav, Consultant for the Appellant
Shri Ram Niwas Authorized Representative for the Respondent
CORAM: HON'BLE MR. S. S. GARG, MEMBER (JUDICIAL)
HON'BLE MR. P. ANJANI KUMAR, MEMBER
(TECHNICAL)
FINAL ORDER NO. 61600/2025
DATE OF HEARING: 14.10.2025
DATE OF DECISION: 14.10.2025
S.S.GARG:
The present appeal is directed against the impugned order
dated 20.08.2018 passed by the commissioner (Appeals)
whereby the Commissioner (Appeals) confirmed the demand of
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Rs. 6,94,139/- under Section 73 of the Act along with interest
and also imposed penalty of Rs. 5,30,604 and penalty of Rs.
17,353 under Section 76 and Rs. 20,000 under Section 77 of the
Act.
2. Briefly the facts of the present case are that the appellant
are engaged in providing taxable services falling under the
category of "Renting of Immovable Property Services" under
Section 65 (105) (zzzz) of the Finance Act, 1994. As per the
Department, the appellant have contravened the provisions of
Section 68, 69 and 70 of the Act, read with Rule 4, 6 & 7 of the
Service Tax Rules, 1994 as they neither applied for registration
nor discharged their service tax liability for the said service
provided. During the course of audit of M/s Food Corporation of
India, Bathinda by the internal audit party, it was observed that
they had hired the godowns from M/s Punjab State Warehouse
Corporation. On this allegation of non payment of service tax
two show cause notices dated 16.10.2015 and 06.04.2016 were
issued and both the show cause notices were adjudicated vide
Order-in-Original dated 25.05.2017, wherein the adjudicating
authority dropped the demand by giving the benefit of SSI
exemption to each co-owner individually as claimed by them
under Notification No. 6/2005-ST and 33/2012-ST dated
30.06.2012. Aggrieved by the said order, the Revenue filed the
appeal before the Commissioner (Appeals) and the learned
Commissioner (Appeals) vide the impugned order accepted the
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appeal of the department and set aside the Order-in-Original.
Hence, the present appeal.
3. Heard both the parties and perused the material on
record.
4. Learned counsel Shri Pawan K. Pahwa appeared for the
appellant and submits that the impugned order is not
sustainable in law as the same has been passed without
properly appreciating the facts and the law. He further submits
that the Commissioner (Appeals) has wrongly appreciated the
facts that the agreement with PSWC is in the name of Ram
Singh only whereas the agreement entered with PSWC by each
co-owner and all the co-owners have let out their respective
shares only; each co-owner is receiving rent separately and TDS
is also deducted in their individual PAN numbers. He further
submits that all these aspects have been duly considered and
addressed by the adjudicating authority. He also submits that
the co-owner of the property could not be treated as association
of the persons or body of the individual for assessment under
the taxing statutes. He also submits that Co-ownership of the
property by the co-owner does not result into the formation of
an Association of Persons with the co-owners. Each of the co-
owner in the present case is receiving the rental income from
the property in capacity of an individual and not as a member of
an Association of Persons. He further submits that this issue is
no more res integra and the Tribunal in various cases has
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settled the issue in favour of the assessee. In support of his
submissions, he relied upon the following cases:
Krishnakant Dipakbhai Patel Vs Commissioner
of Service Tax-Service Tax Ahmedabad
Mahalaxmi Enterprise Palanpur, Gujarat Vs.
Commissioner of Central Excise, Customs
(Adjudication)-Gandhinagar-CESTAT Ahmedabad
Commissioner of C. EX., NASIK Vs Deoram
Vishrambhai Patel - (2015 (40) S.T.R. 1146 (Tri. -
Mumbai)
M/s Bansal & Co Owners Vs Commissioner of Central
Excise & Service Tax, Ludhiana- CESTAT Chandigarh
M/s.Krishi Upaj Mandi Samiti Vs. CCE & ST, Jaipur-1
& Jaipur-II- CESTAT- New Delhi.
M/s Punjab State Warehousing Corporation Mansa,
Punjab Vs Commissioner of Central Excise,
Chandigarh-II- CESTAT Chandigarh.
5. On the other hand, learned AR reiterated the findings of
the impugned order.
6. After considering the submissions of both the parties and
perusal of the material on record, we find that only issue
involved in the present case is whether the appellant is
individually entitled to the SSI exemption under Notification No.
06/2005 in the capacity of each co-owner separately. Further,
we find that in the present case each co-owner is the owner of
the respective shares in the property and the contract entered
with PSWC by each co-owner for their respective share, the
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PSWC is paying rent to each co-owner separately and the same
is not disputed by the department. Further, the PSWC deducted
the TDS under the PAN number of each co-owner separately in
respect of payments made to them.
7. Further, we find that this issue was recently considered by
this Bench in the case of M/s Bansal & Co Owners vide Final
Order No. 61485-61486/2025 wherein, it has been held in the
following paras:
5. Heard both sides and perused the record of the case. We
find that the rent is being received by the individual co-owners
separately. The premises rented out is not registered in the
name of the alleged AOP; Revenue has not brought any evidence
to indicate even the existence of the AOP. It is not coming forth
if the said AOP has been registered. Under the circumstances, it
is not understood as to how Revenue attempted to tax the AOP.
Interestingly, it appears that the adjudicating authority or the
Revenue were not clear in their approach. On the one hand, they
seek to recover service tax from a non-existent AOP and other
hand, seek to appropriate the service tax paid by the individual
owners. We find that no case has been made by the Department
to demand service tax from the alleged AOP. We find that co-
ordinate Bench of this Tribunal in Mumbai held in the case of
Deoram Vishrambhai Patel (supra), which was followed by this
Bench in the case of Anil Saini (supra) held that:
6. We have considered the submissions
made by both sides and perused the records.
The issue that needs to be decided in this
case is whether the respondent and his
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brothers are to be treated as association of
persons or other vise and service tax liability
on it arises, should be confined without the
benefit of the Notification No. 6/2005-S.T.
7. It is undisputed that the property which
has been rented out by the respondent and
his brothers is jointly owned property;
Service Tax liability arises on such renting of
property.
8. On deeper perusal of impugned order,
we find that the first appellate authority has
considered all the angles in the dispute and
came to the correct conclusion. The findings
of first appellate authority is as under.
"6.2 On mere reading of the
Order-in-Original, it is evident that the
adjudicating officer has considered
above named four persons as one
person for determining tax liability and
imposition of penalties without telling
any legal basis for doing so. The
appellants have contested the Order in
Original mainly on the grounds that
rented property belongs to four
separate persons (all brothers) but the
service tax has been demanded
wrongly by the department from the
appellants by clubbing the rent
received by all the co-owners and,
therefore, the demand off tax is not
maintainable on this ground alone. In
support they have produced a City
Survey Extract as evidence regarding
ownership of the rented property
which shows that the said property
was purchased in 2003 and is owned
jointly by all the four co-owners.
Further, the lease agreements with
M/s. Max New York Life Insurance Co.
Ltd., Oriental Bank of Commerce, Axis
Bank, Kotak Mahindra Bank and HDFC
Standard Life Insurance Ltd. are also
entered into by the appellants in their
individual capacity, as per SCN also,
all four co-owners have obtained
separate Registration Certificate on
10-4-2012 and all the four co-owners
individually paid their Service tax
liability along with interest on 14-2-
2012. Thus, the ownership of the
Property and providing of taxable
renting of immovable Property by the
four appellants in this case is in their
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individual capacity and, therefore,
their tax liability should have been
determined by considering their
individual rental receipts and not
collective one. From the various lease
agreements made with above
mentioned Commercial firms, it cannot
be disputed that monthly rent was
paid by the above named concerns to
each appellant after deducting tax at
their end.
6.3 From the show cause notice
dated 19-10-2012, it is evident that
the appellants had received rent as
detailed below :-
--------
But as the rent was distributed equally among each of the appellant, it is evident that each of them received an amount lesser than Rs. 8 lakhs and 10 lakhs in the years 2007-08 and 2008- 09 respectively which is below the exemption limit of eight lakhs and ten lakhs during the relevant period. The appellants were, therefore, not liable to pay service tax on the amounts received by them during these two years by virtue of Notification No. 6/2005-S.T., dated 1-3-2005. The appellant's case is also supported by the Tribunal's decision in the case of Dinesh K. Patwa v. CST, Ahmedabed which is referred in Para 3(ii) above. However, in the Financial Year 2009- 10 and 2010-22, the receipt off rent by each appellant exceeded the statutory exemption limit of Rs. 10 lakhs and the appellants have paid service tax along with interest on their own before receipt of SCN. This fact is not disputed by the department also and no additional tax liability has been worked out for the said period in OIO. 6.4 Since the appellants were individually liable to pay service tax and eligible for the exemption under general exemption Notification 6/2005-S.T., dated 1-3-2005 during the period 2007-08 and 2008-09, no service tax was payable during the said period. Hence, the question of penalty under Section 76 for the said period does not arise. For the subsequent period i.e. 2009-10 & 8 ST/61817/2018 2010-11, the appellants have already accepted their tax liability and paid Service tax along with interest on 14- 2-2012. The said payment of service tax is certainly a delayed payment, but was made by the appellants on their own when they realized that their taxable value for renting of property had exceeded the exemption limit of Rs. 10 lakhs. The adjudicating authority has claimed in his order that the appellants paid service tax only after Department started investigation, but it is not supported by any evidence or the facts on record. The SCN or the OIO do not talk of any audit objection or Preventive action or any Inspection etc. on the basis of which not payment of service tax by the appellants was pointed out. Instead in the SCN, one statement of Shri Chandulal Vishrambhai Patel is only referred to which was recorded on 22-2-2012 which is 8 days after the appellants had paid service tax along with interest on their own. Thus, the claim of the appellant that they had paid service tax for the years 2009-10 and 2010-11 on their own initiative and there was no suppression of facts etc. on their part with any intention to evade service tax cannot be denied. Considering all these facts, I agree with the appellant's contention that this case was squarely covered under sub-section (3) of Section 73 which provided not to issue any notice under sub-section (1) of Section 73 if the service tax not levied or paid was paid along with interest by the person concerned before service of notice on him and informed the Central Excise Officer of such payment in writing. Further in Explanation 2 of the said sub section it is also clearly provided that no penalty under any of the provisions of the Act or the Rules made thereunder shall be imposed in respect of payment of service tax under this sub-section and interest thereon. Hence, in fact no SCN was required to be issued in this case for recovery of service tax and imposition of penalty and even when it has been 9 ST/61817/2018 issued, no penalty under Section 76 or 78 is imposable in this case for the period 2009-10 and 2010-11."
9. It can be seen from the above reproduced findings of the first appellate authority, the conclusion arrived at is very correct, as co-owners of the property cannot be considered as liable for a Service Tax jointly or severally as Revenue has took identify the service provider and the service recipient for imposing service tax liability, which in this case, we find our individual. The conclusion arrived at by the first appellate authority is correct and he has confirmed the demand raised on the respondents by extending the benefit of Notification No. 6/2005-S.T. We do not find any reason to interfere in such a detailed order.
8. In view of the above, we find that the individual co-
owners of the property cannot be held to be AoP and service tax cannot be demanded from the AoP. We also find that the value of the services provided by the individual co-owners in renting out the immovable property over the years is within the exemption provided under Notification no.33/2012 dated 20.06.2012. The issue is no longer res integra as discussed above. Hence, the impugned orders are set aside and the appeals are allowed.
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8. By following the ratio of the above said decision, we set aside the impugned order and allow the appeal of the appellant with consequential relief if any, as per law.
(Operative part of the order pronounced in the open court) (S. S. GARG) MEMBER (JUDICIAL) (P. ANJANI KUMAR) MEMBER (TECHNICAL) Kailash