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BRIEF FACTS OF THE CASE

M/s. Almas A. Puthawala & Others situated at 9/8, Kashmira Society, Narayannagar Road, Paldi, Ahmedabad (herein-after referred to as ‘the said Service Provider’) is engaged in the business of Leasing / Renting of Immovable property owned by them, which is located at Ground floor, President Plaza, Near Thaltej Char Rasta, S. G. Highway, Ahmedabad, and the said activity is taxable under ‘Renting of Immovable property Service’ as defined under Section 65 of the Finance Act 1994 (as amended) w.e.f 01.06.2007. The above-referred property had been rented / leased by the said Service provider’s to M/s. Parsoli Motors, who were running / managing a showroom / Office / brand/ shop, etc. since September 2007.

2. Potential commercial properties like malls, shopping centers, commercial complexes, etc were identified by the Service Tax, Ahmedabad and a survey of all such identified commercial properties located in the city of Ahmedabad was carried out. During the course of the survey of President Plaza commercial complex located at Thaltej Char Rasta, Sarkhej- Gandhinagar Highway, Ahmedabad, it was found that the Shop / showroom / office located at No.1 Ground floor of the said President Plaza building, has been rented to M/s. Parsoli Motors, who are carrying out the business of showroom / shop / office and the monthly rent of it is Rs.4,75,000/-. On further inquiry, it was found that the said premises is owned by above- mentioned Service provider’s individually / jointly and the rent is paid by the rental / lessee to the individual / joint owners in the following bifurcation ;

Sr. No. Name of the Owner’s Amount of Rent paid (Rs.)01 Almas A Puthawala 1,18,750/-02 Saba M Puthawala 1,18,750/03 Tehsin Atik Puthawala 1,18,750/04 Nadima Aiyub Puthawala 1,18,750/

3. Whereas, the monthly rent of the said property is Rs.4,75,000/-, and considering it from the date of applicability from 01.06.2007, the annual rent for the financial year 2007-08, crosses the exemption limit of Rs. 10 lacs provided under Notifn. No. 08/2008-S. T dtd. 01.03.2008, the said Service provider were required to obtained Service Tax registration on receiving the rent of Rs. 9 lacs, as per the provisions of Section 69 of the Finance Act, 1994 and pay Service Tax at the applicable rate. However, during the course of survey, it was found that the said Service provider has not obtained Service Tax registration and they have failed to pay the amount of Service Tax payable by them at the applicable rate on the grounds that the above-mentioned property owned by them jointly and the rent is collected by them equally or on share of ownership basis and the rent received by them

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individually is below the value based exemption limit as provided under Notifn. No. 08/2008-S.T. dtd. 01.03.2008 as amended.

4. It appeared that, the service of ‘Renting of Immovable Property Service’ is an indivisible service and the fact that the immovable property is owned by more than one individual does not mean that the indivisible service is also to be treated as more than one service depending upon the number of persons who own the immovable property. In case where the property is collectively own, the service provider is to be treated as a single person for the purpose of levy of Service Tax, since service provided is a single service and the recipient of service is also treated as single person. In case the recipient of such service divides the total consideration and makes separate payments to individual owners does not obviate the fact that the service provided is a single service. In all such cases the Service provider is treated as a single person and the turner limit of Rs. 10 lacs is only applicable by treating the total amount received as taxable value. Where the immovable property is collectively owned, for the purpose of service tax the association of persons is treated as a single service provider.

5. Therefore, in view of the above provisions, the Service Tax liability of the said Service provider is as under:

Financial Year

Taxable value i.e total

rent collected

Service Tax payable

Edu. Cess

payable

H. Edu. Cess

payable

Total Service Tax

Payable01.06.07 to 31.03.08 33,25,000/- 3,99,000/- 7,980/- 3,990/- 4,10,970/-2008-09 (Upto Sept. 08)

28,50,000/- 3,42,000/- 6,840/- 3,420/- 3,52,260/-

TOTAL 61,75,000/- 7,41,000/- 14,820/- 7,410/- 7,63,230/-

From the details given in the above table, it appeared that the said Service provider has received total rent of Rs.33,25,000/- from its clients during the period from 01.06.2007 to 31.03.2008. On the said taxable value of Rs.33,25,000/-, the Service tax payable @ 12.36 % comes to Rs.4,10,970/-. Further, during the financial year 2008-09, for the period from 01.04.2008 to 30.09.2008, the amount of rent received by the Service Provider is Rs.28,50,000/- and during the said year the Service provider is not eligible for value-based exemption, so, the amount of Service Tax payable on the taxable value of Rs.28,50,000/- @ 12.36 % comes to Rs.3,52,260/-. The said Service provider is required to pay the same alongwith interest. Further, apart from the commercial property mentioned in this Show cause notice, if the Service provider owns any other commercial property and the same has

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been rented by the Service provider, the amount of rent received by them is required to be included in the taxable value for the respective years.

6. In view of the discussion above, it appeared that M/s. Almas A. Puthawala & Others, Ahmedabad, engaged in providing ‘Renting of Immovable property Service’ without discharging their proper tax liability on the rent collected in respect of commercial property rented by them and they were not registered with Service Tax department and nor paying Service Tax on the value of the Service provided. As per the provisions of the Finance Act, 1994 and rules made thereunder, the Service Provider was required to assess correct value for the service provided by them as well as to pay service tax on the amount received by them for rendering Renting of Immovable property service on due time as prescribed and to follow all the procedure laid down in the Act and Rules. From the above, it appeared that the said service defined under “Renting of Immovable property Service” under Section 65 (90a) of Chapter V of the Finance Act, 1994 and the service provided to various clients by the said service provider is taxable service as provided under Section 65(105)(zzzz) of the Finance Act, 1994. It was further observed that the said service provider had not obtained service tax registration as required under Section 69 of the Finance Act, 1994 and they had not discharged their service tax liability and hence evaded service tax total amounting to Rs.7,63,230/· for the period from 01.06.2007 to 30.09.2008 as mentioned in para supra.

7. Thus it appeared that the said service provider had contravened the provisions of : (i) Section 69 of the Finance Act, 1994 readwith Rule 4 of the

Service Tax Rules, 1994 in as much as they failed to take registration from the department as Service provider for payment of Service Tax and have thereby rendered themselves liable to penalty as provided under Section 76 of Finance Act, 1994.

(ii) Section 68 of the Finance Act, 1994 read with Rule 6 of the Service Tax Rules, 1994 in as-much- as they have failed to pay the service tax amounting to Rs.7,63,230/- as mentioned in para supra for the period from 01.06.2007 to 30.09.2008 to the credit of the Government within the stipulated time limit;

(iii) Sec. 70(1) & 70(2) of the Finance Act, 1994 as amended read with Rule 7 of the Service Tax Rules, 1994 in as much as they have failed to self - assess the Service Tax on the taxable value received by them and to file ST-3 returns for the said service providing firm during the period from 01.06.2007 to 30.09.2008.

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8. All these acts of contravention of the provisions of Section 68, Section 69, and Section 70 of the Finance Act, 1994 read with Rule 4, Rule 6 and Rule 7 of the Service Tax Rules, 1994 appeared to be punishable under the provisions of Section 76, Section 77 and Section 78 of the Finance Act, 1994 as amended time to time.

9. Accordingly, M/s. Almas A. Puthawala & Others were issued a show cause notice bearing F.No. STC/505/Demand/Almas/Div. III/08-09 dated 22.10.2008 asking them as to why ;

(i) Services rendered by them should not be considered as taxable service under the category of “Renting of Immovable property Service” as defined under Section 65 of the Finance Act 1994, as amended, and the amount of taxable value of Rs.61,75,000/- received as payment / recovered by them from their customers should not be considered as taxable value and Service Tax amounting to Rs.7,63,230/- for the period from 01.06.2007 to 30.09.2008 should not be demanded from them under section 73(1) of the Finance Act, 1994 ;

(ii) Interest as applicable on the amount of service tax liability of Rs.7,63,230/- should not be paid by them for the delay in making the payment, under Section 75 of the Finance Act, 1994 as amended ;

(iii) Penalty should not be imposed upon them under Section 76 of the Finance Act, 1994 as amended for the failure to make the payment of service tax payable by them ;

(iv) Penalty should not be imposed upon them under Section 77 of the Finance Act, 1994 as amended for the failure to file prescribed service tax return within the stipulated time ; and

(v) Penalty should not be imposed upon them under Section 78 of the Finance Act, 1994 as amended for suppressing the value of taxable services provided by them before the Department with intent to evade payment of service tax amounting to Rs.7,63,230/-.

DEFENCE REPLY

10. Till date the service provider have not bothered to submit their written submission in this case.

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PERSONAL HEARING

11. Vide this office letter dated 18.06.2010, the service providers were requested to appear for personal hearing on 18.06.2010, but the service provider did not appear for personal hearing. Again vide this office letter dated 28.02.2011, the service providers were requested to appear for personal hearing on 16.03.2011. Shri Bhaumik Shukla, CA appeared for personal hearing and submitted that they will submit the defence reply within 10 days. But till date they have not submitted their defence reply. As such now I have no other option but to proceed further on the basis of records available on the file.

DISCUSSION & FINDINGS

12. The proceeding contemplated under the impugned Show Cause Notice is that M/s Almas A Puthawala & Others are engaged in the business of Renting of Immovable property falling under the category of ‘Renting of Immovable property Service’ without discharging their proper tax liability on the income collected in respect of rent earned towards providing ‘Renting of Immovable property Service’.

13.1 I find that the impugned Show Cause Notice has been issued to the service providers under the category of “Renting of Immovable Property Service”. The said service has been made taxable service vide Section 65 (90a) w.e.f 01.06.2007.

13.2 I find that “Renting of Immovable Property Service” as defined under Section 65 (90a) is as under ;

“renting of immovable property” includes renting, letting, leasing, licensing or other similar arrangements of immovable property for use in the course or furtherance of  business or commerce but does not include —

(i) renting of immovable property by a religious body or to a religious body; or

(ii) renting of immovable property to an educational body, imparting skill or knowledge or lessons on any subject or field, other than a commercial training or coaching centre;

Explanation 1.— For the purposes of this clause, “for use in the course or furtherance of business or commerce” includes use of immovable property

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as factories, office buildings, warehouses, theatres, exhibition halls and multiple-use buildings;]*

Explanation 2.— For the removal of doubts, it is hereby declared that for the purposes of this clause “renting of immovable property” includes allowing or permitting the use of space in an immovable property, irrespective of the transfer of possession or control of the said immovable property;

13.3 The service of “Renting of immovable Property” was taxable service under Section 65(105) (zzzz) of the Finance Act, 1994 as amended by the Finance Act 2010 with the retrospective effect from 1st June 2007, according to which, the “taxable service” means any service provided or to be provided-

“to any person, by any other person, by renting of immovable property or any other service in relation to such renting, for use in the course of or, for furtherance of, business or commerce.”;

Explanation-1- for the purposes of this sub-clause, “immovable property” includes-(i) Building and part of a building, and the land appurtenant

thereto; (ii) land incidental to the use of such building or part of a

building; (iii) the common or shared areas and facilities relating thereto;

and (iv) in case of a building located in a complex or an industrial

estate, all common areas and facilities relating thereto, within such complex or estate,

(v) Vacant land, given on lease or license for construction of building or temporary structure at a later stage to be used for furtherance of business or commerce][clause (v) inserted with effect from 01.07.2010 vide Finance Act, 2010]but does not  include-

a) vacant land solely used for agriculture, aquaculture, farming, forestry, animal husbandry, mining purposes;

b) vacant land, whether or not having facilities clearly incidental to the use of such vacant land;

c) land used for educational, sports, circus, entertainment and parking purposes; and

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d) building used solely for residential purposes and buildings used for the purposes of accommodation, including hotels, hostels, boarding houses, holiday accommodation, tents, camping facilities.

Explanation 2.—For the purposes of this sub-clause, an immovable property partly for use in the course or furtherance of business or commerce and partly for residential or any other purposes shall be deemed to be immovable property for use in the course  or  furtherance of business or commerce;

13.4. From the above definition, it is very much clear that the service provided by the noticees falls under “Renting of Immovable Property Services” and it is a very much taxable service. It is also not a disputed fact that they have provided the said service to M/s Parsoli Motors by giving their immovable property on lease.

14.1 I further find that the impugned show cause notice was issued prior to retrospective amendment effective from 01.06.2007, taken place vide Section 75 and 76 of the Finance Act., 2010. These retrospective amendment and its validations with effect from 01.06.2007, substantiated the content of the impugned show cause notice as, the period covered in the impugned show cause notice is 01.06.2007 to 30.09.2008. In this regard, I further find that M/s Home Solution Retail India Ltd had moved to Delhi High Court when the department have demanded service tax based on the earlier definition of taxable service i.e. prior to retrospective amendment have taken place. The Hon’ble Delhi High Court had given interim injunction to M/s Home Solution Retail India Ltd. However, against the said injunction order, the department had filed an appeal before the Apex Court against the judgment of Delhi High Court in the matter of Home Solution Retail India Ltd. and Ors. Vs. UOI (2009-PIOI-196-HC- DEL-ST). The aforesaid appeal came up for hearing before the Hon’ble Supreme Court on 04.02.2011. The Hon’ble Supreme Court has passed an order to the effect that the High Court of Delhi will hear and dispose off all the writ petitions as expeditiously as possible. Before the aforesaid hearing, the Hon’ble Supreme Court while hearing the appeal on 10.01.2011 filed by the department the Supreme Court has ordered that “interim stay of the operation of the impugned judgment till the next date”. Therefore, the order which was passed by the Supreme Court on 10.01.2011 would continue to operate till the disposal of the writ petitions in the High

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Court (post amendments), staying the levy of service tax on renting of immovable property has been nullified.

Thus, I find that the basis of Stay granted in the case of M/s Home Solution … by the Hon’ble Delhi Court does not come to their rescue for non payment of service tax taken.

14.2 Further, also I find that, the hon’ble Punjab and Haryana High Court has in CWP No.11597 of 2010, in the case of M/s Shubh Timb Steels Ltd. Vs UOI passed an order dated 22.11.2010 reported at 2010 (20) STR 737 (P&H), upheld the validity of levy of service tax on Renting of Immoveable Property and upheld Parliament legislative competence to levy Service Tax on Renting, with retrospective amendment. This view has been further followed by the hon’ble High Court of Orissa in the case of Utkal Builders Ltd., Vs UOI reported at 2011 (22) STR 257 (Ori.).

15. I find that in this case, the property located at Ground Floor, President Plaza, Thaltej Char Rasta, Sarkhej Gandhinagar Highway, Ahmedabad had been rented out to M/s Parsoli Motors for use in the course or furtherance of business or commerce. The said property is jointly owned by all the noticees which was purchased jointly with the individual share / investment. Moreover, in terms of the conditions in the lease deed, the monthly specific percentage of rent has also been agreed upon to be payable to each of the joint owner of the subject property as can be seen from the show cause notice. I also find that a single lease deed has been executed by all the notices i.e. joint owners as the ‘Lessors’ and the tenant M/s Parsoli Motors as the ‘Lessee’.

16. I find that in terms of Section 68 ibid every ‘person’ providing taxable service to any person has been made responsible to pay service tax. However, the term ‘person’ has not been found defined in the context of service tax. I find that it has been found defined vide clause (42) of section 3 of the General Clauses Act, 1897, as “person shall include any company or association of body of individual, whether incorporated or not”.

17.1 As regards to scope of ‘includes’, the Apex Court in the case of Doypack System (Pvt.) Ltd. V/s UOI reported at 1988(36) ELT 201 (SC), has held that it is well settled that the word ‘includes’ is an inclusive definition and expands the meaning. In this context, it would be of benefit to extract the Judgment of the Hon’ble Supreme Court of India in the case of

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Karnataka Power Transmission Corporation Ltd Vs Ashok Iron Works Pvt. Ltd., reported in 2009 AIR SCW 1502 at paras 12, 13 & 14 which reads as follows :

“12. Lord Watson in Dilworth v. Commissioner of Stamps (1899) AC 99 made the following classic statement :

“The word “include” is very generally used in interpretation clauses in order to enlarge the meaning of words or phrases occurring in the body of the statute; end when it is so used these words or phrases must be construed as comprehending, not only such things as they signify according to their natural import, but also those things, which the interpretation clause-declares that they shall include. But the word “include” is susceptible of another construction, which may become imperative, if the context of the Act is sufficient to show that it was not merely employed for the purpose of adding to the natural significance of the words or expressions defined, It may be equivalent to “mean and include”, and in that case it may afford an exhaustive explanation of the meaning which, for the purposes of the Act, must invariably be attached to these words or expressions.”

15. Dilworth (supra) and few other decisions came up for consideration in Peerless General Finance and Investment Co. Ltd. and this Court summarized the legal position that inclusive definition by the Legislature is used; (one) to enlarge the meaning of words or phrases so as to take in the ordinary, popular and natural sense of the words and also the sense which the statute wishes to attribute to it; (two) to include meaning about which there might be some dispute; (three) to bring under one nomenclature all transactions possessing certain similar features but going under different names.

16. It goes without saying that interpretation of a word of expression must depend on the text and the context. The resort to the word ‘includes’ by the Legislature often shows the intention of the Legislature that it wanted to give extensive and enlarged meaning to such expression. Sometimes, however, the context may suggest that word “includes” may have been designed to mean “means” The setting, context and object of an enactment may provide sufficient guidance for interpretation of word “includes” for the purposes of such enactment.”

17.2 Further, as held in the case of Arunachal Forests Products Ltd. V/s UOI reported at 1993 (66) ELT 345 (Gau), inclusive definition may enlarge the scope or include something which may be disputed. Further, also in the case of Tata Consultancy Service V/s State of Andhra Pradesh reported at 2004(178) ELT 22(SC), the Apex Court held that ‘includes’ used in a clause will include all those which are sought to be included.

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17.3 Accordingly, in the facts and circumstances of the case, all the noticees acted as the association of individuals in relation to providing the subject service to the ‘Lessee’. The service has been provided jointly i.e. by a single lease deed to a single person i.e. the lessee namely M/s Parsoli Motors. The service provided is a taxable service falling in the category of Renting of Immovable Property. The recipient of the service has received a single service. It is immaterial whether the recipient of the service has made payment by a single Cheque or multiple Cheques as per the directions of the said noticees i.e. the joint owners of the property.

17.4 It can be the plea of the noticees that renting of immovable property service provided by each person was to be treated as indivisible service and rent receipt by individual person was to be treated as a single service. I do not find any force in the argument. On one hand they consider that it is ‘indivisible service’ and on other hand it is said that rent receipt by individual should be treated as a ‘single service’. The nature of service provided, in this case, is renting of a premise for business purpose, to a recipient only. Thus an indivisible single service has been provided jointly by individuals, which according to me, can not be considered to be divided into 4 services on the ground that such service has been provided jointly by 4 individuals.

17.5.1 I further find that Chargeability or liability to Income Tax is on earning where earning / income of the members of collectively owned property is not determinable, obviously income tax will be charged as associations of persons. Whereas, in the case of service tax, it is not on earning or income but on the gross value of service provided. Moreover, unless and until value of service provided with service tax is received from the service recipient, no service tax liability arises. In the instant case, indivisible service has been provided to a single recipient jointly by number of persons i.e. noticees in their capacity as co-owners of the property acting as the association of individuals.

18. I conclude that in the facts and circumstances of the case, joint owners of the property should be considered as ‘association of individuals’ which is included in the definition of ‘person’ in terms of the clause (42) of Section 3 of the General Clauses Act, 1897.

19.1.1 I find that the service of “Renting of Immovable Property” is an indivisible service where the service is being provided by renting out the immovable property, which, in this case, is owned by more than one

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individual jointly and thus the service to the recipient namely M/s Parsoli Motors has been provided jointly by all the noticees acting as the ‘association of persons’ irrespective of the fact whether or not gross amount of taxable service provided received from the recipient by a single Cheque or by separate Cheques issued to all the joint owners in terms of the condition incorporated in the Lease Deed. In such a situation, by no stretch of imagination, it can be considered that since separate payments have been made by the recipient of service, such service provided to the recipient should be considered separate service provided by all the individuals i.e. the noticees.

19.2.2 Accordingly, I am of the firm opinion that the threshold exemption limit (Rs.8 lakhs during 2007-08 and Rs.10 lakhs during 2008-09) should not be applicable taking into consideration the total gross amount received as taxable value by all the noticees in their capacity as the ‘association of persons’ and not the taxable value received by an individual noticee.

19.3 In view of the above discussion, I conclude that benefit of threshold exemption vide Noti. No. 06/2005-S.T., dated 01.03.2005 as amended, is not admissible to them and that the total gross amount received as taxable value from the service recipient should be considered as the taxable value for discharging service tax liability considering the ‘association of persons’ as the ‘person’, as a single service provider.

20. From the above discussion, it is concluded that the noticees did not discharge their statutory obligation deliberately. They were well aware of their service tax liability even then they did not pay service tax on the taxable services being provided by them to M/s Parsoli Motors and thus, there was suppression of material facts from the department with intent to evade payment of service tax deliberately. The service tax amount not paid by the noticees is therefore, recoverable from them under the provisions of sub-section (2) of Section 73 read with Section 68 of the Finance Act, 1994.

21. I find that the noticees have contravened the provisions of Section 67 and Section 68 of the Finance Act, 1994 read with Rule 6 of the Service Tax Rules, 1994, in as much as they have suppressed the taxable value and also failed to make payment of service tax of Rs.7,63,230/- on such suppressed value under the category of ‘Renting of Immovable Property’ service, such amount of service tax is required to be paid by them along with applicable interest in terms of the provisions of Section 73 and Section 75 of the Finance Act, 1994.

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22. Since the said noticees have not discharged service tax liability on the amount of taxable service received and therefore, they have contravened the provisions of Section 67 and 68 of the Finance Act, 1994 and thereby rendered themselves for penal action under the provisions of Sections 76, 77 and 78 of the Finance Act 1994.

Penalty under Section 76:

23.1 I further observe that during the relevant period M/s Almas A Puthawala & Others have defaulted in payment of service tax which has been established as not paid, in accordance with the provisions of Section 68 of the Finance Act, 1994 read with Rule 6 of the Service Tax Rules, 1994, and thereby rendered liable to pay mandatory penalty under the provisions of Section 76 of the Finance Act, 1994 for default in payment of service tax on time till the final payment. It has come to my notice that till date M/s Almas A Puthawala & Others have not paid the service tax, hence imposition of mandatory penalty under Section 76 is once again justified.

23.2 Accordingly, I hold that M/s Almas A Puthawala & Others are liable to imposition of penalty under Section 76 of the Finance Act, 1944. My conclusion is also based on various decisions of Hon’ble High Courts & Tribunals as mentioned below ;

CCE & ST Vs First Flight Couriers Ltd reported at 2007(8) STR 225 (Kar.)

UOI Vs Aakar Advertising, reported at 2008 (11) STR.5 (Raj.) UOI Vs Shiv Ratan Advertisers reported at 2008 (12) STR 690

(Raj.) Shiv Network Vs CCE, Daman reported at 2009 (14) STR 680

(Tri-Ahmd) CCE, Vapi Vs Ajay Sales Agencies reported at 2009 (13) STR 40

(Tri–Ahmd) Siddhi Motors Vs CCE, Rajkot reported at 2009 (15) STR 422

(Tri-Ahmd)

23.3 I further observe that the Hon’ble CESTAT in a recent judgment in the case of M/s Gujarat Industrial Security Force Society Vs CST, Ahmedabad, vide order No. A/1110/WZB/AHD/2010 dated 05.08.2010, has held that no lenient view can be taken under Section 76 of the Finance Act, 1994. The relevant paras are reproduced below ;

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“2. After hearing both the sides, I find that in this case, the assessee was registered more than 6 years back and no explanation has been given by them for delayed filing of return and delayed payment of service tax. Under these circumstances, I am not finding fault in stand taken by the lower authority that penalty is imposable under section 76 and once it is held that penalty is imposable under section 76, the amount fixed as per the provision of section 76 is required to be imposed. Under these circumstances, even though the Ld. Advocate submitted that the appellant is a non profit organization, no lenient view can be taken in view of the provisions of law.3. Accordingly, the appeal is rejected.”

23.4 Hon’ble High Court of Gujarat in the case of CCE & Cus. Vs Port Officer, reported at 2010 (19) STR 641 (Guj) has now settled the issue of penalty under Section 76. The relevant para is reproduced below ;

“10. A plain reading of Section 76 of the Act indicates that a person who is liable to pay service tax and who has failed to pay such tax is under an obligation to pay, in addition to the tax so payable and interest on such tax, a penalty for such failure. The quantum of penalty has been specified in the provision by laying down the minimum and the maximum limits with a further cap in so far as the maximum limit is concerned. The provision stipulates that the person, who has failed to pay service tax, shall pay, in addition to the tax and interest, a penalty which shall not be less than one hundred rupees per day but which may extend to two hundred rupees for everyday during which the failure continues, subject to the maximum penalty not exceeding the amount of service tax which was not paid. So far as Section 76 of the Act is concerned, it is not possible to read any further discretion, further than the discretion provided by the legislature when legislature has prescribed the minimum and the maximum limits. The discretion vested in the authority is to levy minimum penalty commencing from one hundred rupees per day on default, which is extendable to two hundred rupees per day, subject to a cap of not exceeding the amount of service tax payable. From this discretion it is not possible to read a further discretion being vested in the authority so as to entitle the authority to levy a penalty below the stipulated limit of one hundred rupees per day. The moment one reads such further discretion in the provision it would amount to re-writing the provision which, as per settled canon of interpretation, is not permissible. It is not as if the provision is couched in a manner so as to lead to absurdity if it is read in a plain manner. Nor is it possible to state that the provision does not further the object of the Statute or violates the

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legislative intent when read as it stands. Hence, Section 76 of the Act as it stands does not give any discretion to the authority to reduce the penalty below the minimum prescribed.”

23.5 The Hon’ble High Court of Gujarat has further confirmed the above view in the case of CCE Vs S J Mehta & Co., reported at 2011 (21) STR 105 (Guj.) and CCE Vs Bhavani Enterprises reported at 2011 (21) STR 107 (Guj.).

Penalty under Section 77 :

24. I further find that the service provider has failed to take registration and failed to file returns & hence they are liable for penalty under Section 77 for not taking service tax registration and not filing service tax returns.

Penalty under Section 78 :

25.1 I further observe that the show cause notice also proposes imposition of penalty under Section 78 of the Finance Act, 1994. I find that fraud, suppression of facts and wilful mis-statement on the part of M/s Almas A Puthawala & Others has been established beyond doubt as discussed and concluded in the earlier part of this order. Accordingly, I hold that M/s Almas A Puthawala & Others are also liable to penalty under the provisions of Section 78 of the Finance Act, 1994.

25.2 As it is already proved that the service provider had suppressed the facts, the consequences shall automatically follow. Hon’ble Supreme Court has settled this issue in the case of U.O.I Vs Dharmendra Textile Processors reported in 2008 (231) ELT 3 (S.C) and further clarified in the case of U.O.I Vs R S W M reported in 2009 (238) ELT 3 (S.C). Hon’ble Supreme Court has said that the presence of malafide intention is not relevant for imposing penalty and mens rea is not an essential ingredient for penalty for tax delinquency which is a civil obligation.

25.3 I, therefore, hold that they have rendered themselves liable to penalty under Section 78 of the Finance Act, 1994. My above view gets support from below mentioned case laws ;

Shiv Network Vs CCE, Daman reported in 2009 (14) STR 680 (Tri.Ahmd.)

CCE, Vapi Vs Ajay Sales Agencies reported in 2009 (13) STR 40 (Tri. Ahmd.)

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Order No. A/754/WZB/AHD/2010 dt. 09.06.2010 / 23.06.2010 in the case of M/s Bajrang Security Services Vs CST, Ahmedabad.

Order No. A/1937/WZB/AHD/2010 dated 08.10.2010 / 20.12.2010 in the case of M/s Dhaval Corporation Vs CST, Ahmedabad.

25.4 I further observe that recently hon’ble High Court of Punjab & Haryana, in the case of CCE Vs Haryana Industrial Security Services reported at 2011 (21) STR 210 (P&H), has also upheld the penalty equal to service tax imposed under Section 78 of the Finance Act, 1994. Hon’ble Karnataka High Court has also taken similar view in the case of CCE, Mangalore Vs K Vijaya C Rai reported at 2011 (21) STR 224 (Kar.)

Both Penalty under Section 76 & 78 – Justified:

26.1 I also find that penalty under Section 76 ibid is provided for failure to pay service tax whereas penalty under Section 78 ibid is for suppressing value of taxable service. In the instant case, service tax liable to be paid in terms of Section 68 read with Rule 6 of the Service tax Rules, 1994, have not been found paid as well as service tax has not been paid / short paid by suppressing value of taxable service by reason of wilful mis-statement and suppression of facts. Of course these two offences may arise in the course of same transaction, or from the same action of the person concerned. But the incidents of imposition of penalty are distinct and separate and even if the offences are committed in the course of same transaction or arises out of the same act the penalty is imposable for ingredients of both offences, this aspect was also considered by the Hon’ble High Court of Kerala in the case of Assistant Commissioner, C.Ex. Vs Krishna Poduval – 2006 (1) STR 185 (Ker). I also find that the Hon’ble Mumbai Tribunal in the case of Golden Horn Container Services Pvt. Ltd. v/s Commr. of C. Ex., Raipur reported at 2009 (16) S.T.R. 422 (Tri.-Mumbai), has held that Section 76 provides for a penalty who commits default simpliciter in payment of the tax whereas section 78 is a more stringent penal provision, which provides harsher penalty who commits default with mens rea. Since in this case also, M/s Almas A Puthawala & Others has committed default with mens rea, the decision of the tribunal is squarely applicable.

26.2 Therefore, I am of the view that in the facts and circumstances of the case, it is justifiable, if the penalty is imposed under the provisions of Section 76 and 78 of the Finance Act, 1994, separately, following the decisions of Hon’ble Kerala High Court and Mumbai tribunal (supra). My views are also further supported by various decisions of tribunals in the cases of ;

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a) Shiv Network v/s Commissioner of Central Excise & Customs, Daman reported at 2009 (14) S.T.R. 680 (Tri.-Ahmd.)

b) Commissioner of Central Excise, Vapi v/s Ajay Sales Agencies reported at 2009 (13) S.T.R. 40 (Tri.-Ahmd.), and

c) Mett Macdonald Ltd. v/s Commissioner of Central Excise, Jaipur reported at 2001 (134) E.L.T. 799 (Tri.-Del.).

d) M S Shah & Co., Vs CST, Ahmedabad – Order No. A/1328/ WZB/ Ahd/ 2010 dated 30.06.2010 / 26.08.2010.

e) Bajarang Security Services Vs CST, Ahmedabad – Order No. A/745/ WZB/Ahd/2010 dated 09.06.2010 / 23.06.2010.

f) CESTAT, Principal Bench, New Delhi in the case of Bajaj Travels Ltd., Vs CCE, Chandigarh – 2009 (16) STR 183 (Tri.Del.)

27. In view of the above discussions and findings, I pass the following order:

-: O R D E R :-

(i) I deny the exemption vide Noti. No. 06/2005-S.T., dated 01.03.2005 as amended, on the ground that the indivisible service falling in the category of Renting of Immovable Property Service, has been provided to a recipient jointly and collectively by all the noticees acting as ‘association of individuals’.

(ii) I consider the Services rendered by them as taxable service under the category of “Renting of Immovable Property Service” as defined under Section 65 (90a) of the Finance Act 1994, as amended, and consider the amount of taxable value of Rs.61,75,000/- received as payment / recovered by them from their service recipient as taxable value and accordingly, confirm the Service Tax amounting to Rs.7,63,230/- (Rupees Seven Lakhs Sixty Three Thousand Two Hundred Thirty Only) for the period from 01.06.2007 to 30.09.2008 under Section 73(2) of the Finance Act, 1994, and the same should be recovered from an individual noticee as under as per their share ;

Sr.No. Name of the noticee

Amount of Service Tax confirmed to be recovered.

1 Almas A Puthawala

1,90,807.50 (Rs. One Lakhs Ninety thousand eight hundred seven & paise fifty only)

OIO No. 09/STC-AHD/ADC(MKR)/2011-12 Page 17 of 19

2 Saba M Puthawala

1,90,807.50 (Rs. One Lakhs Ninety thousand eight hundred seven & paise fifty only)

3 Tehsin Atik Puthawala

1,90,807.50 (Rs. One Lakhs Ninety thousand eight hundred seven & paise fifty only)

4 Nadima Aiyub Puthawala

1,90,807.50 (Rs. One Lakhs Ninety thousand eight hundred seven & paise fifty only)

Total: 7,63,230/-

(iii) I direct S/Shri Almas A Puthawala, Saba M Puthawala, Tehsin Atik Puthawala & Nadima Aiyub Puthawala to pay the interest as applicable on the amount of their service tax liability for the delay in making the payment under Section 75 of the Finance Act, 1994.

(iv) I impose a penalty of Rs.200/- (Rupees Two Hundreds Only) upon them, per day or at the rate of 2% of the service tax amount per month, whichever is higher, under the provisions of Section 76 of the Finance Act, 1994, as amended, for failure to pay Service Tax and Education Cess within the stipulated period as required under the provisions of Section 68(1) of the Finance Act, 1994 read with Rule 6 of the Service Tax Rules, 1944, as amended. The penalty under the Section 76 should be calculated upto 10.05.2008 in view of amendment under Finance Act, 2008. As the actual amount of penalty could be depending on actual date of payment of service tax, however, as per Section 76 of the Finance Act, 1994, penalty will be restricted to the above confirmed amount of service tax liability.

(v) I impose a penalty of Rs.6,000/- (Rupees Six Thousand Only) upon them, for their failure to file prescribed S.T.-3 half yearly returns, under Rule 7C of the Service Tax Rules, 1994 read with section 70 & 77 of the Finance Act, 1994.

(vi) (a) I also impose a penalty of Rs.7,63,230/- (Rupees Seven Lakhs Sixty Three Thousand Two Hundred Thirty Only) upon them under Section 78 of the Finance Act, 1994 for suppressing the value of taxable services provided by them before the Department with intent to evade payment of service tax under the category “Renting of Immovable Property Service”. However, convenient distribution of Penalty amount imposed as above, among them could be as under:

Sr.No. Name of the Amount of Service Tax confirmed to be

OIO No. 09/STC-AHD/ADC(MKR)/2011-12 Page 18 of 19

noticee recovered.1 Almas A

Puthawala1,90,807.50 (Rs. One Lakhs Ninety thousand

eight hundred seven & paise fifty only)

2 Saba M Puthawala

1,90,807.50 (Rs. One Lakhs Ninety thousand eight hundred seven & paise fifty only)

3 Tehsin Atik Puthawala

1,90,807.50 (Rs. One Lakhs Ninety thousand eight hundred seven & paise fifty only)

4 Nadima Aiyub Puthawala

1,90,807.50 (Rs. One Lakhs Ninety thousand eight hundred seven & paise fifty only)

Total: 7,63,230/-

(b) If the service tax amount is paid along with appropriate interest as applicable, within 30 days from the date of receipt of this order, then the amount of penalty imposed under Section 78 shall be reduced to 25% of the service tax amount, provided if such penalty is also paid within such period of 30 days.

(viii) It is further clarified that the distribution of Service tax liability and penalty amount under Section 78 among the concerned person has been suggested above in this order as per the share of each person. The same ratio can be applied with respect to other penalty imposed under Section 70, 76 and 77. However, if any person makes full or partial payment to government, on behalf of other member (s), the same shall also be treated as payment in compliance of this order.

The show cause notice bearing No. STC/505/Demand/Almas/ Div.III/08-09 dated 22.10.2008 is disposed of accordingly.

-Sd-

( Dr. Manoj Kumar Rajak)Additional Commissioner,

Service Tax :Ahmedabad.

F.No.STC/505/Demand/Almas/D-III/08 Date : 18.05.2011

BY REGISTERED AD

To1. Almas A Puthawala ,2. Saba M Puthawala,3. Tehsin Atik Puthawala,4. Nadima Aiyb Puthwala.

9/B, Kashmira Society,Narayannagar Road,Paldi, Ahmedabad.

OIO No. 09/STC-AHD/ADC(MKR)/2011-12 Page 19 of 19

Copy to:

1. The Commissioner of Service Tax, Ahmedabad. (Att. Review Cell) 2. The Assistant Commissioner, Service Tax, Div-III, A’bad. 3. The Supdt. AR-XV, Service Tax Division III, Ahmedabad with extra

copy of the OIO to be delivered to the assessee and submit the acknowledgement to this office.

4. Guard File.