CESTAT New Delhi set aside a ₹4.66 lakh service tax demand on rent from property let out as a hostel, but refused credit of ₹1,48,714 paid by challans without proof of credit-rule compliance.

The Customs, Excise and Service Tax Appellate Tribunal (CESTAT), New Delhi, has held that rent from property let out for use as a hostel falls within renting of residential dwelling for use as residence, which Section 66D(m) of the Finance Act, 1994 kept out of the scope of taxable service. It refused, however, a credit claim unsupported by evidence [Anju Makhija v. Commissioner of Central Excise & CGST, Jodhpur, 2026-juristway.com-3334-CESTAT(New Delhi)-ST].

The Bench of Ajay Sharma, Member (Judicial), and Hemambika R. Priya, Member (Technical), heard the appeal; the order was written by Ms. Priya. Acting on information from the Income Tax Department, the Department demanded ₹4,65,750 for 1 Apr 2016 to 30 Jun 2017. It treated the entire rent of ₹23,17,500 as taxable, including ₹16,38,750 the appellant said came from residential renting. The Commissioner (Appeals) upheld the demand on 2 Jun 2023 for want of documents.

The appellant, represented by a chartered accountant, argued that the nature of the rent was verifiable from her income tax returns and that the taxable amounts had been wrongly worked out. The Revenue said she had not appeared before the adjudicating authority and had produced no evidence.

The Tribunal noted that it had already decided the issue for this appellant for 2013-14 to 2015-16 in Final Order No. 51465/2026, dated 15 Sep 2026. There it held, with reference to the CBIC Education Guide, that the property let out for use as a hostel was a residential dwelling. Under Section 66D(m), renting of a residential dwelling for use as residence was outside taxable service. Following that order, the demand, interest and penalties were set aside.

On the claim for CENVAT credit of ₹1,48,714 paid through two challans dated 11 Mar 2019, the Tribunal held that credit is available only when the output service is taxable and on documents and records prescribed in Rules 9(2) and 9(6). No evidence of compliance was led, so the credit was denied. The appeal was allowed to that extent.

2026-juristway.com-3334-CESTAT(New Delhi)-ST