2024 (6) TMI 1114 - HC - Service Tax

Invocation of extended period of limitation - non-payment of service tax in respect of the services rendered in the premises of TSL s Steelworks - recovery of service tax with interest and penalties - HELD THAT - The finding of the learned Tribunal that no documentary evidence was submitted to indicate that the service rendered by TGS to TSL was service to self is patently erroneous and perverse - There is no provision in law under which service tax is levied providing that two units of a public limited company registered under the Companies Act because of being separately registered as required under the Service Tax Rules 1994 can and are to be treated as two distinct persons and services provided by one unit to another shall be deemed to be taxable supply. In the absence of such specific provision transaction between two units of the same company cannot be held as service rendered by one unit to the other within the meaning of the Act. Two separate service tax registration of the two units is wholly irrelevant in this regard. It is settled law that one unit of the company does not and cannot render service to another unit of the same company as this would amount to service rendered to self which is not a taxable service under the Act. It is a principle settled by the Hon ble Apex Court in CCE Navi Mumbai Vs Amar Bitumen Allied Products Pvt. Ltd. 2006 (8) TMI 187 - SUPREME COURT that it is necessary that judicial precedent is followed and in the event a Bench of the same strength of the Tribunal seeking to differ with the decision of another Bench the matter has to be referred to the President of the Tribunal for reference to a larger bench for deciding the matter. Without assigning any reason or basis this judicial principle laid down by the Hon ble Apex Court has also been violated by the Tribunal in passing the impugned order. The law is no more res integra that a company incorporated under the Companies Act 1956 is a single person/entity in the eye of law and cannot reconstitute itself to several legal entities. Divisions/branches thereof cannot have identity different and distinct from the company. Reference in this regard may be made to Section 3(42) of the General Clauses Act 1897 - thus separate registration of each factory/premises of manufacturer/service provider does not and cannot render each one of such factory/premises of the manufacturer/service provider a separate legal entity. In fact there is no such provision in either the Central Excise Act or the Act or in any other law of the land. It is well settled that credit of input service is to be utilized for payment of service tax towards inter alia output service. There is or can be no dispute with this legal position and this is what the representatives of TGS and TSL agreed with during the course of personal hearing - TGS had rightly availed the subject CENVAT credits of service tax paid without there being any concomitant obligation to make payment of service tax on the services rendered to another unit of TSL. Contrary finding of the Tribunal is also erroneous and untenable. The Department s appeal is unsustainable and is rejected. The impugned order of the CESTAT being contrary to law and unsustainable in its entirety; the issue of whether the normal period or the extended period of limitation is sustainable in the instant case is irrelevant. Appeal of Revenue dismissed.

Summary

Issues Involved:

1. Whether services rendered by one unit/division of a company to another unit/division of the same company are "service" under the Finance Act, 1994 and exigible to service tax thereunder.
2. Whether the extended period of limitation can be invoked in this case.
3. Whether the impugned order of the Customs, Excise and Service Tax Appellate Tribunal (CESTAT) is a non-speaking and non-reasoned order, violating the principles of natural justice.

Issue-Wise Detailed Analysis:

1. Services Rendered by One Unit/Division to Another Unit/Division of the Same Company:

The primary contention was whether the services rendered by Tata Growth Shop (TGS), a unit of Tata Steel Ltd. (TSL), to another unit of TSL, constitute a "service" under the Finance Act, 1994, and thus are liable to service tax. The court held that TGS and TSL are part of the same legal entity. It is a settled principle that a company incorporated under the Companies Act, 1956, is a single person/entity in the eye of law and cannot reconstitute itself into several legal entities. Divisions or branches of a company cannot have an identity distinct from the company itself. Therefore, services rendered by one unit of TSL to another do not constitute a "service" provided by one person to another under Section 65(105) of the Act read with Section 66 thereof. The court found the Tribunal's distinction between TGS and TSL based on separate registrations as misconceived and irrelevant for determining the taxability of services between units of the same company.

2. Extended Period of Limitation:

The Revenue argued that the extended period of limitation should be invoked because TSL allegedly suppressed facts with the intent to evade service tax. However, the court noted that the Tribunal found no specific allegations of suppression, fraud, or intent to evade tax. The court emphasized that the Revenue's discovery of facts during the course of record checking, rather than from an independent source, does not justify invoking the extended period of limitation. The court concluded that the demand for service tax could only be sustained for the normal period of limitation, not the extended period.

3. Nature of the Tribunal's Order:

The Assessee contended that the Tribunal's order was non-speaking and non-reasoned, thus violating principles of natural justice. The court agreed, noting that the Tribunal failed to adequately address specific contentions and documentary evidence presented by the Assessee. The court found the Tribunal's conclusions to be patently erroneous and perverse, particularly the finding that TGS and TSL are different legal entities based on separate registrations. The court reiterated that separate registrations are procedural requirements and do not alter the legal identity of the company or its units.

Conclusion:

The court ruled in favor of the Assessee, holding that services rendered by one unit of TSL to another do not constitute taxable services under the Act. The court also rejected the Revenue's appeal regarding the extended period of limitation, finding no evidence of suppression or intent to evade tax. Consequently, the impugned order of the CESTAT was set aside as contrary to law and unsustainable. The Assessee's appeal was allowed, and the Revenue's appeal was dismissed.