2025 (7) TMI 1712 - AT - Service Tax

Taxability of services between Joint Venture Companies - Refund of service tax paid by the appellant as per debit notes raised by Rajasthan State Mines Minerals Limited (RSMML) - two different entities are involved in the activity/transaction and as such the same cannot be treated as self service - Activities undertaken as per joint venture agreement can be said to be a service between copartners of the joint venture or not - rejection of refund on the ground that the claimant had not furnished concerned documentary evidences by which it could be established that the amount of Service Tax was actually paid by Assessee to M/s RSMML. Two different entities are involved in the activity/transaction and as such the same cannot be treated as self service - HELD THAT - The corporation is registered under Section 69 of the Finance Act 1994 and having Service Tax Registration No. AAACR78571IST001 and charging service tax on the services charges plus royalty recovered. Commissioner (Appeals) finds that the appellant filed the instant refund in respect of this service tax paid by them to the corporation. It is observed that after the introduction of Negative List w.e.f. 01.07.2012 the terms service is defined under Section 65(B)(44) of the Finance Act 1944 as any activity carried out by a person for another for consideration and includes a declared service. In the instant case two distinct legal entities vis M/s. Mayun Inorganics Ltd. (the appellant) and M/s. Rajasthan State Mineral Development Corporation Ltd. (the Corporation) are involved in the transaction and a consideration is also flowing for activity performed by the Corporation. It cannot be termed as self service in as much as two different legal persons/entities are involved in the said transaction. Activities undertaken as per joint venture agreement can be said to be a service between copartners of the joint venture or not - HELD THAT - Reference made to Explanation 3(a) of the definition of service according to which an unincorporated association or a body of persons as the case may be and a member thereof shall be treated as distinct persons. Resultantly Joint Venture and the members of the Joint Venture are to be treated as distinct person and held that taxable services provided for consideration by the Joint Venture to its members or vice versa and between the members of the Joint Venture are therefore taxable. M/s. Mayur Inorganics Ltd. being new Company is having distinct legal existence and the consideration flowing from the new Company to the CORPORATION is liable for service tax even in terms of the said CBEC Circular dated 24.09.2014. Rejection of refund also on the ground of non submission of documentary evidences - HELD THAT - The activity in question falls within the scope of taxable services as defined under Section 65B(44) of the Finance Act 1994. Section 65B(37) defines the person. According to both the provisions any activity carried out by one person for another person for consideration is a service and the company and its subsidiary company/joint ventures are the distinct persons. Resultantly it stands established that the services provided by RSMM to newly formed joint venture company for a consideration are covered under the aforesaid definitions. Both being the separate entities and the admitted fact that appellant had paid service tax as apparent from above mentioned invoices/debit notes. Accordingly RSMM had correctly paid the service tax. The appellant cannot claim refund of the service tax paid as per it liability. There are no infirmity in the order under challenge. Same is hereby upheld - appeal dismissed.

Summary

ISSUES:

Whether the transaction between two distinct legal entities in a joint venture arrangement can be treated as "self service" exempt from service tax liability.Whether a joint venture member has locus standi to claim refund of service tax paid to another joint venture member or the joint venture itself.Whether service tax charged by one entity on mining-related services provided to another distinct entity under an agreement is taxable under Section 65B(44) of the Finance Act, 1994.Whether refund claims are barred by limitation under Section 11B of the Central Excise Act, 1944 when filed after one year from the relevant date.Whether the refund claim is maintainable where the claimant has not directly deposited the service tax with the government.Whether service tax collected by one entity and not deposited under the jurisdiction of the assessing authority affects the refund claim's maintainability.Whether the amount claimed as refund constitutes unjust enrichment under Section 12B of the Central Excise Act, 1944 as made applicable under Section 83 of the Finance Act, 1994.

RULINGS / HOLDINGS:

The Court held that two distinct legal entities involved in a transaction cannot treat the transaction as "self service" since "any activity carried out by a person for another for consideration" falls within the definition of service under Section 65B(44) of the Finance Act, 1994.It was held that a joint venture and its members are "distinct persons" under Explanation 3(a) of Section 65B(44), and therefore taxable services provided between them are liable to service tax; hence, the appellant lacks locus standi to claim refund for service tax paid to another entity.The service tax charged by the corporation on mining services provided to the appellant company is taxable and correctly paid; the refund claim is not sustainable as the appellant did not bear the incidence of tax in law.Refund claims filed after expiry of one year from the relevant date are barred by limitation under Section 11B of the Central Excise Act, 1944 and liable to be rejected.The claimant who has not deposited the service tax directly to the government has no locus standi to file a refund claim for the same.The refund claim is not maintainable if the service tax collected by one entity was not deposited under the jurisdiction of the assessing authority where the refund is claimed.The service tax amount recovered by the claimant from buyers as part of sale price constitutes unjust enrichment under Section 12B of the Central Excise Act, 1944, and thus the claimant is not eligible for refund.

RATIONALE:

The Court applied the statutory definition of "service" under Section 65B(44) of the Finance Act, 1994, which includes "any activity carried out by a person for another for consideration," and Explanation 3(a) treating a joint venture and its members as distinct persons for taxation purposes.The Court relied on the principle that taxable services provided between distinct legal entities, including joint venture members, are subject to service tax, as clarified in the CBEC Circular dated 24.09.2014.The limitation bar under Section 11B of the Central Excise Act, 1944 was applied strictly to refund claims, emphasizing the one-year time limit from the relevant date for filing such claims.The Court emphasized the requirement of direct payment of service tax to the government by the claimant to maintain locus standi for refund claims, consistent with established jurisprudence.The doctrine of unjust enrichment under Section 12B of the Central Excise Act, 1944, as made applicable under Section 83 of the Finance Act, 1994, was applied to deny refund where the tax amount was passed on to buyers.No dissent or doctrinal shift was indicated; the Court upheld the established legal framework and prior authoritative interpretations regarding joint ventures and service tax liability.