GST Helpdesk   Subscription   Demo   New User   Login      
Tax Management India .com
TMI - Tax Management India. Com
Extracts
Home List
← Previous Next →

2016 (7) TMI 307 - GUJARAT HIGH COURT

2016 (7) TMI 307 - GUJARAT HIGH COURT - 2016 (44) S.T.R. 391 (Guj.) , [2016] 95 VST 82 (Guj) - Taxability of services provided by the SEZ unit to the DTA unit of the same assessee - principle of mutuality - Maintainability of appeal before the High Court - whether the appeal would lie before the Honble Supreme Court as provided under section 35(L) of the Act? - Demand of service tax with interest and penalty - The assessee opposed such proposal mainly on the ground that one unit of a company can .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

her it has another unit situated in Domestic Tariff Area or not. In particular, Rule 19(7) of the Special Economic Zones Rules, 2006 while recognising that the same legal entity may have two units, one in SEZ and another in DTA, mandates that the two would have distinct identities with separate books of accounts. - For various purposes, thus a SEZ unit of an enterprise which also has an additional unit in Domestic Tariff Area, therefore, has a distinct identity. Its accounts are separate, it .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

n be separately worked out. - Under the circumstances, in view of statutory scheme noticed in the Finance Act, 1994 and Special Economic Zones Act, 2005, the contention of the respondent company that on the principle of mutuality, the services rendered by its SEZ unit to a Domestic Tariff Area unit, would not be chargeable to service tax, cannot be accepted. - Valuation - free services - Held that:- When the service is provided but no value thereof is charged, there would be no question .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

e possible for the authority to collect any service tax on such service. - For such reasons, while therefore, dismissing the Revenue's appeal against the judgement of the Tribunal, on the grounds different from which appealed to the Tribunal, we answer the question clarifying that in the present case, no service tax was leviable since the SEZ unit of respondent assessee had not charged for the services provided to its DTA unit. - Decided against the revenue. - TAX APPEAL NO. 42 of 2013 With .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

ng substantial questions of law were framed : (I) Whether, against the impugned judgement and order passed by the Customs, Excise & Service Tax Appellate Tribunal, present appeal before this Court would be maintainable or not and/or whether the appeal would lie before the Honble Supreme Court as provided under section 35(L) of the Act? (II) If the Question No.(I) is answered in affirmative and it is held that the appeal would be maintainable before this Court, in that case, to consider the f .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

ould be maintainable before the High Court in terms of section 35F of the Central Excise Act, 1994( the Act for short). The sole surviving question therefore, is whether the Tribunal erred in holding that the respondent was not liable to pay service tax. This question arises in the following background : 4. The respondent is a company registered under the Companies Act and has various units established in the country. One of its units is situated in the Special Economic Zone( SEZ for short). Thi .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

authority therefore, issued a show cause notice why service tax on such services provided by the assessee should not be levied with penalty and interest. The assessee opposed such proposal mainly on the ground that one unit of a company cannot provide service to another unit since for providing taxable service, it is necessary that there should be two separate entities. The assessee pressed in service the principle of mutuality and contended that there cannot be any service tax on such activitie .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

f such premises or offices. He also referred to subrule( 7) of rule 19 of the Special Economic Zones Rules, 2006,(hereinafter referred to as the Rules of 2006 ) which provides that if an enterprise is operating both as a Domestic Tariff area unit as well as a Special Economic Zone Unit, it shall have two distinct identities with separate books of accounts, but it shall not be necessary for the Special Economic Zone unit to be a separate legal entity. He recorded that assessee's SEZ and DTA u .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

thin its sweep an individual, a Hindu Undivided Family, a cooperative society, a company or even a proprietary concern or an association of person or body of individuals, a local authority and any agency office or branch owned or controlled by such individual, HUF etc. He was therefore, of the opinion that the respondent assessee had not paid service tax though liable. He also held that the respondent assessee had breached relevant provisions of the Finance Act, 1944. He therefore, ordered recov .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

uld not mean they are separate entities. The Tribunal was of the opinion that service tax would be levied on a transaction between a person and another person and levy of service tax therefore, would require a transaction between two persons. It is against this judgement that the department has filed the present appeals. 6. Learned counsel for the department contended that the Tribunal committed an error in interpreting the provisions of the Finance Act, 1994. SEZ unit was distinct and separate .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

l relied on decision of Division Bench of this Court in case of Sintex Industries Ltd. v. Commissioner of Central Excise reported in 2013(287) ELT 281 in which the assessee had two units within a common boundary wall, having two separate central excise registration. In such background, the Court observed that the assessee having obtained separate registration was estopped from contending that the two were not separate factories, simply because they were situated within a common boundary wall. 7. .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

: 1) In case of Commr. of Cus. & C. Ex., MeerutI v. Janardan Plywood Industries Ltd. reported in 2015(323) ELT 46 (Uttarakhand), in which it was found that the company had two manufacturing units. In context of small scale industries exemption, it was held that the manufacturer of both the units is a single legal entity and, therefore, aggregate value of clearances of both the units must be taken into account for determining the eligibility of SSI exemption. 2) In case of Sahney Steel and Pr .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

id take place was that the company from its registered office in Hyderabad took the goods to its branch office outside the State and arranged to deliver them to the buyer. 3) In case of UP State Cement Corporation Ltd. v. Commissioner of Sales Tax, UP reported in 1979 (43) STC 475 (ALL), it was noticed that UP Government owned two cement factories. One supplied cement to another for which it was also billed. In context of liability to pay sales tax, it was observed that before a transaction can .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

y the society from the sale of a plot by its member. 8. Having heard learned counsel for the parties and having perused the materials on record, we may refer to the relevant statutory provisions. Section 66 of the Finance Act,1994 pertains to charge of service tax and provides that there shall be levied a tax referred to as the service tax at the rate of 12 per cent of the value of taxable services referred in clauses (a) to (zzzzw) in subsection( 105) of section 65 and collected in such manner .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

chase orders and fulfilment services, information and tracking of delivery schedules, managing distribution and logistics, customer relationship management services, accounting and processing of transactions, [operational or administrative assistance in any manner], formulation of customer service and pricing policies, infrastructural support services and other transaction processing. Explanation For the purposes of this clause, the expression "infrastructural support services" include .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

s Act, 2005 defines Special Economic Zone as to mean a Special Economic Zone notified under the proviso to subsection( 4) of section 3 and subsection( 1) of section 4. Section 2(zc) defines unit to mean a unit set up by an entrepreneur in a Special Economic Zone and would include an existing unit. Section 7 of the Special Economic Zones Act, 2005 pertains to exemption from taxes, duties or cess and provides that any goods or services exported out of, or imported into, or procured from the Domest .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

the Domestic Tariff Area shall be chargeable to duties of customs including antidumping, countervailing and safeguard duties under the Customs Tariff Act, 1975 (51 of 1975), where applicable, as leviable on such goods when imported; and (b) the rate of duty and tariff valuation, if any, applicable to goods removed from a Special Economic Zone shall be at the rate and tariff valuation in force as on the date of such removal, and where such date is not ascertainable, on the date of payment of duty .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

nit and provides for various details that the letter of approval granted to a unit of manufacturing specified project in the SEZ units. Subrule( 7) thereof reads as under : (7) If an enterprise is operating both as a Domestic Tariff Area unit as well as a Special Economic Zone Unit, it shall have two distinct identities with separate books of accounts, but it shall not be necessary for the Special Economic Zone unit to be a separate legal entity: Provided that foreign companies can also set up m .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

eloper shall maintain proper accounts, financial yearwise, and such accounts which should clearly indicate in value terms the goods imported or procured from Domestic Tariff Area, consumption or utilization of goods, production of goods, including byproducts, waste or scrap or remnants, disposal of goods manufactured or produced, by way of exports, sales or supplies in the domestic tariff area or transfer to Special Economic Zone or Export Oriented Unit or Electronic Hardware Technology Park or .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

elopment Commissioner shall place the same before the Approval Committee for consideration. 01.07.2016 14. From these statutory provisions, it can be seen that upon the support services of business being provided by a service provider, service tax at the prescribed rates would be levied. In view of materials on record, we have proceeded on the basis that the respondent company SEZ unit had provided such services to its DTA unit. We may notice that the Special Economic Zones Act was enacted to pr .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

uld be subject to such terms and conditions as may be prescribed, exempt from the payment of taxes, duties or cess under all enactments specified in the First Schedule. Thus, for the purpose of taxation of various kinds within the unit situated in the Special Economic Zones, receive a special consideration. It is because of these concessions granted to such units that under section 30 of the Special Economic Zones Act, 2005, it is provided that in cases of goods removed from a Special Economic Z .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

wise, clearly indicating in value terms the goods imported or procured from Domestic Tariff Area, consumption or utilization of goods, production of goods,etc. Under subrule( 3), a unit would have to submit Annual Performance Reports which shall have to be placed before the Approval Committee for consideration. Likewise, under subrule( 7) of Rule 19 it is provided that if an enterprise is operating both Domestic Tariff Area unit as well as a Special Economic Zone Unit, it shall have two distinct .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

mandates that the two would have distinct identities with separate books of accounts. It is because of the special concessions in taxation, including duty drawbacks and other exemptions that the SEZ unit has to maintain scrupulously accounts of all imports and procurements from Domestic Tariff Area. It also has to pay customs duty on goods cleared to Domestic Tariff areas as if such goods were imported into India. Subrule( 7) of Rule 19 clarifies that in case of an enterprise which has unit bot .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

industry of a common enterprise or a company, is not a new or unknown phenomena. In number of cases, where Income Tax Act provides profit linked incentives such as deductions under sections 80HHC, 80I, 80IA, 80IB, etc., the industry or unit engaged in such eligible business is treated separate and distinct for the purpose of accounting so that deductions of the assessee out of its eligible business can be separately worked out. Similar principles would apply in other special deductions also whe .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

2005, the contention of the respondent company that on the principle of mutuality, the services rendered by its SEZ unit to a Domestic Tariff Area unit, would not be chargeable to service tax, cannot be accepted. If this principle is applied, the very artificial creation of treating a SEZ unit separate and distinct for accounting, consumption of raw materials, production and clearance purposes would shatter. The concept of mutuality is essentially based on the principle that where certain servi .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

f subsection( 105) of Section 65. For applicability of this charging section, therefore, what is needed is to ascertain the value of taxable service. In other words, service tax can be levied only if the service is provided, even if it is otherwise, a taxable service, carries a certain value. If the value of service provided is nil, there would be no occasion for charging the service tax. In essence, thus section 66 aims at collecting service tax when a certain service is provided for a value. T .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

arge was collected and in such a case, the authority would have ample power to inquire into the matter and come to appropriate conclusion on the basis of available materials on record. However, if the department proceeds on the premise that a certain service though otherwise a taxable service, the service provider did not collect any charge for the same from the service recipient, in our opinion, it would simply not be possible for the authority to collect any service tax on such service. 19. We .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

 

 

 

 

 



|| Home || Acts and Rules || Notifications || Circulars || Schedules || Tariff || Forms || Case Laws || Manuals ||

|| About us || Contact us || Disclaimer || Terms of Use || Privacy Policy || TMI Database || Members || Site Map ||

© Taxmanagementindia.com [A unit of MS Knowledge Processing Pvt. Ltd.] All rights reserved.

Go to Mobile Version