TMI Blog2021 (2) TMI 5X X X X Extracts X X X X X X X X Extracts X X X X ..... e requirement of the main part of Rule 2(l) of the Cenvat Credit Rules. The said service is also a service used in relation to TSL s business of manufacture of final products indirectly. The requirement of the inclusive part of the definition of Rule 2(l) of the Cenvat Credit Rules, as it then was, is also therefore satisfied. Hence, the said service is input service on which TSL is eligible to avail cenvat credit. A similar issue arose in the case of JUBILANT LIFE SCIENCES LTD. VERSUS C.C.,C.E S.T NOIDA [ 2017 (8) TMI 358 - CESTAT ALLAHABAD] . In this case input services were received and consumed in providing Scientific and Technical Consultancy Services by the R D centres of the assessee to its own units for manufacturing drugs and it was held that t he appellant have rightly taken cenvat credit as permissible under Rule 3 read with Rule 2(1) of CCR, 2004 as the services in question have been admittedly used by the manufacturer indirectly in relation to manufacture of final dutiable products. We also find that there is no dispute with regard to the distribution of the credit as permitted in the scheme of the Act and the Rules. The service involved is an input servic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... anded and penalties imposed upon the appellants are thus unsustainable. The impugned order cannot be sustained - The issue of time limitation need not be considered. Appeal allowed - decided in favor of appellant. - Service Tax Appeal Nos. 480, 481 of 2012 - FINAL ORDER NO. 75028-75029/2021 - Dated:- 28-1-2021 - SHRI P. K.CHOUDHARY, MEMBER(JUDICIAL) AND SHRI P.ANJANI KUMAR, MEMBER(TECHNICAL) Dr.Samir Chakraborty, Senior Advocate Shri Abhijit Biswas, Advocate for the Appellant (s) Shri D.Halder, Authorized Representative for the Respondent (s) ORDER Both the appeals are against the Order-in-Original No.40/S.Tax/Commr/2012 dated July 11, 2012 passed by the Commissioner of Central Excise Service Tax, Jamshedpur disallowing Cenvat Credit of Service Tax availed by the appellant no. 1 ( TSL ) during the period from April 2006 to March 2011 and confirming a demand amounting to ₹ 6,96,10,852/- under Rule 14 of the Cenvat Credit Rules, 2004 read with the Proviso to Section 11A(1) of the Central Excise Act, 1944 and Section 73(1) of the Finance Act, 1994 (in short, the Act ), along with interest under Rule 14 of the Cenvat Credit Rules read wi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 18,82,031/-. (e) The Department, during audit of the appellant s accounts, raised objection and contended that TSL had incorrectly availed cenvat credit of the service tax involved on the basis of ISD invoices since the Mumbai Head Office should have distributed the credit proportionately to all the divisions of TSL and not to the Jamshedpur Steelworks only. TSL denied such contention of the Department. (f) However, since on scrutiny of its records TSL noticed that it had inadvertently availed credit of service tax of ₹ 83,86,816/- which was attributable to its two collieries, West Bokaro and Jamadoba, which were engaged in manufacturing exempted goods, it reversed the said cenvat credit attributable to these mines along with interest payable thereon by debiting its RG 23 Part II on 01.04.2011 and 07.05.2011 respectively. The Department was informed about this by letters dated 06.5.2011 and 31.05.2011. (g) On 08.08.2011 a show cause notice was issued by the Commissioner alleging that TSL had contravened Rules 3, 4(7) and 9(6) of the Cenvat Credit Rules inasmuch as it had taken irregular and inadmissible cenvat credit amounting to ₹ 6,96,10,852/- ( ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Rules, 2002 read with provisions of Notification No. 35/2001-CE (NT) dated June 26, 2001, do not have separate legal entity of their own. They are a part of TSL, who is also the manufacturer for the purposes of, inter alia, Rule 3 of the Cenvat Credit Rules. (v) The agreement dated 18.12.1998 was entered into between TSL and Tata Sons Limited and not between the individual divisions of TSL and Tata Sons Limited. There is no mention in the agreement of any individual Division. There is also no mention of payment of subscription by the constituent division or divisions of TSL to Tata Sons Limited, inspite of the fact that benefit of the service rendered by Tata Sons Limited was enjoyed by all the divisions of TSL, since they are part of the same company, which is the recipient of such services. (vi) The entire subscription payable under the agreement was paid by TSL s Mumbai Head Office and the Jamshedpur Steelworks respectively. None of the divisions made any proportionate contribution towards subscription for the subject services rendered by Tata Sons Limited to the said service provider. No part of the cost of such subscription paid to Tata Sons Limited was borne o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (d) Commr. of C.Ex. Vs. National Engineering Industries Ltd., 2016 (42) STR 945 (Raj) (e) Titan Industries Ltd. Vs. Commissioner of Central Excise Service Tax, 2019-TIOL-2525-CESTAT-MAD (f) Godrej Consumer Products Ltd. Vs. Commr. of GST C.Ex., 2019 (369) ELT 841 (T). (x) Contrary to the erroneous finding of the Commissioner, the subject service, BEBP, on which service tax is paid upon classification as intellectual property services under Section 65(105)(zzy) of the Act. The Agreement allows user by TSL of the Tata brand name, on its products/goods manufactured at its factory in Jamshedpur. This enhances the marketability of the said goods. Thus the said services have been used by TSL, the manufacturer, indirectly in relation to the manufacture of final dutiable products in its factory, satisfying the requirement of the main part of Rule 2(l) of the Cenvat Credit Rules. The said service is also undisputedly a service used in relation to the business of manufacture of the subject goods indirectly, thus satisfying the requirement of the inclusive part of the definition of Rule 2(l) of the Cenvat Credit Rules. Hence, the said service duly qualif ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Ltd. under BEBP agreement dated 18.12.1998 between Tata Steel Ltd. and Tata Sons Ltd. is eligible as input service for TSL and the service tax paid is available as cenvat credit to TSL under the Cenvat Credit Rules, 2004? (ii) Whether TSL as ISD was entitled to, during the relevant period, distribute under the Cenvat Credit Rules, 2004, the credit of service tax paid as per the BEBP Agreement dated 18.12.1998 between itself and Tata Sons Ltd. exclusively to its Steelworks at Jamshedpur and not to other units of TSL? (iii) Whether any part of the demand is barred by limitation? 7. Re: Issue (i) 7.1 We find from the records that the service under the agreement was classified under Section 65(105)(zzy) of the Act as intellectual property services and service tax was paid accordingly. 7.2 The BEBP Agreement allows user by TSL of the Tata brand name, on its products/goods manufactured at its factory in Jamshedpur. Such user of the brand name enhances the marketability of the said goods. Hence, the services have been used by TSL, the manufacturer, indirectly in relation to the manufacture of final dutiable products in its factory at Jamshedpur. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the appeal and set aside the impugned order. 7.3.1 The appeal preferred by the Department against this order was dismissed by the Hon ble Supreme Court, with the finding that there was no merit in the appeal [Commissioner Vs. Jubilant Life Sciences Ltd., 2019 (29) GSTL J74 (SC)]. 7.3.2 The principle followed in this decision is also applicable herein. 7.4 We therefore conclude that the service involved is an input service under the Cenvat Credit Rules for TSL and the tax paid on such service is available as cenvat credit to TSL. Issue No. (i) is therefore answered in favour of the appellants. 8. Issue No. (ii) 8.1 Rule 2(m) and Rule 7 of the Cenvat Credit Rules, as in force prior to 01.4.2012, reads as follows: 2(m) input service distributor means an office of the manufacturer or producer of final products or provider of output service, which receives invoices issued under Rule 4A of the Service Tax Rules, 1994 towards purchases of input services and issues invoice, bill or, as the case may be, challan for the purposes of distributing the credit of service tax paid on the said services to such manufacturer or producer or provider, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Ecof Industries Ltd., 2011 (271) ELT 58 (Kar). Referring to Rules 2(l), 2(m) and 7 it has been observed and held therein as follows: 8. . Therefore, only two limitations are put for the distribution of credit by an Firstly, it cannot exceed the amount of service tax paid and secondly, the credit of service tax attributable to service used shall not be distributed in a unit exclusively engaged in the manufacture of exempted goods or providing of exempted services. 9. In fact, the Board has issued a circular clarifying in this regard, which is extracted by the Tribunal at para 7 which reads as under:- Para 7. Para 2.3 of the Master Circular referred to by the ld. Advocate reads as under:- 2.3 An input service distributor is an office or establishment of a manufacturer of excisable goods or provider of taxable service. It receives tax paid invoices/bills of input services procured (on which cenvat credits can be taken) and distributes such credits to its units providing taxable services or manufacturing excisable goods. The distribution of credit is subject to the conditions that (a) the credit distributed against an eli ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... said relevant period. 6. The first objection of the Department therefore that the credit from one unit was utilized for the purpose of duty liability of other unit without pro rata distribution by the input service distributor therefore would not survive in view of no previous restriction of this nature flowing from Rule 7 of the Rules of 2004 . 8.4 Further, on perusal of the records, we are of the view that TSL have rightly contended that there is no Tata Steel Group Companies . The company is Tata Steel Limited, which is incorporated and registered under the Companies Act, 1956 as a public limited company. It has various divisions/units situated in various parts of the country, as detailed hereinabove. The registered and Head Office of the company, including of the said divisions/units, is at Mumbai, the ISD in the instant case. No evidence to the contrary is disclosed in either the show cause notice or in the impugned order, as well as in the instant proceedings. It is settled proposition of law that divisions and units of a company are not separate legal entities/persons. They are part and parcel of the same legal entity, the company, of which they are di ..... X X X X Extracts X X X X X X X X Extracts X X X X
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