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2014 (9) TMI 1058 - HC - Service TaxLiability of service tax - Maintainability of appeal before the High Court - whether the two units of the assessee i.e. SEZ unit and DTA units are one or separate legal entity - SEZ units to carry out work in-house for the units located in Domestic Tariff Area (DTA) of L & T Ltd. - Held that - Since such question has not direct relation with the determination of rate of service tax or value of services, it is well within the bounds of jurisdiction of this court to adjudicate the matter. The decision of this court in the case of Ruchi Soya Industries Limited v. Union of India 2014 (12) TMI 310 - GUJARAT HIGH COURT would, therefore, be squarely applicable to the facts of the present case. The contention that the appeals are not maintainable, therefore, does not merit acceptance. The first question formulated by the court is accordingly answered in favour of the revenue and against the assessee. It is, accordingly, held that against the impugned order passed by the Appellate Tribunal, appeal would lie before this court under section 35G of the Central Excise Act, 1944.
Issues Involved:
1. Maintainability of the appeal before the High Court. 2. Whether the SEZ unit and DTA unit of L&T Ltd. are separate legal entities for the purpose of levy of Service Tax. Detailed Analysis: 1. Maintainability of the Appeal: The first issue revolves around whether the appeal against the Tribunal's order should be heard by the High Court or the Supreme Court. The respondent argued that the appeal should lie before the Supreme Court under section 35L of the Central Excise Act, 1944, as it involves the determination of the rate of duty or value of services. They cited several precedents, including the Karnataka High Court's decision in *Commissioner of S.T., Bangalore v. Scott Wilson Kirkpatrick (I) Pvt. Ltd.*, which outlined disputes that do not fall within the jurisdiction of the High Court under section 35G of the Act. The respondent contended that the case involves determining whether the activity is a service rendering activity, which directly relates to the rate of service tax. The appellant countered, arguing that the issue does not relate to the rate of duty or value of services but to whether the SEZ and DTA units of L&T Ltd. are separate legal entities. They referenced the Supreme Court's decision in *Navin Chemicals Mfg. & Trading Co. Ltd. v. Collector of Customs*, which clarified that the question must have a direct and proximate relation to the rate of duty or value of goods. The High Court examined the statutory provisions and precedents, concluding that the issue at hand does not relate to the determination of the rate of service tax or value of services. Instead, it pertains to whether the SEZ and DTA units are separate legal entities, a question of fact regarding the character of the assessee. Therefore, the High Court held that the appeal is maintainable before it under section 35G of the Central Excise Act, 1944. 2. SEZ and DTA Units as Separate Legal Entities: The second issue involves whether the SEZ unit and DTA unit of L&T Ltd. are separate legal entities for the purpose of levying Service Tax. The Tribunal had previously held that the SEZ and DTA units cannot be considered separate legal entities, and therefore, the services rendered by the SEZ unit to the DTA unit are not taxable. The respondent argued that the SEZ and DTA units are not separate persons as defined under section 2(5) of the SEZ Act. They contended that for Service Tax to be levied, there must be two legal persons involved - the service provider and the service receiver. The Tribunal supported this view, stating that the SEZ unit and DTA unit of L&T Ltd. are not separate legal entities and, thus, Service Tax is not applicable. The High Court noted that the principal controversy is whether the SEZ unit and DTA unit are separate legal entities, which does not have a proximate relation to the determination of the rate of service tax or the value of services. It is primarily a question of fact regarding the character of the assessee. The High Court agreed with the Tribunal's view that the SEZ and DTA units are not separate legal entities, and therefore, the services rendered by the SEZ unit to the DTA unit are not taxable. Conclusion: The High Court held that the appeal is maintainable before it under section 35G of the Central Excise Act, 1944. It also upheld the Tribunal's decision that the SEZ and DTA units of L&T Ltd. are not separate legal entities, and hence, the services rendered by the SEZ unit to the DTA unit are not subject to Service Tax. The appeals were listed for hearing on merits on 23rd December 2014.
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