2013 (12) TMI 1175 - AT - Service Tax

Waiver of predeposit of tax - Rent-a-cab service as well as air travel agency service - Reimbursement of expenses - Held that - there is no dispute that Rent-a-cab Operator and Air Travel Agency are two divisions of the appellant s company. The only allegation is that they have taken separate registrations in terms of Board s circular dt. 20.3.08 and therefore the argument that they are to be treated as separate legal entities would not be sustained. In view of that, we find that applicant is able to make out a prima facie case for waiver of predeposit of entire amount of tax, interest and penalty during pendency of appeal. Accordingly, predeposit of tax along with interest and penalty shall stand waived and recovery thereof stayed during pendency of the appeal - Stay granted.

Summary

Issues involved: Application for waiver of predeposit of tax, demand on inter-unit billing, parking charges reimbursement, separate registrations for divisions.

Waiver of Predeposit of Tax: The applicant sought waiver of predeposit of tax amounting to Rs.1,12,066 along with interest and penalty. The appellant argued that the demand on inter-unit billing of two divisions, namely Rent-a-Cab Operator and Air Travel Agency, both owned by the appellant's unit, should not be sustained. The major amount demanded was on inter-unit billing, which the appellant contended was not valid as both divisions belonged to the same unit. Additionally, the appellant claimed that parking charges collected from customers were merely reimbursement of expenses incurred by them. The Tribunal noted that the two divisions were part of the same company and had obtained separate registrations as per a Board's circular. The Tribunal held that the argument that they should be treated as separate legal entities based on separate registrations was not sustainable. Consequently, the Tribunal found that the appellant had made a prima facie case for the waiver of predeposit of the entire amount of tax, interest, and penalty during the appeal's pendency. Therefore, the predeposit of tax along with interest and penalty was waived, and the recovery thereof was stayed during the appeal's pendency. The stay application was allowed.

Separate Registrations for Divisions: The Tribunal considered the issue of separate registrations for the two divisions, Rent-a-Cab Operator and Air Travel Agency, within the appellant's company. The appellant argued that despite having separate registrations as per a Board's circular, the two divisions should not be treated as separate legal entities. The Tribunal agreed with the appellant's contention and held that obtaining separate registrations did not automatically establish the divisions as distinct legal entities. Consequently, the Tribunal concluded that the appellant's divisions should not be treated as separate legal entities based solely on separate registrations. This finding influenced the decision to waive the predeposit of tax, interest, and penalty during the appeal's pendency.

This judgment from the Appellate Tribunal CESTAT CHENNAI highlights the importance of considering the actual relationship between divisions within a company, even if they have obtained separate registrations. The decision emphasizes that separate registrations alone may not be sufficient to establish divisions as separate legal entities, especially when they are part of the same company. The judgment demonstrates the Tribunal's careful analysis of the facts and legal arguments presented, ultimately leading to the waiver of predeposit based on the appellant's prima facie case.