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2014 (5) TMI 464 - AT - Service TaxDemand of service tax - Separate entity or single entity - commissioning and installation services and maintenance and repair services - whether M/s. Tata Steel Ltd.(Growth Shop) and M/s. Tata Steel Ltd. are different legal entities or one and the same entity, whereby, the services rendered by M/s. Tata Steel Ltd.(Growth Shop) to M/s.Tata Steel Ltd.(Steel Division) would come under the scope of Service Tax - Held that - Prima facie, we find that M/s.Tata Steel Ltd.(Growth Shop) has been appointed to provide services by floating tenders by M/s.Tata Steel Ltd. through M/s.M.N.Dastur & Co.. From the argument of the Ld.Advocate, we find that M/s.Dastur & Co. has only been appointed for the purpose of inviting tenders and selection of bidders. Also, from the submission of the Ld.Advocate we find that M/s.Tata Steel Ltd.(Growth Shop) and M/s.Tata Steel Ltd.(Steel Works) are not separately, incorporated as companies under the Companies Act, 1956. He submits that even though separate PAN based registrations were taken, but the entire liability relating to Income Tax and prescribed Income Tax Returns are filed from their Head Office on behalf of the units against a single PAN number and prima facie, we find that the Applicant and M/s.Tata Steel Ltd. (Steel Works) are not two separate legal entities, but units of Tata Steel divisions. In absence of any contrary judgement placed by the Revenue to the decisions of M/s.Indian Oil Corporation Ltd. 2007 (5) TMI 135 - CESTAT, KOLKATA and Precot Mills Ltd. (2006 (2) TMI 25 - Appellate Tribunal, Bangalore), prima facie, we are of the view that Service Tax may not be payable for rendering service by one division to another division of the same legal entity. In the result, the Applicant could able to make out a prima facie case, for total waiver of pre-deposit of dues adjudged - Stay granted.
Issues involved: Application seeking waiver of pre-deposit of Service Tax and penalties under Sections 77 and 78 of the Finance Act, 1994.
Analysis: 1. Issue of legal entity: The main issue in this case was whether M/s. Tata Steel Ltd.(Growth Shop) and M/s. Tata Steel Ltd. are separate legal entities or part of the same entity for the purpose of Service Tax liability. The Appellant argued that since both are part of the same legal entity, no Service Tax is payable for services rendered between them. The Respondent contended that they should be treated as separate legal entities due to having separate PAN registrations and an agreement with an arbitration clause. The Tribunal analyzed the structure of the entities, the nature of agreements, and the filing of tax returns. The Tribunal found that the entities were not separately incorporated companies and operated as units of Tata Steel. Without any contrary judgments provided by the Revenue, the Tribunal held that Service Tax may not be applicable for services between divisions of the same legal entity. 2. Interpretation of legal precedents: The Appellant relied on judgments of M/s. Indian Oil Corporation Ltd. and Precot Mills Ltd. to support their argument that services rendered within the same legal entity are not subject to Service Tax. The Tribunal considered these judgments and found them applicable in the absence of contradictory judgments provided by the Revenue. The Tribunal highlighted the importance of legal precedents in interpreting tax liabilities and determining the applicability of Service Tax in intra-entity transactions. 3. Waiver of pre-deposit: The Tribunal ultimately ruled in favor of the Appellant, granting a waiver of the pre-deposit of Service Tax and penalties during the pendency of the Appeal. The Tribunal found that the Appellant had made a prima facie case for the waiver based on the analysis of the legal entity issue and the absence of contradictory judgments. The decision to waive the pre-deposit and stay the recovery of dues showcases the Tribunal's consideration of the legal arguments presented and the interpretation of relevant legal precedents in tax matters. In conclusion, the judgment by the Appellate Tribunal CESTAT KOLKATA in this case centered around the determination of the legal entity status of the involved parties for the purpose of Service Tax liability. The Tribunal relied on legal precedents, analyzed the structure and operations of the entities, and ultimately granted a waiver of the pre-deposit and stayed the recovery of dues based on the findings regarding the legal entity issue.
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