2014 (10) TMI 346 - AT - Service Tax

Waiver of pre deposit - payment of service tax by demerged company - The department is disputing the payment by Sahara India TV Network and insists that the payment should have been made by Sahara India Commercial Corporation Ltd. only and not by Sahara India TV Network, Mumbai, since it is only a division of the former. - Held that - From the show cause notice, it appears that the charge against the appellant is that Sahara India TV Network which is a division of Sahara India Commercial Corporation Ltd., cannot discharge the tax liability on behalf of Sahara India Commercial Corporation Ltd. We do not find any provision in law which supports this proposition. So long as Sahara India TV Network is a part and parcel of Sahara India Commercial Corporation Ltd. and they have received consideration for services rendered by the parent company and discharge service liability, the same cannot be said to be a wrong discharge of tax liability or misutilisation of cenvat credit. Thus the appellant has made out a prima facie case for waiver of the dues. Accordingly we grant unconditional waiver of the dues adjudged against the appellant and stay recovery thereof during the pendency of the appeal - Stay granted.

Summary

Issues: Service tax liability discharge by a division of a company, utilization of cenvat credit, validity of discharge of tax liability, waiver of dues during the pendency of appeal.

Analysis:
1. The appeal and stay petition were filed against an order-in-original passed by the Commissioner of Central Excise confirming a service tax demand against a company. The company, M/s. Sahara India Commercial Corporation Ltd., had various divisions, including Sahara TV Network and Aamby Valley Ltd. A brand agreement allowed Aamby Valley Ltd. to use the brand name of Sahara India Commercial Corporation Ltd. for a consideration falling under 'intellectual property service.' Sahara India TV Network, a division of the company, discharged the service tax liability of the consideration received. The dispute arose as the department insisted that the payment should have been made by the parent company, not the division. The Tribunal referred to a previous case and held that if the tax liability is discharged by a division of the company, it would suffice, considering them as part of the same legal entity. Thus, the discharge of tax liability by Sahara India TV Network was considered valid.

2. The Revenue contended that the discharge of service tax liability by Sahara India TV Network using cenvat credit was incorrect. However, the Tribunal found no legal provision supporting this argument. As long as Sahara India TV Network, as a division of Sahara India Commercial Corporation Ltd., received consideration for services rendered by the parent company and discharged the service tax liability, it was deemed a valid discharge. The Tribunal concluded that there was no wrong discharge of tax liability or misutilization of cenvat credit by the division. Consequently, the Tribunal granted unconditional waiver of the dues adjudged against the appellant and stayed the recovery during the appeal's pendency.