2014 (12) TMI 708 - AT - Service Tax

Waiver of pre-deposit of service tax - business support service - inter unit services between the two units namely M/s. Godrej Industries and M/s. Godrej Consumer Products Ltd. - reimbursement of expenses - Held that - In the case of J.M. Financial Services Pvt. Ltd. (2013 (7) TMI 151 - CESTAT MUMBAI) and Paramount Communication Ltd. (2013 (3) TMI 134 - CESTAT NEW DELHI) on similar set of facts wherein the expenses incurred by one unit have been recovered from the other unit on sharing basis, it was held that it was not in the nature of business support service. Therefore, following the precedent decision of this Tribunal and in these circumstances, the applicants have made out a strong case for complete waiver of pre-deposit of entire amount of service tax, interest and penalty and the same shall stand waived and recovery thereof stayed during the pendency of the appeal. - Stay granted.

Summary

Issues:
1. Waiver of pre-deposit of service tax, interest, and penalties under the Finance Act, 1994.

Analysis:
The appellant sought waiver of pre-deposit of service tax amounting to &8377; 3,00,46,092/- along with interest and penalties under the Finance Act, 1994. The case involved M/s. Godrej Industries and M/s. Godrej Consumer Products Ltd., with the revenue contending that the amount received from the latter for shared services constituted business support services attracting service tax. A show cause notice was issued, and demands were confirmed, leading to the appellant's request for waiver of pre-deposit at this stage.

The appellant's counsel argued that the expenses incurred were for common services received by both M/s. Godrej Industries and M/s. GCPL, with the latter being a sister concern. It was emphasized that the appellant was not providing a service to M/s. GCPL but sharing expenses on a common basis. Citing precedents like J.M. Financial Services Pvt. Ltd. Vs. CST and Paramount Communication Ltd. Vs. Commissioner of Central Excise, the counsel contended that in similar scenarios where expenses were shared between units, it was not considered business support service liable for service tax.

After hearing the arguments, the Tribunal, following the decisions in the aforementioned cases, concluded that the expenses shared on a recovery basis did not constitute business support services attracting service tax. Relying on the precedent set by the Tribunal, the appellant was granted a complete waiver of pre-deposit of the entire service tax amount, interest, and penalties. Consequently, the recovery of the said amounts was stayed during the pendency of the appeal, aligning with the established legal interpretation and case law.

This judgment highlights the significance of shared expenses between related units and the distinction between providing services and cost-sharing arrangements. The decision underscores the importance of legal precedents in determining tax liabilities related to shared services and sets a clear standard for cases involving similar factual circumstances.