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2021 (2) TMI 5 - AT - Service TaxCENVAT credit - input services or not - Input service distributor (ISD) - service rendered by Tata Sons Ltd. under BEBP agreement dated 18.12.1998 between Tata Steel Ltd. and Tata Sons Ltd. - service tax paid as per the BEBP Agreement dated 18.12.1998 between itself and Tata Sons Ltd. exclusively to its Steelworks at Jamshedpur and not to other units of TSL - time limitation. Whether the service rendered by Tata Sons Ltd. under BEBP agreement dated 18.12.1998 between Tata Steel Ltd. and Tata Sons Ltd. is eligible as input service for TSL and the service tax paid is available as cenvat credit to TSL under the Cenvat Credit Rules, 2004? - HELD THAT - The BEBP Agreement allows user by TSL of the Tata brand name, on its products/goods manufactured at its factory in Jamshedpur. Such user of the brand name enhances the marketability of the said goods. Hence, the services have been used by TSL, the manufacturer, indirectly in relation to the manufacture of final dutiable products in its factory at Jamshedpur. This satisfies the requirement of the main part of Rule 2(l) of the Cenvat Credit Rules. The said service is also a service used in relation to TSL s business of manufacture of final products indirectly. The requirement of the inclusive part of the definition of Rule 2(l) of the Cenvat Credit Rules, as it then was, is also therefore satisfied. Hence, the said service is input service on which TSL is eligible to avail cenvat credit. A similar issue arose in the case of JUBILANT LIFE SCIENCES LTD. VERSUS C.C.,C.E S.T NOIDA 2017 (8) TMI 358 - CESTAT ALLAHABAD . In this case input services were received and consumed in providing Scientific and Technical Consultancy Services by the R D centres of the assessee to its own units for manufacturing drugs and it was held that t he appellant have rightly taken cenvat credit as permissible under Rule 3 read with Rule 2(1) of CCR, 2004 as the services in question have been admittedly used by the manufacturer indirectly in relation to manufacture of final dutiable products. We also find that there is no dispute with regard to the distribution of the credit as permitted in the scheme of the Act and the Rules. The service involved is an input service under the Cenvat Credit Rules for TSL and the tax paid on such service is available as cenvat credit to TSL - Issue is amnswered in favor of appellant. Whether TSL as ISD was entitled to, during the relevant period, distribute under the Cenvat Credit Rules, 2004, the credit of service tax paid as per the BEBP Agreement dated 18.12.1998 between itself and Tata Sons Ltd. exclusively to its Steelworks at Jamshedpur and not to other units of TSL? - HELD THAT - TSL have rightly contended that there is no Tata Steel Group Companies . The company is Tata Steel Limited, which is incorporated and registered under the Companies Act, 1956 as a public limited company. It has various divisions/units situated in various parts of the country, as detailed hereinabove. The registered and Head Office of the company, including of the said divisions/units, is at Mumbai, the ISD in the instant case. No evidence to the contrary is disclosed in either the show cause notice or in the impugned order, as well as in the instant proceedings. It is settled proposition of law that divisions and units of a company are not separate legal entities/persons. They are part and parcel of the same legal entity, the company, of which they are divisions/units. None of them can be termed as a company as per the Companies Act, 1956. Registration separately as per the provision of the Central Excise Act, 1944 or the Finance Act 1994 as per the requirement of the said statutes and the rules framed thereunder cannot and does not alter this settled legal position. This issue also decided in favor of appellant - TSL as ISD was entitled to distribute the credit of the service tax paid in respect of the service rendered under the BEBP Agreement exclusively to its Jamshedpur Steelworks during the relevant period - issue covered by the decision in the case of MAHINDRA LOGISTICS LTD. VERSUS COMMISSIONER OF CUSTOMS, EXCISE SERVICE TAX, NAGPUR 2012 (12) TMI 880 - CESTAT MUMBAI where it was held that Mahindra and Mahindra Limited is a legal entity which is having two separate divisions. Merely by taking two separate service tax registrations, it cannot be said that both are separate legal entitled. Therefore, demand for the period 15.12.2007 to 10.9.2008 is not sustainable. The CENVAT credit amount involved has been correctly availed, distributed and utilised by the appellants. The tax demanded and penalties imposed upon the appellants are thus unsustainable. The impugned order cannot be sustained - The issue of time limitation need not be considered. Appeal allowed - decided in favor of appellant.
Issues Involved:
1. Whether the service rendered by Tata Sons Ltd. under the BEBP agreement dated 18.12.1998 between Tata Steel Ltd. and Tata Sons Ltd. is eligible as "input service" for TSL and the service tax paid is available as Cenvat credit to TSL under the Cenvat Credit Rules, 2004? 2. Whether TSL as ISD was entitled to, during the relevant period, distribute under the Cenvat Credit Rules, 2004, the credit of service tax paid as per the BEBP Agreement dated 18.12.1998 between itself and Tata Sons Ltd. exclusively to its Steelworks at Jamshedpur and not to other units of TSL? 3. Whether any part of the demand is barred by limitation? Detailed Analysis: Issue (i): The service under the BEBP agreement was classified as "intellectual property services" under Section 65(105)(zzy) of the Act, and service tax was paid accordingly. The agreement allowed TSL to use the "Tata" brand name on its products, enhancing their marketability, thus indirectly relating to the manufacture of final dutiable products at TSL's Jamshedpur factory. This satisfies the requirements of Rule 2(l) of the Cenvat Credit Rules, making the service an "input service" eligible for Cenvat credit. This conclusion is supported by the decision in CCE vs. Ultratech Cement Ltd. and Jubilant Life Services Ltd. vs. Commissioner of Cus, C.Ex. & ST, where similar principles were upheld. Therefore, the service involved is an "input service" for TSL, and the tax paid on such service is available as Cenvat credit to TSL. Issue (ii): Rule 2(m) and Rule 7 of the Cenvat Credit Rules, as in force prior to 01.4.2012, allowed the distribution of Cenvat credit by an ISD to its manufacturing units, subject to certain conditions. The definition of "Input Service Distributor" in Rule 2(m) clarified that a manufacturer with multiple units could distribute the credit of service tax paid on input services to any of its units. Rule 7 imposed only two limitations: the credit distributed could not exceed the amount of service tax paid, and the credit attributable to services used in a unit exclusively engaged in manufacturing exempted goods or providing exempted services could not be distributed. TSL, as ISD, was entitled to distribute the credit of service tax paid under the BEBP Agreement exclusively to its Jamshedpur Steelworks, as supported by the decisions in CCE vs. Ecof Industries Ltd. and CCE vs. Dashion Ltd. Additionally, the company Tata Steel Limited, including its various divisions/units, is a single legal entity, and separate registrations under the Central Excise Act or Finance Act do not alter this legal position. Therefore, TSL's distribution of credit was valid and in accordance with the relevant provisions. Issue (iii): Given the findings on Issues (i) and (ii), it was deemed unnecessary to address the limitation issue. Conclusion: The Cenvat credit amount involved was correctly availed, distributed, and utilized by the appellants. The tax demanded and penalties imposed were unsustainable, and the impugned order was set aside. The appeals were allowed with consequential relief. (Order pronounced in the open court on 28 January 2021.)
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