2024 (10) TMI 1346 - AT - Service Tax

Levy of service tax on Business Support Service - Denial of CENVAT Credit on club membership renewal fees in terms of Rule 2(l) of the CENVAT Credit Rules, 2004 - Suo-Moto recredit to the CENVAT account taken on account of service tax paid twice or in excess of the service tax liability done without documentary evidence as prescribed under Rule 9 of the CENVAT Credit Rules, 2004 - Imposition of penalty for non-payment of Service Tax under the category of Intellectual Propery Service other than copyright - time limitation. Levy of service tax on Business Support Service - HELD THAT - The appellant and EPML were operating in two completely different products and were catering to two completely different sets of customers. As such, EPML could not have outsourced the activities of evaluation of prospective customers, processing of purchase orders and fulfilment of services to the Appellant, as alleged in the impugned Show Cause Notice. Moreover, the exports were not being made by the appellant to its own goods and accounting of the same was made in the books of the appellant only. It is an admitted position in the impugned order that none of the parties were undertaking the export of goods manufactured by the other. Therefore, by exporting its own goods, the appellant has not provided any kind of support service to EPML, but the same is to themselves only. The appellant was not undertaking the activity of evaluation of prospective customers, processing of purchase orders or fulfilment of service as the Appellant and EPML were dealing in varied products and were catering to varied customers - the activity of export of goods by the appellant through their group company viz. EPML cannot be termed as business support service . Therefore, on merit, the appellant is not liable to pay Service Tax under the said category. Accordingly, the demand of Rs.1,54,77,549/- under the category of Business Support Service , is dropped. Denial of CENVAT Credit on club membership renewal fees in terms of Rule 2(l) of the CENVAT Credit Rules, 2004 - HELD THAT - In this case, the charges paid by the Appellant were towards corporate club membership which were used for organising meeting with various stakeholders viz., promoters, distributors and vendors in order to carry out sales promotion activities - the appellant is entitled to avail CENVAT Credit on club membership renewal fees. Hence, the CENVAT Credit of Rs.82,400/- cannot be denied to the appellant. Suo-moto recredit to the CENVAT account without documentary evidence - HELD THAT - The the appellant is entitled to avail CENVAT Credit on club membership renewal fees. Hence, the CENVAT Credit of Rs.82,400/- cannot be denied to the appellant. Imposition of penalty for non-payment of Service Tax - HELD THAT - The appellant has paid the entire amount of tax along with interest before issuance of the Show Cause Notice upon being pointed out by the audit. In these circumstances, no penalty is imposable on the appellant. Accordingly, the penalty of Rs.1,49,822/- imposed against the appellant is dropped. Time limitation - HELD THAT - The fact is noted that periodical audits took place from time to time, at the premises of the appellant. Therefore, the Show Cause Notice issued on 15.12.2016 for the period 2011-12 is barred by limitation. Hence, the appellant also succeeds on the ground of limitation. The impugned order is set aside - appeal allowed.

Issues Involved:

1. Demand of Service Tax under the category of "Business Support Service".
2. Denial of CENVAT Credit on club membership renewal fees.
3. Suo-moto recredit to the CENVAT account without documentary evidence.
4. Imposition of penalty for non-payment of Service Tax under "Intellectual Property Service other than copyright".

Issue-wise Detailed Analysis:

Issue No. 1: Demand of Service Tax under "Business Support Service"

The appellant challenged the demand of Service Tax amounting to Rs. 1,54,77,549/- under the category of "Business Support Service". The Revenue alleged that the appellant provided business support services to its group company by exporting its own goods, thereby saving customs duty under the EPCG Scheme. However, it was held that the appellant's arrangement with its group company was not a service but a mutual understanding to optimize customs duty savings. The tribunal found that the appellant did not outsource any service to its group company and that the arrangement did not constitute a service under the definition of "Business Support Service". The tribunal relied on the C.B.E.C. Circular No. 334/4/2006-TRU dated 28.02.2006, which clarified that an element of outsourcing must be present for a transaction to be taxable under this category. Consequently, the demand under "Business Support Service" was dropped.

Issue No. 2: Denial of CENVAT Credit on Club Membership Renewal Fees

The appellant was denied CENVAT Credit of Rs. 82,400/- on club membership renewal fees, which was contested on the grounds that the club membership was used for business purposes. The tribunal noted that the membership was used for organizing meetings with stakeholders, which qualifies as a business activity. Citing the case of Reliance Industries Limited, the tribunal held that CENVAT Credit is allowable when such services are used for business purposes. Therefore, the denial of CENVAT Credit on club membership renewal fees was overturned.

Issue No. 3: Suo-moto Recredit to the CENVAT Account

The appellant took a suo-moto recredit of Rs. 1,06,839/- in the CENVAT account, which was disputed due to the lack of documentary evidence. The tribunal observed that the recredit was due to service tax being paid twice or in excess and noted that the issue was not raised during periodic audits. The tribunal found that the Show Cause Notice was barred by limitation as it was issued beyond the permissible period. Consequently, the demand was set aside on the grounds of limitation.

Issue No. 4: Imposition of Penalty for Non-payment of Service Tax

A penalty of Rs. 1,49,822/- was imposed for non-payment of Service Tax under "Intellectual Property Service other than copyright". The appellant had already paid the tax along with interest before the issuance of the Show Cause Notice. The tribunal held that since the tax was paid prior to the notice, no penalty was imposable, and thus, the penalty was dropped.

Limitation:

The tribunal noted that periodic audits were conducted, and the details were available in the public domain. It was held that the Show Cause Notice issued on 15.12.2016 for the period 2011-12 was barred by limitation, supporting the appellant's case on this ground as well.

Conclusion:

The tribunal set aside the impugned order, allowing the appeal with consequential relief. The demands under "Business Support Service" were dropped, CENVAT Credit on club membership fees was allowed, the suo-moto recredit was upheld, and the penalty for non-payment of Service Tax was removed.

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