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TMI Blog2006 (2) TMI 25X X X X Extracts X X X X X X X X Extracts X X X X ..... e issue involved is common in these appeals, they are taken up together for the disposal as per law. The appellants manufactured Cotton yarn, Polyester yarn and blended yarn of cotton which are excisable. The Corporate Office of the appellant is in Coimbatore. They have Spinning unit in Kerala and Andhra Pradesh states. Further, they have doubling units in Kerala, Tamilnadu and Andhra Pradesh. They have dyeing units in Karnataka, Tamilnadu and Andhra Pradesh. A weaving unit is in Tamilnadu. The above units of the appellants, M/s. Precot Mills Ltd., Coimbatore are independent units and are separate profit centers. The Corporate Office of the Company in order to evaluate the performance of each unit, raise inter unit debit notes to account fo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Revenue. 3. The learned Chartered Accountant urged the following points (i) As per Section 65 of the Finance Act, 1994, taxable service means, any service provided to a client by a Management. Consultant in connection with the management of any organization in any manner. Hence, it is necessary that the client relationship should be established between the service provider and the service receiver before proposing levy of service tax. In the appellants case, client relationship is not established since they belong to same Company, namely Precot Mills Ltd. (ii) One cannot be a service provider as well as client when the service receiver and the service provider are belong to the same Company. (iii) The inter unit debit notes raised by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ce tax - Recovery - Non-resident/person out side India providing service in India - Tax cannot be recovered from service receiver in India as same person cannot be both client and agent, and amendment to Rule 2 of Service .Tax Rules, 1994 by insertion of clause (iv) for payment of tax by service receiver in India had only prospective effect - Section 68 of Finance Act, 1994. (iii) Saturday Club Ltd. Vs. Asst. Commissioner, Service Tax Cell, Calcutta, 2005 (180) ELT 437 (Cal.) wherein it was held that principally there should be existence of two sides/ entities for having transaction as against consideration. In a members club, there is no question of two sides. Members and club both are same entity. One may be called as principal when the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ceedings against the appellants, the Asst. Commissioner in his order dated 27.6.2002 has taken into consideration the following facts:- (i) The service provider and the service receiver belong to the same Corporate entity known as Precot Mills Ltd. with a single certificate of incorporation. (ii) Share holding is for the Corporate body and balance sheet is prepared for the whole entity and not unit-wise. (iii) For service tax to be leviable, the provider and the client of Management Consultancy Services need to be two separate legal entity as construed from Section 65 (72) of the Act which is not the situation in the instant case. (iv) It is usual practice that for internal accounting purposes and apportioning cost inter unit book a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in allowing its members to use its space as mandap. The ratio of the above case law is clearly applicable to the present case. M/s. Precot Mills Ltd. is a Corporate entity. It has got various units which function as separate profit centers. When service is rendered by one unit to the other, debit note is raised for the value of service in order to evaluate the performance of a particular unit. Ultimately there is only one Balance sheet for the legal entity for M/s. Precot Mills Ltd. and not for the separate unit. In other words, the appellants, M/s. Precot Mills Ltd. do not receive any valuable consideration for services rendered by. one unit of the appellant to the other unit, in view of the fact that the each unit is part of the same lega ..... X X X X Extracts X X X X X X X X Extracts X X X X
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