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TMI Blog2016 (10) TMI 134X X X X Extracts X X X X X X X X Extracts X X X X ..... e tax. Thus the term taxable service has a direct relation to the consideration either paid in cash or by way of deferred payment or by mentioning of any other valuable consideration. This would reinforce our belief that when no charge was collected for providing the service, there would be no question of applying a rate of tax on the value of such service. According to the assessee, providing of service by its SEZ unit to its DTA unit was merely for the purpose of convenience and SEZ unit had not collected any charge for such service from its DTA unit. Though the Assessing Officer in his order has made a brief reference to the SEZ unit receiving consideration for such service, we do not find any basis for such a conclusion. In fact, the case of assessee all along has been that invoices were raised for such services merely for the purpose of convenience and in fact, since promotional programmes were being organised, which would benefit the entire company and its different units, there was no question of charging a particular unit by SEZ unit for such service and that raising of invoices was merely for the purpose of convenience. If that be so, in our opinion, no service tax coul ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... operations for finance and accounts and human resources functions and such services were availed by units of assessee situated in Domestic Tariff area( DTA for short). These were in the nature of business support services and were taxable services under the Finance Act, 1994. The adjudicating authority therefore, issued a show cause notice why service tax on such services provided by the assessee should not be levied with penalty and interest. The assessee opposed such proposal mainly on the ground that one unit of a company cannot provide service to another unit since for providing taxable service, it is necessary that there should be two separate entities. The assessee pressed in service the principle of mutuality and contended that there cannot be any service tax on such activities. The adjudicating authority however, was of the opinion that the SEZ and DTA units of the assessee company were separate and distinct units. He referred to rule 4 of Service Tax Rules, 1994 which refers to registration, sub rule( 3A) of which provides that where an assessee is providing taxable service of more than one premises or offices and does not have any centralized billing systems or centrali ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s filed the present appeals. 6. Learned counsel for the department contended that the Tribunal committed an error in interpreting the provisions of the Finance Act, 1994. SEZ unit was distinct and separate entity and provided taxable service to DTA unit of the same company. Merely because both the units were under the same company, would not mean that the services provided is not taxable. He submitted that the principle of mutuality would not apply and was wrongly applied by the Tribunal. He invited our attention to rule 19(7) of the Special Economic Zone Rules to contend that SEZ unit is a distinct and separate entity from other units of the same company situated outside the said SEZ area. Counsel relied on decision of Division Bench of this Court in case of Sintex Industries Ltd. v. Commissioner of Central Excise reported in 2013(287) ELT 281 in which the assessee had two units within a common boundary wall, having two separate central excise registration. In such background, the Court observed that the assessee having obtained separate registration was estopped from contending that the two were not separate factories, simply because they were situated within a common boundary ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... members of a cooperative housing society and its members, was applied in the context of a part of the surplus retained by the society from the sale of a plot by its member. 8. Having heard learned counsel for the parties and having perused the materials on record, we may refer to the relevant statutory provisions. Section 66 of the Finance Act,1994 pertains to charge of service tax and provides that there shall be levied a tax referred to as the service tax at the rate of 12 per cent of the value of taxable services referred in clauses (a) to (zzzzw) in sub section( 105) of section 65 and collected in such manner as may be prescribed. Section 65(105) defines various taxable services. Clause (zzzq) thereof pertains to service provided to any person by any other person in relation to support services of business or commerce in any manner. Section 65(104c) defines support services of business or commerce as under : Support Services of Business or Commerce means services provided in relation to business or commerce and includes evaluation of prospective customers, telemarketing, processing of purchase orders and fulfilment services, information and tracking of delivery schedule ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the date of payment of duty. 11. Under section 30 of this Act, therefore, any goods removed from a Special Economic Zone to the Domestic Tariff Area would be chargeable to duties of customs including antidumping, countervailing and safeguard duties under the Customs Tariff Act, as leviable on such goods when imported. 12. In exercise of powers conferred under the Special Economic Zones Act, 2005, the Central Government has framed the Special Economic Zones Rules, 2006. Rule 19 thereof pertains to letter of approval to a unit and provides for various details that the letter of approval granted to a unit of manufacturing specified project in the SEZ units. Sub rule( 7) thereof reads as under : (7) If an enterprise is operating both as a Domestic Tariff Area unit as well as a Special Economic Zone Unit, it shall have two distinct identities with separate books of accounts, but it shall not be necessary for the Special Economic Zone unit to be a separate legal entity: Provided that foreign companies can also set up manufacturing units as their branch operations in the Special Economic Zones in accordance with the provisions of Foreign Exchange Management (Establishment i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ions as may be prescribed, exempt from the payment of taxes, duties or cess under all enactments specified in the First Schedule. Thus, for the purpose of taxation of various kinds within the unit situated in the Special Economic Zones, receive a special consideration. It is because of these concessions granted to such units that under section 30 of the Special Economic Zones Act, 2005, it is provided that in cases of goods removed from a Special Economic Zone to the Domestic Tariff Area, the same would be chargeable to duties of customs including antidumping, countervailing and safeguard duties under the Customs Tariff Act, as applicable, leviable on such goods when imported. In view of such special status and in order to enable a unit to claim such exemption, drawbacks and concession, under sub rule( 2) of Rule 22 of the Special Economic Zones Rules, 2006, it is provided that every unit and developer has to maintain proper accounts financial year wise, clearly indicating in value terms the goods imported or procured from Domestic Tariff Area, consumption or utilization of goods, production of goods, etc. Under sub rule( 3), a unit would have to submit Annual Performance Reports w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the income of the assessee from such eligible business after deductions, would also form part of the total income. Nevertheless, for the purpose of accounting, the particular industry eligible for deduction would be treated separate from other units. 17. Under the circumstances, in view of statutory scheme noticed in the Finance Act, 1994 and Special Economic Zones Act, 2005, the contention of the respondent company that on the principle of mutuality, the services rendered by its SEZ unit to a Domestic Tariff Area unit, would not be chargeable to service tax, cannot be accepted. If this principle is applied, the very artificial creation of treating a SEZ unit separate and distinct for accounting, consumption of raw materials, production and clearance purposes would shatter. The concept of mutuality is essentially based on the principle that where certain services or facilities are created by group of persons for themselves, as in the case of a club for recreation, any excess or residue, from out of the funds collected, would not become the income of the club chargeable to tax. 18. The question of charging service tax however, needs to be looked from a slightly different angle ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to the assessee, providing of service by its SEZ unit to its DTA unit was merely for the purpose of convenience and SEZ unit had not collected any charge for such service from its DTA unit. Though the Assessing Officer in his order has made a brief reference to the SEZ unit receiving consideration for such service, we do not find any basis for such a conclusion. In fact, the case of assessee all along has been that invoices were raised for such services merely for the purpose of convenience and in fact, since promotional programmes were being organised, which would benefit the entire company and its different units, there was no question of charging a particular unit by SEZ unit for such service and that raising of invoices was merely for the purpose of convenience. If that be so, in our opinion, no service tax could be levied not on the principle of mutuality but, as noted, on the ground that service provided carried no actual value. 22. For such reasons, while therefore, dismissing the Revenue's appeal against the judgement of the Tribunal, on the grounds different from which appealed to the Tribunal, we answer the question clarifying that in the present case, no service ..... X X X X Extracts X X X X X X X X Extracts X X X X
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