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TMI Blog2022 (11) TMI 437X X X X Extracts X X X X X X X X Extracts X X X X ..... ociate companies amount to provision of any service by one company in the agreement with to any other companies in the said cost sharing agreement. However, since the activities under taken under the cost sharing agreement do not amount to provision of Service in terms of the decision of Hon ble Apex Court in case of Gujarat State Fertilizers Chemicals Ltd., the demand of Service Tax on the activities under taken under the cost sharing agreement cannot be sustained. Appeal allowed. - SERVICE TAX Appeal No. 596 of 2011 - FINAL ORDER NO.A/11349/2022 - Dated:- 2-11-2022 - MR. RAMESH NAIR, MEMBER (JUDICIAL) AND MR. RAJU, MEMBER (TECHNICAL) Shri Jigar Shah, Advocate for the Appellant Shri. Vinod Lukose, Superintendent (Authorized Representative) for the Respondent ORDER This appeal has been filed by M/s. Hazira Lng Pvt Ltd against confirmation of demand of Service Tax, Interest and Penalty. 2 Learned Counsel submitted that the Appellants are the company registered under the provisions of erstwhile Companies Act, 1956. The Appellants were registered with Service Tax Authorities, Ahmedabad having registration number AAACH9143CST001. 2.1 Learned Counsel ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... se notice dated 18.10.2010 alleged suppression, wilful misstatement on the part of the Appellants and therefore, invoked extended period of limitation and also demanded interest and penalties from the Appellants. 2.5 Learned Counsel submitted that the Appellants vide their letter dated 03.01.2011 filed a detailed reply to the show cause notice dated 18.10.2010 and submitted that the service tax is not payable. However, the Commissioner of Service Tax Ahmedabad vide his Order in Original No. STC/32/COMMR/AHD/2011 dated 13.07.2011 confirmed the demand of service tax along with interest and penalty as it was proposed in the show cause notice. 2.6 Learned Counsel for the Appellants argued that the sharing of costs between two associated enterprises is not rendition of service and therefore, demand of service tax is not sustainable. 2.7 He argued that the demand of service tax of Rs.2,64,57,777/- is raised on the Appellants on the costs shared with their associated enterprise namely HPPL. The Appellants submit that cost sharing is not rendition of service and therefore demand of service tax itself is not sustainable. 2.8 Learned Counsel for the Appellants further relied on f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ahabad. 2.11 Learned Counsel for the Appellants would further submit that the activity would not fall within the definition of business support services as defined in Section 65(104c) of the Finance Act, 1994. Learned Counsel for the Appellants submit that by no stretch of imagination, the cost sharing between the parties would be equated with rendition of business support services of the nature specified above. 2.12 Learned Counsel argued that the entire controversy in the present case is surrounding the waiver of outstanding amount of M/s. HPPL by the Appellants. As Appellants realized that HPPL is not in sound financial position to pay the dues to the Appellants, the said amount was waived off by the Appellants on 31.03.2008. Learned Counsel argued that Appellants and HPPL were associated enterprise. He pointed out that with effect from 10.05.2008, the Section 67 of the Finance Act, 1994 was amended to have effect that payment would include debit/credit in the books accounts by book adjustment in case of associated enterprises. 2.13 Learned Counsel submit that the amendments carried out in Section 67 of the Finance Act, 1994 are prospective in nature and therefore wou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e explanation is only for considering different modes of payment. It may be noted here that in the present case the amount is waived off and no payment is made to the Appellants. As submitted above, the liability to pay service tax was only on receipt of consideration and not at any other point in time. Therefore, reliance cannot be placed on explanation to Section 67(4) of the Finance Act, 1994. Learned Counsel further submit that the said explanation was amended with effect from 10.05.2008 which reads as under: gross amount charged includes payment by cheque, credit card, deduction from account and any form of payment by issue of credit notes or debits notes and book adjustment, and any amount credited, as the case may be, to any account, whether called suspense account or by any other name, in the books of account of a person liable to pay service tax, where the transaction of taxable service is with any associated enterprise 2.20 Learned Counsel for the appellant submit that the above explanation was amended with effect from 10.05.2008 to treat even the debit/credit entries as payment in case of associated enterprise. However, this would take effect only with effec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... imed, they were sharing certain cost. Shri Sujal Shah Manager Taxation of Hazira Port Pvt Ltd in his statement dated 04.10.2010 stated that the object of the cost sharing agreement was to identify the requirement for a joint or a common function that may be required by any of the associated enterprises namely Hazira Lng Pvt Ltd, Hazira Ports Pvt Ltd and Hazira Gas Pvt Ltd., respectively and to jointly procure and use the said services. The said agreement also required the associated enterprises to contribute towards their allocated share in cost of common function. The appellants had raised debit notes on associated enterprises and in the said debit notes they have treated the said cost sharing as supply of business support services. In the ST-3 returns for the period October, 2007 to March, 2008, the appellant had made the following remark in their ST-3 returns: The amount shown as taxable service charged represents the value to be contributed by our associated enterprise which in our view is not subject to Service Tax . Though the said transaction did not result into rendition of any taxable service, taking a conservative view to avoid litigation, they treated it as bus ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... % of the HCN whereas GACL receives 40% of the supply in accordance with their respective requirement To enable GACL to receive this HCN through common pipeline, arrangement/agreement was entered into between these two parties. For this purpose, handling facilities were installed in the premises of GSFC However, fact remains, for which there is no dispute, that for installation of these facilities both the parties had contributed towards the investment Since the said handling facilities are in the premises of GSFC, incineration also takes place at the said premises. Handling facilities expenditure thereof is shared equally by both the parties. That is clearly provided in the agreement/arrangement that was agreed to between the parties and is reflected in the Minutes dated 6-7-1980 Once these facts are accepted, we find that handling portion and maintenance including incineration facilities is in the nature of joint venture between two of them and the parties have simply agreed to share the expenditure. The payment which is made by GACL to GSFC is the share of GACL which is payable to GSFC By no stretch of imagination, it can be treated as common service provided by GSFC to GACL for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng Group Companies. The object of entering into such cost sharing arrangement is to reduce the cost of operation of the Participating Group Companies. The activities carried out by the Appellant enables the Participating Group Companies to share the common services, the best available talent and resources required for carrying out their business activities. No taxable service is provided by the Appellant and therefore in absence of rendition of such service by the Appellant to the Participating Group Companies, the demand of Service tax cannot sustain. 5.8 It is seen that in the impugned Order contrary to the above findings recorded in Para 4.3 regarding procuring of services which are reproduced hereinabove, the adjudicating authority in Para 4.5 onwards of the impugned Order erroneously proceeds on the basis that those services were provided by the appellant. This self-contradictory finding is not supported by any documentary evidence. On the basis of such erroneous self-contradictory findings, the adjudicating authority holds that the activities do fall under the definition of 'Business Support Services under Section 65(104c) read With Section 65(105)(zzzq). We find tha ..... X X X X Extracts X X X X X X X X Extracts X X X X
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