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TMI Blog2024 (6) TMI 1115X X X X Extracts X X X X X X X X Extracts X X X X ..... of service tax paid and secondly the credit of service tax attributable to services used shall not be distributed in a unit exclusively engaged in the manufacture of exempted goods or providing of exempted service. No provision of the CENVAT Credit Rules, including Rule 7, prohibits input service tax paid at a particular unit being sought to be availed in another unit. Once the manufacturer is registered as an input service distributor in terms of Rule 7, it is entitled to distribute the credit of duty paid on such inputs in the manner prescribed to any of its unit keeping into account the limitations imposed by Rule 7. The extraneous reasonings of the adjudicating authority contained in the said order are irrelevant and have no substance or merit whatsoever, particularly in view of the settled proposition of law in this respect. In the instant case, the company Tata Steel Limited, which is duly incorporated and registered under the Companies Act, 1956 as a public limited company has various divisions/units situated in various parts of the country. The registered and Head Office of the company, including of the said divisions/units, is at Mumbai, the ISD in the instant case. It is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... haria (d) Mines at Noamundi (e) Collierial at West Bokaro. Each manufacturing unit of the various Divisions, though separately registered in terms of Rule 9 of the Central Excise Rules, 2002 read with provisions of Notification No. 35/2001-CE(NT) dated June 26, 2001, do not have separate legal entity of their own. They are a part of TSL, who is also the manufacturer for the purposes of, inter alia, Rule 3 of the CENVAT Credit Rules. 3. TSL entered into a BEBP with its holding company, Tata Sons Limited. As per the said agreement, Tata Sons Limited renders service to TSL in the nature of intellectual property services , taxable under Section 65(105)(zzr) of the Finance Act, 1994 as was in force during the relevant period. In consideration of the said service, TSL paid yearly subscription to TATA Sons Limited which, as per the agreement, was based on certain percentage of annual turnover of TSL. The said agreement was entered into between TSL and Tata Sons Limited and not between the individual divisions of TSL and Tata Sons Limited. In fact, in the said agreement there is no mention of any individual division nor is there any mention therein of payment of subscription by the constit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... had incorrectly availed CENVAT credit of the subject service tax involved on the basis of ISD invoices, inasmuch as, the Mumbai Head Office should have distributed the credit proportionately to all the divisions of TSL and not to the Jamshedpur Steelworks only. TSL replied to the said objection pointing out the incorrectness of the said allegation. However, during such exercise TSL noticed that it had inadvertently availed credit of service tax amount of Rs.83,86,816/- which was attributable to West Bokaro and Jamadoba Collieries which were engaged in manufacturing exempted goods during the relevant period. Hence, in view of Rule 7(b) of the CENVAT Credit Rules, TSL reversed the proportionate CENVAT credit attributable to these mines, of a total of Rs.83,86,816/ - (including education cess and secondary higher education cess), along with appropriate interest payable thereon, vide service tax RG 23 Part II, Serial No. 1 dated April 1, 2011 and Serial No. 2140 dated May 7, 2011. The Department was also duly informed, by letters dated May 06, 2011 and May 31, 2011, about such reversal and payment of interest. Thereafter on August 8, 2011, a show cause notice was issued by the Commiss ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... GSTL 298(T); the appeal against which decision filed by the Department was dismissed by the Hon b1e Supreme Court of India, with the finding that there was no merit in the appeal [Commissioner of Customs, Central Excise Service Tax vs. Jubiliant Life Science Limited, 2019 (29) GSTL, J-74 (SC). The Tribunal accordingly allowed the appeal of TSL and held that the CENVAT credit amount involved had been correctly availed, distributed and utilized by TSL and hence the tax demanded and penalties imposed by the adjudication order of the Commissioner were unsustainable. The Tribunal, accordingly, set aside the said adjudication order with consequential relief, if any, to TSL. 6. After hearing the parties vide order dated 21.09.2022 following substantial questions of law were formulated by this Court for consideration:- (i) Whether in the facts and circumstances of the case, Hon ble CESTAT, Kolkata has erred by setting aside the OIO No.40/S.Tax/Commr/2012 dated 11.07.2012 by allowing the appellant M/s Tata Steel Limited, Jamshedpur (hereinafter referred as M/s TSL, Jamshedpur,) to take all the Cenvat Credit alone, whereas the services provided by M/s Tata Sons Limited to the separate regist ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Hon ble High Courts, Department having accepted the decisions, no interference with Tribunal s decision is called for: In this regard he referred following decisions: (i) CCE Cus. Vs. Precot Meridian Ltd., 2015 (325) ELT 234 (SC) (Para-3, 4 5). (ii) Birla Corporation Ltd. Vs. CCE, 2005 (186) ELT 266 (SC) (para-5). In this regard he also referred to the recent decision of the Hon ble Karnataka High Court in the case of Commissioner of C.Ex., ST Cus. Bengaluru Vs. Hinduja Global Solutions Ltd., 2022 (61) GSTL 417 (Kar) (para-8 to11). In so far as the Question of Law (ii) is concerned; it is submitted that it does not arise out of the impugned order of the Tribunal and therefore it being a substantial question of law required to be decided by this Hon b1e Court in the present proceedings cannot and does not arise. The said question of law has no relevance whatsoever in the instant case. 9. Having heard learned counsel for the parties and after going through the impugned order and relevant documents on records; few provisions of the CENVAT Credit Rules and other provision is required to be appreciated. Section 2(m) of the Cenvat Credit Rules, 2004 defines of Input Service Distributor . ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gs of the adjudicating authority contained in the said order are irrelevant and have no substance or merit whatsoever, particularly in view of the settled proposition of law in this respect. In this regard, reference may be made to the decision of Commissioner of C.Ex. Bangalore Vs. ECOF Industries Pvt. Ltd., 2011 (271) ELT 58 (Kar) (Para-8 10) 8. It is in this context, the definition of input service distributor makes it clear that a manufacturer or a producer of a final product or a provider of output service may have more than one unit and may be distributed in various parts of the country. It is in this background the definition of service distributor is defined as office of the manufacturer or producer of a final product or provider of output service which receives invoices issued under Rule 4A of the Service Tax Rules, 1994 towards purchases of input services and issues invoice, bill or, as the case may be, challan for the purposes of distributing the credit of service tax paid on the said services to such manufacturer or producer or provider, as the case may be. Therefore, the law mandates that the manufacturer who wants to avail the benefit of this service tax if he has mor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... has various divisions/units situated in various parts of the country. The registered and Head Office of the company, including of the said divisions/units, is at Mumbai, the ISD in the instant case. 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 and, as such, under any law of the country. As such, the divisions/units becoming companies of Tata Steel Group , erroneously held in the impugned order of commissioner, cannot and does not arise. Registration separately as per the provision of the Central Excise Act, 1944 or the Finance Act 1944 as per the requirement of the said statutes and/or the rules framed thereunder cannot and does not alter this settled legal position. In this respect reference may be made to the decisions of the Tribunal in Sahara India Commercial Corporation Vs. Commr. of C.Ex, 2019 (21) GSTL 170 (Tri-Mumbai), paras 2 7 and Mahindra Logistics Ltd. Vs. CC, Ex. ST, 2012-TIOL- 1919-CESTAT-MUM, Para-6. 12. The restriction on distributio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... perusal of the show cause notice would show that the entire basis of the Revenue was wrongfully availment of the credit. Mere wrongfully avaiment without element of mens rea and that too for the purpose of evading payment of duty would not be sufficient to impose penalty. The adjudicating authority, without any basis or evidence, merely mechanically recorded that the assessee had, by reason of willful misstatement, suppression of fact or in contravention of the provisions of the Rules, evaded payment of central excise duty. He was not even sure whether this was a case of willful misstatement or suppression of fact or contravention of provisions of the Rules. At the cost of repetition, the subject service, BEBP, on which service tax is paid upon classification as intellectual property services under Section 65(105)(zzy) of the Act. From the Agreement it would be seen that it allows user by the appellant of the Tata brand name, on its products/goods manufactured at its factory in Jamshedpur. This enhances the marketability of the said goods. Thus, the said services have been used by the assessee, the manufacturer indirectly in relation to the manufacture of final dutiable products in ..... X X X X Extracts X X X X X X X X Extracts X X X X
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