Custom, Excise & Service Tax Tribunal
M/S Amara Raja Electronics Ltd.. & vs The Commissioner on 16 February, 2016
CUSTOMS, EXCISE AND SERVICE TAX APPELLATE TRIBUNAL REGIONAL BENCH AT HYDERABAD Bench Single Member Bench Court I Appeal No.E/26835 to 26837/2013 (Arising out of Order-in-Appeal No.05/2013(T)CE, Dated 07-03-2013 & 04/2013(T)CE, Dated 06-03-2013 Passed by C.C.C.E&ST.(Appeals)Guntur) For approval and signature: Honble Ms. Sulekha Beevi, C.S., Member(Judicial) 1. Whether Press Reporters may be allowed to see the Order for publication as per Rule 27 of the CESTAT (Procedure) Rules, 1982? 2. Whether it should be released under Rule 27 of the CESTAT (Procedure) Rules, 1982 for publication in any authoritative report or not? 3. Whether their Lordship wish to see the fair copy of the Order? 4. Whether Order is to be circulated to the Departmental authorities? M/s Amara Raja Electronics Ltd.. & M/s Amara Raja Power Systems Ltd Chittoor District. ..Appellant(s) Vs. The Commissioner. C&CE. Tirupathi ..Respondent(s)
Appearance Ms. Kamana Srikanth, Advocate for the Appellant Shri Deepak, AR for the Respondent Coram:
Honble Ms. Sulekha Beevi, C.S. Member(Judicial) Date of Hearing : 28/01/2016 Date of Decision:16/02/2016 FINAL ORDER No._______________________ [Order per: Sulekha Beevi, C.S.,]
1. The appellant, M/s Amara Raja Electronics Ltd (AREL) is engaged in the manufacture of Home UPS/Trickle charge/modules and the appellant M/s Amara Raja Power Systems Ltd(ARPSL) is engaged in the manufacture of inverters and convertors. The issue involved in the appeals filed by the above appellants being same, the appeals were heard together and are disposed by this common order.
2. During the verification of records, it was noticed by the department that the appellants have availed Cenvat credit of service tax paid on the branches common sharing expenses under the category of business auxillary services as input services on the basis of invoices issued by M/s Amararaja Batteries Ltd.( ARBL). The department entertained a view that the appellants were having an understanding with M/s ARBL for sharing of common expenses incurred at the common branch offices and the invoices appear to be raised by M/s ARBL merely to collect expenses shared by them. That no service is rendered by ARBL and that no service was received by appellants herein. That there is no relationship of service provider and service recipient between ARBL and appellants. The invoices raised by ARBL are not valid invoices and these were meant to collect expenses shared by them. A show cause notice was served on appellants raising the allegation that the transactions in the invoices were mere commercial transactions to share common expenditure between the group companies and proposing to deny credit availed on the input services and demanding recovery of the same along with interest and proposing to impose penalty. After due process of law, the original authority confirmed the demand along with interest and imposed equal amount of penalty. The appellants carried the issue in appeal and vide order impugned herein the Commissioner (Appeals) upheld the demand, interest and penalty. Being aggrieved, the appellants have filed the present appeal.
3. On behalf of the appellant, the learned counsel Ms Kamana Srikanth explained that the services were received by appellants from ARBL and M/s Mangal Precision Products Ltd.( MPPL) at their branch offices in Chennai, Hyderabad and Mumbai. She submitted that ARBL and MPPL provided office space on a rental basis to the appellants. So also, they provided requisites for running an office, such as telephone, electricity, and other office expenses. Services like IT related services and manpower services were also provided. The branch of the appellant company was thus functional and integrally connected with the factory, as the branch provided the marketing support in connection with the manufacturing operations. The department has denied the credit alleging that these services provided by ARBL and MPPL do not have a nexus with the manufacture of finished products, and that these transactions are only in the nature of sharing of common expenses. She laid thrust on the purchase orders and argued that these documents would reveal the nexus between the services availed at branch and the factory. The learned counsel placed reliance on the judgment laid in CCE Bangalore, III, Vs Standzen Toyotetsu India(P)Ltd -2011(23) STR 444(Karnataka), Wipro Ltd. Vs CCE Bangalore 2013(289) ELT 184, Surani ceramics Ltd Vs CCE Rajkot 2012(283) ELT 388(Tri.Ahmd) and CCE, Nagpur Vs Ultratech Cement Ltd. -2010(260) ELT 369(Bom). In addition, she submitted that in the appellant own case appeal No.E/22613/2014-SM, the Tribunal has decided the issue in favour of the appellants vide Order dated 17-12-2015.
4. Against this, the learned AR Sri Deepak vehemently argued that credit is not admissible as there is no service provided by ARBL and MPPL to the appellants. The transactions are only commercial transactions in which some common expenditure between the group companies are being shared and these transactions did not qualify as input service as defined under Rule 2(l) of Cenvat Credit Rules, 2004. He pointed out that in the invoices, though the service tax is paid, under the category of Business Auxiliary Services it can be seen that the expenses for electricity charges, e-mail expenses marketing and sale promotion expenses, office maintenance expenses, postage and telegram, printing and stationery, rental and taxes, staff welfare expenses subscription, periodical expenses and telephone expenses are shared between the group companies. That, there is no relationship of service provider and service recipient between ARBL/MPPL and the appellants. Rule 4(A) of Service Tax Rules, 1994 provides for the scheme of input service distributor, in order to avail the benefit of tax credit paid on common expenses incurred by the group companies. But ARBL or MPPL have not raised the invoices under the provisions of registered Input Service Distributor. From the invoices, it is seen that ARBL and MPPL have extended their financial support to appellants to meet their expenses. That there is no element of service is involved, as there is no relationship of service provider and service recipient; That appellants are not entitled to claim the credit upon the invoices.
5. I have heard the rival submissions and perused the appeal records. The main allegation for denying credit is that there is no service rendered by ARBL and MPPL to the appellants. That the arrangement is merely sharing of common expenses. Undisputedly, the department was collecting service tax for all these years, from ARBL and MPPL who are registered with the Service Tax Department. The department was very well aware of the impugned activity of ARBL and MPPL while paying service tax under BAS, BSS and other category of services. They were filing ST-3 returns in this regard and no objection has been raised by the department against such payment of service tax. Without raising any objection at the end of service provider, and after having accepted the tax, as well as the returns, the allegation is now raised at the end of the service recipient that credit cannot be taken since there is no rendering of services at all. In this regard it would be appropriate to mention it would be appropriate to mention, the observations made by the Tribunal while considering the Stay Application vide Order dated 07-02-2014. The same is reproduced as under:
..Even though it is a sharing of expenses of the branch offices, the fact remains that the branch office belongs to one of the group companies and the owner of the branch among the group companies provides the services to the appellant for which the service tax is paid and charged to the appellant. On going through the records and submissions, we find that the services have a nexus to the appellants activities and therefore have to be considered as input services. The department proposes to deny the credit only on the ground that the arrangement is of expense sharing. In our opinion, this cannot be the ground for denying the credit. The ground should be the one that neither service has not been provided or services received are not input services. Therefore, we find that appellant has been able to make a prima facie case on merits for waiver of pre-deposit and stay against recovery during the pendency of appeal. Accordingly the requirement of pre-deposit of adjudged dues is waived and stay against recovery granted during the pendency of appeals.
6. Further this tribunal vide Order dated 17-12-2015 in Appeal No.E/22611/ and 22613 of 2014 has answered the issue in favour of the appellants. When the department has accepted the tax on the services provided by sister concern to appellants, then they cannot deny credit alleging that no services were rendered. It is submitted by the learned Counsel that ARBL and MPPL are separate legal entities incorporated under the Companies Act ,1956 and they are separately assessed to Income Tax. M/s ARBL and M/s MPPL being independent legal entities, such money collected from appellants for the services provided to them and also expenses recovered to compensate the cost of sourcing the services, would be taxable under BSS/BAS. There is no evidence to establish that there is no intention to provide service and it was mere understanding with the sister companies for sharing of common expenses. In CCE, Bangalore Vs Stanzen Toyotetsu India (P)Ltd. 2011(23) STR 444(Kar) the Honble High court while considering the eligibility of credit on input service observed as under:
the services mentioned in the section are only illustrative and it is not exhaustive. Therefore, when a particular service not mentioned in the definition clause is utilised by assessee/manufacturer and service tax paid on such service is claimed as Cenvat credit, the question is what are the ingredients that are to be satisfied for availing such credit. If the credit is availed by the manufacturer, then the said service should have been utilised by the manufacturer directly or indirectly in or in relation to the manufacture of final products or used in relation to activities relating to business. If any one of the tests is satisfied, then such a service falls within the definition of input service and the manufacturer is eligible to avail Cenvat credit of the service tax paid on such services.
7. When ARBL and MPPL have paid service tax under the category of BAS/BSS, the strong inference that can be drawn is that they have provided services as per the invoices raised by them. Revenue has not been able to adduce any evidence that there is no service rendered. The said issue, whether the transactions are services or not, should be agitated by the department against service providers viz. ARBL and MPPL, from whom the service tax has been collected. Credit cannot be denied at the service recipients end, alleging that no service has been provided.
8. From the foregoing discussions, I am of the view that the denial of credit is unjustified. In the result, the impugned orders are set aside and the appeals are allowed with consequential reliefs, if any.
(Pronounced on 16-02-2016 in open court) ( SULEKHA BEEVI. C.S.) MEMBER(JUDICIAL) DKS 8