Tata Steel wins appeal: Service tax credit valid for input services under BEBP Agreement

The service rendered by Tata Sons Ltd. under the BEBP agreement was deemed eligible as an "input service" for Tata Steel Ltd. The service tax paid was available as Cenvat credit to Tata Steel Ltd. The distribution of the credit of service tax paid under the BEBP Agreement exclusively to Tata Steel Ltd.'s Jamshedpur Steelworks was valid. The tax demanded and penalties imposed were unsustainable, leading to the appeals being allowed with consequential relief.

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Issues Involved:
1. Whether the service rendered by Tata Sons Ltd. under the BEBP agreement dated 18.12.1998 between Tata Steel Ltd. and Tata Sons Ltd. is eligible as "input service" for TSL and the service tax paid is available as Cenvat credit to TSL under the Cenvat Credit Rules, 2004Rs.
2. Whether TSL as ISD was entitled to, during the relevant period, distribute under the Cenvat Credit Rules, 2004, the credit of service tax paid as per the BEBP Agreement dated 18.12.1998 between itself and Tata Sons Ltd. exclusively to its Steelworks at Jamshedpur and not to other units of TSLRs.
3. Whether any part of the demand is barred by limitationRs.

Detailed Analysis:

Issue (i):
The service under the BEBP agreement was classified as "intellectual property services" under Section 65(105)(zzy) of the Act, and service tax was paid accordingly. The agreement allowed TSL to use the "Tata" brand name on its products, enhancing their marketability, thus indirectly relating to the manufacture of final dutiable products at TSL's Jamshedpur factory. This satisfies the requirements of Rule 2(l) of the Cenvat Credit Rules, making the service an "input service" eligible for Cenvat credit. This conclusion is supported by the decision in CCE vs. Ultratech Cement Ltd. and Jubilant Life Services Ltd. vs. Commissioner of Cus, C.Ex. & ST, where similar principles were upheld. Therefore, the service involved is an "input service" for TSL, and the tax paid on such service is available as Cenvat credit to TSL.

Issue (ii):
Rule 2(m) and Rule 7 of the Cenvat Credit Rules, as in force prior to 01.4.2012, allowed the distribution of Cenvat credit by an ISD to its manufacturing units, subject to certain conditions. The definition of "Input Service Distributor" in Rule 2(m) clarified that a manufacturer with multiple units could distribute the credit of service tax paid on input services to any of its units. Rule 7 imposed only two limitations: the credit distributed could not exceed the amount of service tax paid, and the credit attributable to services used in a unit exclusively engaged in manufacturing exempted goods or providing exempted services could not be distributed. TSL, as ISD, was entitled to distribute the credit of service tax paid under the BEBP Agreement exclusively to its Jamshedpur Steelworks, as supported by the decisions in CCE vs. Ecof Industries Ltd. and CCE vs. Dashion Ltd. Additionally, the company Tata Steel Limited, including its various divisions/units, is a single legal entity, and separate registrations under the Central Excise Act or Finance Act do not alter this legal position. Therefore, TSL's distribution of credit was valid and in accordance with the relevant provisions.

Issue (iii):
Given the findings on Issues (i) and (ii), it was deemed unnecessary to address the limitation issue.

Conclusion:
The Cenvat credit amount involved was correctly availed, distributed, and utilized by the appellants. The tax demanded and penalties imposed were unsustainable, and the impugned order was set aside. The appeals were allowed with consequential relief.

(Order pronounced in the open court on 28 January 2021.)

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