Service tax input credits allowed between company divisions without one-to-one correlation requirement for commissioning services

CESTAT Kolkata allowed the appeal in a service tax case involving commissioning installation and maintenance services for April 2005 to March 2010. The Tribunal followed Jharkhand HC's decision that set aside its earlier order, which had applied the Supreme Court ruling in Amar Bitumen case establishing that company divisions cannot have separate legal identities from the parent company. The Tribunal held that both entities were the same legal person and could utilize input service tax credits for output services without requiring one-to-one correlation between credits and payments under Central Excise law.

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Issues Involved:
Appeal against service tax demand and penalty imposition.

Analysis:
1. The appellant, engaged in manufacturing of iron and steel, appealed against the demand for service tax and penalty. The case involved rendering services by one manufacturing unit to another within the same division.
2. The Tribunal observed that the appellant failed to prove the case of 'Self Service' and confirmed the existence of service provider, recipient, and payment made for services rendered. The demand for service tax was sustained for the normal period only.
3. The High Court set aside the Tribunal's order, emphasizing that a company is a single entity in the eyes of the law, and divisions cannot have distinct identities. The Court highlighted the utilization of input credit for service tax payment and rejected the Department's appeal.
4. Following the High Court's decision, the Tribunal held that the appellant and the service provider were the same entity, allowing the utilization of input credit for service tax payment without the obligation to pay tax on services rendered within the company.
5. Consequently, the impugned order was set aside, and the appeal was allowed with any consequential relief.

This detailed analysis covers the legal judgment comprehensively, addressing the issues involved and the Tribunal's decision in light of the High Court's ruling.

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