2025 (3) TMI 379 - AT - Service Tax

Service tax not payable on inter-divisional services when appellant and division are same entity

M/s. Tata Steel Limited (Growth Shop) Versus Commissioner of Central Excise and Service Tax, Jamshedpur

CESTAT Kolkata held that the appellant and its division were the same entity for service tax purposes. The Tribunal followed its earlier precedent in the ... Non-payment of service - commissioning & installation service - maintenance or repair service - interpretation of the relationship between Tata Steel Limited (TSL) and its divisions, specifically Tata Growth Shop (TGS) - HELD THAT:- The issue had already come up for consideration before this Tribunal in the appellant’s own case for an earlier period M/S TATA STEEL LIMITED [2024 (8) TMI 598 - CESTAT KOLKATA] wherein it has been observed 'we hold that TGS & TSL are the same identity and it is well settled that the credit of input is to be utilized for payment of service tax towards output services. There is or can be no dispute with this legal position and this is what the representatives of TGS and TSL, 'agreed with. Further, it is also settled legal position that under the Central Excise law there is no requirement of one-to-one correlation between the credits availed in respect of the input and input service and utilization thereof in payment of central excise duty or service tax in respect of dutiable goods manufactured and cleared and/or output service rendered. Hence, TGS has rightly availed the subject cenvat credits of service tax paid, without there being any concomitant obligation to make payment of service tax on the services rendered to another unit of TSL.' Following the precedent decision in the appellant’s own case, it is held that no Service Tax is payable by the appellant. Consequently, the impugned orders are set aside. Conclusion - TGS and TSL were the same entity for service tax purposes. No Service Tax is payable by the appellant. Appeal allowed. The Appellate Tribunal considered the issue of whether service tax was payable by the appellant, Tata Steel Limited (TSL), in a case involving the rendering of services by one manufacturing unit of the steel division to another manufacturing unit within the same division. The core legal questions revolved around the interpretation of the relationship between TSL and its divisions, specifically Tata Growth Shop (TGS), in terms of service tax liability for services provided between these entities.The Tribunal analyzed the facts of the case, which included TGS being a profit center of TSL engaged in manufacturing heavy machinery and equipment, registered under the Central Excise Act and as a service provider for service tax purposes. TGS provided services to external customers and to TSL, availing CENVAT Credit for service tax paid on subcontracted services. TSL prepared consolidated annual accounts reflecting the affairs of all its divisions, including TGS, without separate profit and loss accounts for TGS. TGS participated in bidding for tenders and received purchase orders from TSL, maintaining a separate bank account for transactions with TSL.The Tribunal considered the appellant's argument that a previous Tribunal decision in their favor should apply to the current case, as the issue was no longer res integra. The Revenue, represented by the Authorized Representative, upheld the findings in the impugned orders confirming service tax demands against the appellant.In its analysis, the Tribunal referred to the previous Tribunal decision in the appellant's earlier case, where the issue of service tax liability between TGS and TSL was discussed. The previous decision was challenged in the Hon'ble Jharkhand High Court, which set aside the Tribunal's order, emphasizing that a company under the Companies Act is a single entity in the eyes of the law, and divisions cannot have separate legal identities. The High Court ruled in favor of the appellant, stating that TGS had rightly availed CENVAT credits without the obligation to pay service tax on services rendered to another unit of TSL.Based on the precedent set by the Jharkhand High Court decision, the Tribunal held that TGS and TSL were the same entity for service tax purposes. It reiterated the principle that input credits can be utilized for service tax payments without a one-to-one correlation between input and output services. Therefore, the Tribunal concluded that no service tax was payable by the appellant, setting aside the impugned orders and allowing the appeals with consequential relief as per law.In summary, the Tribunal's decision clarified the legal relationship between TGS and TSL, emphasizing their unity as a single entity for service tax purposes and affirming the appellant's position that no service tax liability existed in the case at hand.