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2020 (12) TMI 1055
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....t Infrastructure Ltd. [Abhijeet Ltd. ] and Corporate Ispat Alloys Ltd. [Corporate Ltd. ]. These plants were mentioned in the Central Excise registration of the Appellant. At these manufacturing plants, the Appellant manufactured DRI, Pig Iron and billets, which were sold to Abhijeet Ltd. and Corporate Ltd., who further sold these goods to independent buyers at the same price as they were sister concerns of the Appellant. The Appellant claims to have shared the profits with Abhijeet Ltd. and Corporate Ltd. by way of discounts and incentives. The discount was a fixed discount, based on the quantity of goods sold by Abhijeet Ltd. and Corporate Ltd. Incentives were in the form of additional discounts, if the sales made by Abhijit Ltd. and Corporate Ltd. met a certain sales target mutually agreed upon by the Appellant and the two concerns. These incentives and discounts were paid on a monthly basis by way of debit notes issued by Abhijeet Ltd. and Corporate Ltd. The Appellant settled the account of Abhijeet Ltd. and Corporate Ltd. after adjusting the aforesaid discounts/incentives. These discounts/incentives were also recorded in the books of accounts of the Appellant as "COMM.SAL....
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....nstant show cause notice is without jurisdiction and could not have been issued to the Noticee in the first place under section 73 of the Act. A.2. To elucidate, the Noticee submits that it is not the case of the revenue authorities that Noticee was liable to pay service tax during the disputed period as a recipient of service. The entire basis of the show cause notice dated April 17, 2013 is that the demerged undertakings of Abhijeet & Corporate have been merged with the Noticee and thus all liabilities of demerged undertaking lie with Noticee. Based on the aforesaid allegation of Para 19 of the show cause notice dated April 17, 2013, instant proceedings have been initiated against the Noticee. A.3. The demerged undertakings as defined in the scheme of merger were specified to be the DRI/Sponge iron plants of Abhijeet & Corporate. The legal entities i.e. body corporate of Abhijeet & Corporate did not merge with Noticee. The aforesaid legal entities continue to be operating as going concerns and executing their business transactions. A.4. At the outset the Noticee submits that during the disputed period payment of service tax was the liability of Abhijeet....
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.... is without jurisdiction & is liable to be dropped on this ground itself." 6. The reply filed by the Appellant, however, did not find favour of the Commissioner, who by the order dated 23 December, 2014, confirmed the demand on service tax under section 73 of the Finance Act read with sections 68 and 70 of the Finance Act with interest and penalties under sections 77 and 78 of the Finance Act. The relevant portion of the order of the Commissioner is reproduced below:- "7.1.10. Thus, from the above, it is clear that the Party No.1 and Party No.2 has provided services as "Commission Agent" to the Noticee, which are taxable under the category of "Business Auxiliary Services". Accordingly, service tax in respect of services provided by them are recoverable. However, in this regard, I would like to resolve the dispute raised by Noticee as to from whom this Tax will be recoverable, whether from the Party No.1 and Party No. 2 or from the Noticee. In this context, I rely on the order dated November 13, 2009 of Hon'ble High Court of Judicature at Bombay, Bench at Nagpur. As per the said Order the Hon'ble High Court the Party No.1 and Party No. 2 merged with the Noticee w.e.f. Ap....
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....7 to June 30, 2009. The show cause notice as well the impugned order have failed to establish suppression/mis-declaration on the part of the Appellant. Therefore, the extended period of limitation is not invokable in the instant matter. 9. Shri R.K. Majhi, learned Authorized Representative of the Department has, however, supported the impugned order and made the following submissions. i. The order dated November 13, 2009 of the Bombay High Court relating to merger categorically mentions that all the liabilities, including contingent liabilities relating to and forming part of the demerged undertaking immediately before demerger shall become the liabilities of the demerger company and, therefore, the Appellant is not justified in contending that the Appellant is not liable to pay service tax as the legal entities of the service provider have not merged with the Appellant; ii. The Appellant is also not justified in asserting that it did not receive BAS from Abhijeet Ltd. and Corporate Ltd. The goods were delivered directly to the consumers and not to Abhijeet Ltd. and Corporate Ltd. The Appellant has accepted that it had appointed Abhijeet Ltd. and Corporate Ltd.....
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....7. A copy of Scheme of arrangement as sanctioned by the Court and duly signed by Adv. Mr. Anjan de, is annexed to this order, which is marked as 'X' for identification." 14. It would be appropriate to reproduce the relevant paragraphs of the Scheme of Arrangement that was sanctioned by the Bombay High Court. 15. Paragraph 1 of the Scheme of Arrangement between Abhijeet Ltd. and the Appellant deals with definitions and the relevant clauses are as follows:- " 1.7 "Demerged Company" shall mean Abhijeet Infrastructure Limited. (Company Identification Number U27108MH1984PLC033473) a Company incorporated on 19/08/1984 (Nineteenth July Nineteen Eighty Four) under the Companies Act, 1958 having its Registered Office at F.S. MIDC Industrial Area, Hingna Road, Nagpur - 440016. 1.8 'Demerger' shall mean the transfer of the "Demerged Undertakings" from the "Demerged Company" and vesting them in the Resulting Company in accordance with the Scheme. 1.9 "Demerged Undertakings" shall mean the "Sponge iron Plant and Power Plant" of the "Demerged Company" and include all its industrial undertaking, business, activities, operations and infrastructure, tangible and int....
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....ons. It gets manufactured sponge Iron, Billets and rolled Steel Products from the assets owned by the Demerged Company and taken on Lease by it. The Resulting Company has an annual capacity of 550000 MT of Pig Iron, 255000 MT of Sponge Iron, 205000 MT of Iron and Steel Castings and 260000 MT of billets. Further, the Company also has Coal Mining blocks for captive use. The Company has 15.5 MW Blast Furnace Gas based power generation facilities for meeting a part of its own power requirements. In the immediately preceding Financial Year, the Resulting Company has shown very good prospects. However, the Resulting Company has accumulated losses and unabsorbed depreciation arising from of operations in the years previous to those Financial Years. Apart from physical resources the Resulting Company has valuable human resources and systems." 17. Paragraph 4 deals with Specific Benefits of The Scheme of Arrangement and the relevant clauses are reproduced below:- " 4. SPECIFIC BENEFITS OF THE SCHEME OF ARRANGEMENT 4.1 Scheme intends to cause a Demerger of the "Demerged Undertakings" from "Demerged Company" and transfer and vest them in the Resulting Company. 4.....
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....nces, if any, thereon." 19. Schedule A referred to in clause 1.9(a) and Schedule A1 referred to in clause 1.9(b) are reproduced below:- SCHEDULE-A "Fixed Assets and Liabilities pertaining to the Demerged Undertakings of the "Demerged Company" as shown in its audited Balance Sheet asat the commencement of business hours on 01/04/2008, being. 1. 350 TPD DRI Plant together with all lands described in Schedule A2, buildings, structures, infrastructure, utilities and auxiliaries, situated at Village Siltara, Raipur. 2. 15 MW Waste Heat Recovery Based Power Plant together with all lands described in Schedule A2, buildings, structures, infrastructure, utilities and auxiliaries, situated at Village Siltara, Raipur. SCHEDULE- A1 All intangible properties, licences, consents, approvals, clearances, certificates, authorizations, benefits, incentives, rights, agreements, contracts, permits, entitlements, engagements, concessions, privileges, subsidies, trademarks, systems, data, designs, drawings, specifications, resources, modules and assets of every kind, nature and description pertaining to Demerged Undertakings." 20. The "Demerged Company" ar....
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....the Demerger. Paragraph 5.2.2 provides that all assets, properties, rights, entitlements, benefits, liabilities, contingent liabilities, and obligations pertaining to Demerged Undertakings transferred to and vested in the Resulting Company, shall belong to and be owned, controlled and managed by the Resulting Company, together with charges and encumbrances, if any. All the fixed assets pertaining to the "Demerged Undertakings"and the liabilities of the "Demerged Company" are shown in Schedule A, while all the intangible properties have been described in Schedule A-I. 26. It is, therefore, more than apparent that only the Sponge Iron Plants and Power Plants of Abhijeet Ltd. and Corporate Ltd. merged with the Appellant and it was not a merger of Abhijeet Ltd. merged with the Appellant and it was not a merger of Abhijeet Ltd. and Corporate Ltd with the Appellant. The Demerged Companies, namely Abhijeet Ltd. and Corporate Ltd., continue to operate as going concerns. Thus, the liabilities of Abhijeet Ltd. and Corporate Ltd. could not have been fastened upon the Appellant. 27. However, even if it is assumed that BAS was provided, then too only Abhijeet Ltd. and Corporate Ltd. were ....
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.... 1949-50. The Sales-tax authorities attempted to recover the arrears of tax from the respondent as the purchaser of the business. Xxxxxxxxxx 3. It was next argued on behalf of the appellants that upon a true construction of the registered instrument dated October 5, 1956, the respondent undertook to pay not only Schedule 1 liabilities but also other liabilities like sales tax imposed in regard to the business. It was, however, disputed by Mr. Ganapathy Iyer on behalf of the respondent that there was any undertaking on the part of the respondent to discharge the liabilities in regard to arrears of sales tax. But even on the assumption that the respondent undertook to pay the arrears of sales tax due by the transferor, it does not follow that there is a liability created inter se between the State Government on the one hand and the transferee on the other hand. To put it differently, it is not open to the State Government to rely on the instrument inter vivos between the transferor and the transferee and to contend that there is any contractual obligation between the transferee and the State Government who is not a party to the instrument. We accordingly reject the ....