TaxTMI 
TaxTMI 
2026 (7) TMI 89
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....orable credit rating from the credit rating agency ('CRA') with the help of Group Financial position. Following is a brief description of the impugned transaction. 3.1. Credit Rating Process: Credit rating is an assessment of the credit worthiness of a borrower in general terms or with respect to a particular debt or financial obligation. The function of Credit rating is carried out generally by the CRAs. For the said purpose the CRAs carry out a substantial due diligence on the subject entities. A part of this due diligence activity is the review of business risk, financial risk and management risk. 3.2. The CRAs use different and industry specific rating parameters and employ industry specific considerations in rating an entity. The CRAs adopt a consolidated approach by considering the entire group as a whole in rating broking entities. The reason why the CRAs adopt a consolidated approach to rate broking entities is that the financial sector's business is susceptible to market fluctuations. Hence the flexibility to manage earnings and volatility remains a key factor for the financial sector entities. Companies and groups that have large operations and diversified business ....
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....up companies. (c) Allow the CRAs access to Appellants officers and personal as may be reasonably requested by them. (d) Otherwise co-operate with the CRAs in relation to the credit rating process. 3.6. Thus, under the arrangement, the Appellants have agreed to make various documents including company accounts available to the CRAs. The Appellant has also undertaken to provide access to its officials if so desired by CRAs. After scrutinizing the same, CRAs provides the credit ratings to the subsidiary. In other words, the borrowing capacity of their subsidiary increases due to the said better credit rating. 3.7. The fee charged by the Appellants is on the basis of the rated borrowing capacity of the subsidiary. The relevant portion of the Agreement dated 12.3.2009 is reproduced as under: "2. Subsidiary's Obligations ..... 2.2 In consideration of the Assistance provided by ECL, the Subsidiary agrees to pay ECL fees ("Fees") in accordance with Schedule 1 hereto. Subject to Clause 2.3 of this agreement, such consideration shall accrue on a monthly basis and shall become payable at the end of the financial year by the Subsidiar....
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....r the taxable category of 'support services of business or commerce' and therefore, the benefit afforded to the subsidiary does not fall within the specified activities under the definition of 'support services of business or commerce'. To support his contention, he placed reliance upon the decisions of the Tribunal in Reliance ADA Group Pvt. Ltd. vs. Commissioner of Service Tax, Mumbai - IV [2016 (43) STR 372 (Tri. - Mumbai)], Shriram Chits Private Limited vs. Commissioner of Central Excise, Customs & Service Tax, Hyderabad- III [2020 (1) TMI 187 - CESTAT HYDERABAD] of Rural Electrification Corporation. Ltd. vs. Commissioner of Service Tax [2019 (11) TMI 386 - CESTAT New Delhi]. 8. He further submitted that the word "includes" in the definition of support services of business or commerce is contained in Section 65(104c) of the Finance Act, 1994 must be read as "means". To say this, he relied on the decision of the Hon'ble Supreme Court in Commissioner of Customs, New Delhi vs. Caryaire Equipment India Pvt Ltd [2012 (278) ELT 30 (SC)] and South Gujarat Roofing Tiles Manufacturers Association. vs. State of Gujarat [(1976) 4 SCC 601]. He further submitted that, without prejudi....
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....order qua confirming the demand of service tax and imposing penalty is to be set aside and supported the part of the order dropping the demand of tax in the show cause notice No. 889/COMMR/2013-14 dated 30/09/2013. 9. On the other hand, Learned Authorized Representative drew our attention to the agreement entered into by the appellant along with its subsidiaries and submits that the scope of service has been expanded to include operation and administrative assistance of any kind. The scope will cover all support activities for others on a contract or fee that are ongoing business support functions that business and organizations commonly do for themselves but sometimes find it economical or otherwise worthwhile to outsource. The word 'operational and administrative assistance' have wide connotation and can include certain services already taxed under any other head of more specific description. It is his submission that prior to 01/05/2011 the assistance provided under the contract is an operational assistance towards marketing. As already stated under the under the benefits of Credit Rating that Credit rating is a tool of marketing. This tool of marketing would not come into ex....
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....nts officers and personal as may be reasonably requested by them. (d) Otherwise co-operate with the CRAs in relation to the credit rating process." 12. Thus, under the arrangement, the Appellants have agreed to make various documents including company accounts available to the CRAs. The Appellant has also undertaken to provide access to its officials if so desired by CRAs. After scrutinizing the same, CRAs provides the credit ratings to the subsidiary. In other words, the borrowing capacity of their subsidiary increases due to the said better credit rating. 13. Therefore, we have to see whether the said activity is covered under the 'Support Services to Business or Commerce' or not? 14. For better appreciation of the facts the definition of 'Support Services to Business or Commerce' is extracted below: "support services of business or commerce" means services provided in relation to business or commerce and includes evaluation of prospective customers, telemarketing, processing of purchase orders and fulfillment services, information and tracking of delivery schedules, managing distribution and logistics, customer relationship management services, account....
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....uivalent to 'mean and include' and in that case it may afford an exhaustive explanation of the meaning which for the purposes of the Act must invariably be attached to those word or expression. Thus, the word "include" may in certain context, as in the present case, be a word of limitation. By adding the said inclusive portion, the intention of the legislature is not to enlarge the meaning of the term 'Support Services of Business or Commerce', rather than to limit its scope to specified activities. The said issue has been examined by the Hon'ble apex Court in Commissioner of Customs, New Delhi vs. Caryaire Equipment India Pvt Ltd (supra) wherein the Hon'ble apex Court observed as under: "15. In the instant case, it is the assessee's stand before the Commissioner of Customs and also before the Tribunal, that it fabricates extruded aluminium into aluminium grills. It is not the case of the assessee either before the Commissioner of Customs or before the Tribunal, that aluminium grills are the same as extruded aluminium products. It is an admitted position that assessee carries out the fabrication to derive a product known as aluminium grills made out of extruded aluminium p....
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....y 22. The use of the word "includes" in the restrictive sense is not unknown. The observation of Lord Watson in Dilworth v. Commissioner of Stamps which is usually referred to on the use of "include" as a word of extension, is followed by these lines: "But the word 'include' is susceptible of another construction, which may become imperative, if the context of the Act is sufficient to show that it was not merely employed for the purpose of adding to the natural significance of the words or expressions defined. It may be equivalent to 'mean and include', and in that case it may afford an exhaustive explanation of the meaning which, for the purposes of the Act, must invariably be attached to these words or expressions." It must therefore be held that the manufacture of Mangalore pattern roofing tiles is outside the purview of Entry 22." 17. Further in the case of Karnataka Power Transmission Corporation vs. Ashok Iron Works Private Limited [(2009) 3 SCC 240] the Hon'ble apex Court observed as under: "14. The learned counsel also submitted that the word "includes" must be read as "means". In this regard, the learned counsel placed reliance upon two decisions of th....
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....ent." 18. The Learned Authorized Representative relied upon the decision of the Hon'ble High Court of Gujarat in the case of Parth Poly Wooven Pvt Ltd (supra) wherein it was observed that the said interpretation was applicable to that case only and wherein it has been observed that "to our mind this was also not the intention of the Legislature in the present case" 19. Further, in the case of Air Liquide North India Pvt Ltd vs. Commissioner Central Excise, Jaipur [2017 (4) GSTL. 230 (Tri.-Del.)] which has been affirmed by the Hon'ble High Court of Rajasthan [2019 (27) GSL 194 (Rajasthan)] by relying on the decision of the Hon'ble apex Court in Godfrey Phillips India Ltd vs. State of UP [(2005) 2 SCC 515], the Hon'ble High Court observed as under: "that while interpreting the scope of the expression "Support Service of Business & Commerce" under Section 65(104c) and also of the term "Infrastructural Support Service" in Explanation to Section 65(104c), the principle of noscitur-a-sociis would be applicable and accordingly the expression "Support Service of Business or Commerce" as defined under section 65(104c) would cover only the service which ar....
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....a issued by the Service Tax authorities, which specifies that for a transaction to liable to service tax under the category of Business Support Service, an element of outsourcing must be present but in the disputed transactions, the essential element of outsourcing is missing, hence it cannot be brought under the category of Business Support Service during the relevant period. Further, we find that Business Support Service include a wide array of activities and the SCN does not classify the activity under which it proposed to tax the services received by the appellant." 23. Further, in the case of Reliance ADA Group Pvt Ltd (supra), again the Tribunal observed as under: "5.11 We find that the activity of incurring cost as service is not in the nature of outsourced activity as contemplated in the definition of Business Support Services and therefore would not be taxable under the category of 'Business Support Services'." 24. We find that, in this case no activity has been outsourced being carried out by the appellant for their subsidiaries. The appellant is merely making available certain documents to the CRAs and undertaking incidental functions as elaborated herein ....
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....ion and logistics, customer relationship management services, accounting and processing of transactions, operational or administrative assistance in any manner, formulation of customer service and pricing policies, infrastructural support services and other transaction processing (as amended w.e.f. 01.05.2011) As per amended definition it appears that the assistance provided by the assessee to the subsidiary companies is classifiable under Easiness Support Service and taxable w.e.f. 01.05.2011 under section 65(105)(zzzq) of Finance Act, 1994 and service tax as detailed under is recoverable. Year Value of taxable service Service tax 2011-12 60,73,98,157 Rs. 6,25,62,010/- Amount Detected; Rs. 6,25,62,G10/- Amount Recovered: Nil xxxxxx Para 2: Non-fulfillment of obligation, under Rule 6(3A)(c) of the Cenvat Credit Stales, 2004; It is also noticed that though me assessee has claimed credit rating support fee as non-taxable income, they have failed to follow the procedure as required under Rule 6 of Cenvat Credit Rules, 2004. As per Rule 6 (1) of the CENVAT Credit Rules 2004, the CENVAT credit is not allowed on such quant....