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PJ/Case Laws/2010-11/1036

Service provided to oneself - whether taxable?
Case: ITC Limited versus CCE & ST, Patna
 
Citation: 2010 (20) STR 847 (Tri – Kolkata) 

Issue:- Whether the credit notes received as inter division charges/ inter corporate charges reflected in the books in the course of clearance of goods to other units of the company will be classified as Business Auxiliary services?
 
Brief Facts:- Applicant is engaged in packaging and printing business. The packaging and printing Division is a manufacturer of Packaging materials which are being cleared to other factories of the company on payment of appropriate duty under Rule 8 of the Valuation Rules. The Applicant is also receiving certain amounts by way of credit notes which are reflected in their books of accounts as Inter-Division Charges/ Intra-Corporate National Charges.
 
The Adjudicating Authority held that these charges are in respect of the services provided by the Applicant in relation to basic activity of the company, and therefore, they deserve classification under ‘Business Auxiliary Service’. The demand was based by treating and packing division as a provider of business auxiliary services to other division of the ITC.
 
The Applicant has therefore filed appeal before the Tribunal for waiver of pre-deposit of Service Tax, interest and penalties.
 
Applicant’s Contentions:- Appellant-applicant submitted that for stay purpose, even if the case of Revenue is admitted that the Applicant is providing services to the other division of the same company, the same is not taxable services. In support of their submission, the following decisions are relied upon:
 
 

  1. Precot Mills Ltd v/s CCE, Tirupati [2006 (2) STR 495 (Tri. – Bang)]
  2. Senior Terminal Manager, IOC Ltd v/s CCE, Tirunelveli [2009 (13) STR 287 (Tri – Chennai)]
  3. IOC Ltd. versus CCE, Patna [2007 (8) STR 527 (Tri. – Kolkata)]

The contention of the Applicant is that when one renders service to oneself, no question of leviability of service tax will rise. 

Respondent’s Contentions:- Revenue contended that in the books of accounts, the applicant is showing the amounts in question as Inter–Division Charges/Intra–Corporate National Charges and the applicant is unable to explain these charges before the Adjudicating Authority. As the Applicant is not explaining these charges properly, therefore the demand is rightly made. 

Reasoning of the Judgment:- The Tribunal held that the Adjudicating Authority confirmed the demand of service tax on the Applicant as a provider of BAS to other divisions of the ITC. In these circumstances, it is found prima facie merit in the contention of the appellant that no service tax is leviable for the services provided to oneself, in view of the above decisions relied upon by the Applicant. Pre-deposit of the whole of the amount of Service Tax, interest and penalties are waived.

Decision: - Stay granted. 

Comments:- This is very important decision. Nobody can provide service to himself. There has to be two persons viz. one providing service and other is recipient of service. 

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