whether credit of services received from sister concern admissible?

PJ/Case Law/2016-17/3357

Case:-AMARA RAJA POWER SYSTEMS LTD. versus COMMR. OF CUS. & C. EX., TIRUPATHI

Citation:-2016 (43) S.T.R. 313 (Tri. - Hyd.)

Brief Facts:- The appellant Amara Raja Power Systems Ltd. was engaged in the manufacture of invertors and convertors and M/s. Amara Raja Electronics Ltd. was engaged in the manufacture of Home UPS/Trickle Charge/modules. During verification of records it was noticed that appellants had availed Cenvat credit of Service Tax paid as per invoices issued to them by their sister concerns M/s. Amara Raja Batteries Ltd. (ARBL) and M/s. Mangal Precision Products Ltd. (MPPL). The Service Tax was paid by appellants on the services of “Branches Sharing Expenses” and “Service Tax Group Resource Sharing Expenses” under the category “Business Auxiliary Service”. The appellants claimed credit on such services being input services. A show cause notice was issued proposing to deny the credit and recovery of the same along with interest and penalty. After adjudication the primary authority confirmed the disallowance of credit and ordered recovery of the same along with interest and penalty. In appeal, the Commissioner (Appeals) upheld the demand, interest and penalty. Being aggrieved the appellants have filed these appeals.

Appellant’s Contention- the appellant contended thatthe department had disputed the payments of Service Tax made by ARBL and MPPL. This would only mean that they were service providers. After accepting the tax, the department was now attempting to deny credit alleging that there was actually no service provided, but only sharing of common expenses. The learned counsel argued adverting to the documents like purchase order, invoices, etc. The appellants were manufacturers and undertook the help of sister concerns for providing them facilities like IT Support services, marketing and logistics support service, procurement of inputs, dispatch of final products and similar services. The sister concerns were registered with Service Tax department and raised invoices and collects the charges for services from the appellants including the Service Tax. The sister concerns were thus integrally connected with the appellant factory as they provide the required marketing support in connection with the manufacturing operations. It was therefore clear that the services had a nexus with the appellants manufacturing activities and thus qualify as input services.

Reasoning of Judgment- it was held that The department cannot blow both hot and cold. When the department has accepted tax on the services provided by sister concerns to appellant, then they cannot deny credit saying that no services were rendered.

Decision:-Appeal Allowed.

Comment – The crux of the case is that the appellant is allowed to take the credit of services received from sister concern. Revenue cannot deny the credit stating it not to be service when they themselves had accepted the tax deposited on same from sister concern stating it to be service.

Prepared by- Alakh Bhandari

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PJ/Case Law/2016-17/3357

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