Case Law Details
Hindalco Industries Limited Vs Commissioner Of Central Excise (CESTAT Kolkata)
CESTAT Kolkata held that providing operational or administrative assistance in any manner or providing infrastructural support service or managing distribution and logistics service, fall within the ambit of ‘Business Support Service’.
Facts- M/s. Aditya Birla Management Corporation Pvt. Ltd (ABMCPL) provides common facilities to group companies in the area of consultancy, human resources, legal advice, management, logistics, infrastructure support, business strategic planning, research & development, auditing, electronic data processing, travelling, entertainment, etc., in order to achieve economies of scale and allow group companies to specialize. Accordingly, ABMCPL obtained Service Tax registration under the category of ‘Business Support Service’ to be provided to the group companies and duly discharged Service Tax thereon. At the end of each month, ABMCPL issued tax invoices charging its total cost on the group companies in the agreed ratio and collected Service Tax under the head of ‘Business Support Service’ in the tax invoices. The Service Tax collected was duly deposited with the Government and reflected in the periodical returns.
Two Show Cause Notices were issued to the Appellant proposing to deny the CENVAT Credit availed by them on the ground that ABMCPL are not an Input Service Distributor to distribute the service tax paid on BSS to their group companies. The ABMCPL being a distinct person cannot be said to be an office of the Appellant. The said Show Cause Notices were adjudicated wherein the CENVAT credit of Rs 1,99,69,247/- availed by the Appellant was denied along with demanding interest and penalty. The Appellant is before us against this impugned order.
Conclusion- Held that providing operational or administrative assistance in any manner or providing infrastructural support service or managing distribution and logistics service, fall within the ambit of ‘Business Support Service’. The ABMCPL has been providing these services to their group companies. As per the definition of BSS mentioned above, the services rendered by ABMCPL to their group companies would rightly fall under the category of ‘Business Support Service’. We observe that ABMCPL has been rightly paying Service Tax under BSS for the services rendered by them to their group companies. The department has also not disputed the payment of service tax by ABMCPL under the category of BSS.
Hence the Appellant is entitled to avail the CENVAT Credit of service tax paid on BSS since they have a nexus with the overall business activity of manufacturing final goods and are essential for the day-to-day operations of the Appellant.
In view of the above discussion, we hold that the services rendered by the ABMCPL is rightly classifiable under the category of ‘Business Support Service’ and ABMCPL has rightly paid Service Tax under the said category. The service tax paid by ABMCPL has been rightly distributed to their group companies, including Appellant.
FULL TEXT OF THE CESTAT KOLKATA ORDER
The brief facts of the case are that M/s. Aditya Birla Management Corporation Pvt. Ltd (herein after referred as ABMCPL) provides common facilities to group companies in the area of consultancy, human resources, legal advice, management, logistics, infrastructure support, business strategic planning, research & development, auditing, electronic data processing, travelling, entertainment, etc., in order to achieve economies of scale and allow group companies to specialize. Accordingly, ABMCPL obtained Service Tax registration under the category of ‘Business Support Service’ to be provided to the group companies and duly discharged Service Tax thereon. At the end of each month, ABMCPL issued tax invoices charging its total cost on the group companies in the agreed ratio and collected Service Tax under the head of ‘Business Support Service’ in the tax invoices. The Service Tax collected was duly deposited with the Government and reflected in the periodical returns.
2. Two Show Cause Notices dated 22.02.2012 and 29.06.2012 were issued to the Appellant proposing to deny the CENVAT Credit availed by them on the ground that ABMCPL are not an Input Service Distributor to distribute the service tax paid on BSS to their group companies. The ABMCPL being a distinct person cannot be said to be an office of the Appellant. The said Show Cause Notices were adjudicated vide Orderin-Original dated 04.03.201 1(Impugned Order) wherein the CENVAT credit of Rs 1,99,69,247/- availed by the Appellant was denied along with demanding interest and penalty. The Appellant is before us against this impugned order.
3. In their submissions the Appellant stated that ABMCPL are providing services in relation to the business including marketing, processing of purchase orders, managing distribution and logistics, customer relationship management services, accounting and processing of transactions, administration assistance, customer service,
infrastructural support services and other transaction processing, to their group companies, which fall within the definition of ‘Support Services of Business or Commerce’ (‘BSS’) as per Section 65(104c) of the Finance Act, 1994.
4. As per the definition of BSS, the services provided by ABMCPL to their group companies fall within the definition of ‘input service’ as defined under Rule 2(l) of the CENVAT Credit Rules, 2004. Till 03.2011, the definition of the term ‘input service’ in Rule 2(l) of CCR, 2004 had two limbs – (1) ‘means Clause’; and (2) ‘includes clause’. With effect from 01.04.2011, a third limb being ‘excludes clause’ was added to the definition. They submitted that BSS provided by ABMCPL is covered in the ‘means clause’ since it is used in relation to manufacture of final products by the Appellant. In the absence of ABMCPL, the Appellant would have to perform such activities by themselves and incur the applicable expenses on their own. Since it would not be possible for the Appellant to carry on the business without information technology team, legal team, human resource team, administrative team and managerial team, they utilize the services of ABMCPL. In fact, in addition thereto, each group company would have to incur such expenses by themselves, resulting into increase in cost for Aditya Birla Group as such. The term ‘in or in relation to’ used therein is very wide and expansive. The Appellant has placed their reliance on the decision of the Hon’ble Supreme Court in the case of Collector of Central Excise v. Rajasthan State Chemical Works – 1991 (55) E.L.T. 444 (SC). Accordingly, they contended that the services received by them from ABMCPL would rightly be classifiable under BSS and they are eligible to take CENVAT credit of the service tax paid on such services as ‘input service’.
5. The Appellant contended that the Department denied CENVAT Credit to them by stating that ABMCPL did not provide any services to them and they merely allocated expenses incurred on behalf of the Appellant. Simultaneously, the Department accepted the service tax so paid by ABMCPL. The Department never questioned ABMCPL on the BSS being provided by them or even the correctness of payment of Service Tax thereon. It is a well settled law that when no objection has been raised at the end of service provider, and tax paid has been duly accepted by the department, then the availment of credit cannot be questioned at the recipient’s end alleging that no services were rendered. In this regard, reliance is placed on the following decisions :-
a. Modular Auto Ltd. v. CCE, Chennai [2018 (8) TMI 1691 (Madras HC)]
b. Future Generali India Insurance Co.Ltd.v.CC, Mumbai Central [2023 (4) TMI 922 – CESTAT MUMBAI
c. Cholamandalam MS General Insurance Co. Ltd. v. Commr. of GST & CE, Chennai [2021 (3) TMI 24 – CESTAT CHENNAI]
d. Amara Raja Electronics Ltd. v. CCE, Tirupathi [2016 (43) S.T.R. 601 (Tri.-Hyd.)]
e. Sarvesh Refractories (P) Ltd. v. CCE & C. [2007 (11) TMI 23 –Supreme Court)]
6. The Appellant contended that the Department held that ABMCPL does not fit within the definition of ISD as provided under Rule 2(m) of the CENVAT Credit Rules, 2004, merely for the reason that the ABMCPL adopts a particular ratio to allocate the total costs/expenses incurred by it in respect of the common facilities provided to the group companies on cost-to-cost basis. They argued that the impugned order has not only failed to analyze the facts of the instant case, but also failed to analyze the definition of ISD under Rule 2(m) of the CCR, 2004. Rule 2(m) of the CCR, 2004 provides that an ISD is an office of the manufacturer which receives invoices of input services and distributes the credit thereof to the manufacturer. They reiterated that ABMCPL procures and consumes input services and thereafter provides such services to the group companies to achieve economies of scale for the group and allow the group companies to attain specialization in their respective businesses. Therefore, with such objective, ABMCPL provides BSS to the group companies. The impugned order failed to appreciate the difference between distribution of expenses and distribution of From the service tax returns filed by them in Form ST-3 for the underlying period, it is evident that AMBCPL is discharging the output services tax not only by utilization of CENVAT Credit but also in cash, since the total costs incurred by AMBCPL far exceed the Cenvatable expenses incurred by it. Therefore, AMBCPL is not merely distributing CENVAT Credit but providing services and charging its value on cost-tocost basis to its group companies.
7. Regarding limitation, the Appellant stated that they took the Cenvat Credit on the invoice issued by AMBCPL, which reflected the service tax paid by it in its returns. They also filed the Cenvat Credit statements with its monthly excise returns. Thus, it cannot be said that they have suppressed or willfully mis-stated any facts. Inasmuch as all the facts were in the knowledge of department, the extended period of limitation is not invocable in the present case and hence the substantial demand covered under the first SCN dated 04.10.2012 is barred by limitation . In this regard, they relied on the decision in the case of Anand Nishikawa Co.Ltd. v. CCE, Meerut – 1005 (188) ELT 149 (SC). As the demand is not sustainable, there is no question of imposition of penalty or recovery of interest from the Appellant.
8. The Ld.Authorized Representative for the Department reiterated the findings of the Adjudicating authority in the impugned order.
9. Heard both sides and perused the appeal records.
10. We observe that the Appellant has provided various services to their group companies to enable them to optimize the benefit of specialization and achieve economies of scale. The Appellant claimed that the services provided by ABMCPL to the group companies fall within the definition of ‘Business Support Service’ defined under Section 65(104c) of the Finance Act, 1994, which is reproduced 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, 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.
Explanation- For the purpose of this clause, the expression “infrastructural support services” includes providing office along with office utilities, lounge, reception with competent personnel to handle messages, secretarial services, internet and telecom facilities, pantry and security;]
11. From the above definition it can be seen that providing operational or administrative assistance in any manner or providing infrastructural support service or managing distribution and logistics service, fall within the ambit of ‘Business Support Service’. The ABMCPL has been providing these services to their group companies. As per the definition of BSS mentioned above, the services rendered by ABMCPL to their group companies would rightly fall under the category of ‘Business Support Service’. We observe that ABMCPL has been rightly paying Service Tax under BSS for the services rendered by them to their group companies. The department has also not disputed the payment of service tax by ABMCPL under the category of BSS.
12. The Appellant referred the Board Circular No.102/3/2009-S.T. dated 23.02.2009 and TRU’s Letter No.334/4/2006-TRU, dated 28.02.2006 which clarified the scope of BSS. As per the Board Circular cited above, services which are in the nature of assistance or support provided by the principal to the service recipient would fall under BSS. In the present case, the services rendered by ABMCPL being in the nature of support service provided to the Appellant, qualify as BSS as defined under section 65(104c) of the Finance Act, 1994.The manner of arriving at the value of services rendered would not change the nature of BSS provided by ABMCPL i.e., whether ABMCPL only recovered the expenses incurred or even charged a profit element. Section 67 of the Finance Act, 1994 provides that value of any taxable service is the gross amount charged for such service provided. It neither restricts a service provider from allocating expenses to the recipients nor mandates charging profit margins in exchange for the provision of such services. Therefore, even if ABMCPL merely apportioned expenses incurred by it to support the group entities, such apportioned amount represents the value of taxable service of BSS provided by ABMCPL.
11. The Appellant availed BSS provided by the ABMCPL, wherein ABMCPL carried on these functions on behalf of the Appellant, thus enabling the Appellant to benefit from specialization in their manufacturing activity and achieve economies of scale. The nature of the activities so performed and their close nexus with the business of the Appellant is also clearly visible from the mails exchanged by ABMCPL with the group companies.
12. Further, most of the activities done by ABMCPL are covered under the inclusive portion of the definition of ‘input services’ viz. advertisement and market research, procurement of inputs, accounting, auditing, financing, recruitment and quality control, coaching and training, computer networking, security, legal services etc.
13. Hence the Appellant is entitled to avail the CENVAT Credit of service tax paid on BSS since they have a nexus with the overall business activity of manufacturing final goods and are essential for the day-to-day operations of the Appellant.
14. In view of the above discussion, we hold that the services rendered by the ABMCPL is rightly classifiable under the category of ‘Business Support Service’ and ABMCPL has rightly paid Service Tax under the said category. The service tax paid by ABMCPL has been rightly distributed to their group companies, including Appellant.
15. The Appellant has raised the issue of limitation. They stated that the period involved in the Notice is from March 2007 to March 2012 whereas the Show cause Notice was issued on 22.02.2012 and 06.2012.Thus, part of the demand in the Notices is beyond the normal period of limitation. We observe that the availment of CENVAT credit by the Appellant based on the invoices issued by ABMCPLis known to the Department. There is no suppression of facts involved in this case. Accordingly, the notices issued beyond the normal period is hit by limitation.
16. In view of the above discussion, we hold that the impugned order is liable to be set aside. Accordingly, we allow the Appeal filed by the
(Order pronounced in the open court on 09 June 2023.)
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