Commissioner of CGST & Central Excise Vs Dana India Pvt Ltd (CESTAT Delhi)
CESTAT Deletes Service Tax Demand as Un-Invoiced Allocations Were Not Consideration for Services; Service Tax Demand Quashed Because Internal Cost Sharing Is Not Taxable Service; CESTAT Rules Debit Entries in Parent Company Books Cannot Trigger Service Tax Liability; No Reverse Charge Liability on Un-Invoiced Allocations Because No Consideration Was Agreed.
In Commissioner of CGST & Central Excise Vs Dana India Private Ltd, the Revenue challenged an Order-in-Appeal that had dropped the demand of service tax on “un-invoiced allocations” made by the parent company, Dana USA, to its Indian subsidiary.
The respondent was engaged in manufacturing axles and axle components and was registered under service tax laws. According to the Revenue, Dana USA provided services relating to technical know-how, engineering, sales promotion, product development, human resources, finance, and accounting systems to the respondent. These expenses were categorized as “Selling General & Administration expenses” (SG&A expenses). The respondent paid service tax under reverse charge only on the invoiced portion of such allocations, while no tax was paid on the “un-invoiced allocations” during January 2012 to May 2015. The department issued a show cause notice demanding service tax of Rs.1,88,71,786 along with interest and penalties. The adjudicating authority confirmed the demand and imposed penalties on the company and certain officials. However, the Commissioner (Appeals) allowed the appeals and dropped the entire demand, leading to the Revenue’s appeal before the Tribunal.
