By CA Puloma Dalal, CA Jayesh Gogri,CA Mandar Telang, Chartered Accountants
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If service tax is paid on sharing of common expenses which is not objected by department, CENVAT credit thereof cannot be denied to service receiver.
Facts:
Appellants received invoices from its group company relating to common expenses incurred at branch. CENVAT credit was denied on the ground that it was merely sharing of common expenses. Relying on various judicial pronouncements, it was contested that the requisites for running a branch office was provided by group company which had nexus with manufacture of final product. However, department contended that it was not a case of rendition of services and in order to distribute common credits, the Appellants ought to be “Input Service Distributor”.
Held:
Since department was collecting service tax from group companies which was never objected, allegation cannot be made against service receiver that no services were rendered. In absence of any evidence by revenue that services were not rendered, appeal was allowed.
[Note:- Readers may note the decision in the case of Commr. Of ST vs. Arvind Mills Ltd. 2014 (35) STR 496 (Guj.), wherein the activity of deputation of employees to subsidiary company and recovery of cost thereon was held as not liable to service tax. Reference can also be made to a similar decision of the Delhi CESTAT in the case of ONGC vs. Comm. Of ST, Delhi 2016 (8) TMI 500 – CESTAT Delhi. In sum and substance, in cases of sharing of common expenses, in absence of service, service tax shall not be paid. However, if paid, CENVAT credit thereof shall not be denied.]
