Order date – 02 November 2022

 Facts –

• The Appellant, M/s. Hazira Lng Pvt Ltd have another group company associated enterprise namely M/s. Hazira Port Pvt. Ltd. ("HPPL"). The Appellants shared certain expenditure like common office building, security services, insurance services, manpower costs etc. with HPPL. The Appellants used to raise cost sharing invoices on HPPL. The Appellants also charged applicable service tax under the taxable category of Business Support Services.
• However, due to poor financial conditions of HPPL, the Appellants waived off the sum of Rs.29,20,64,558/- along with service tax of Rs.2,64,57,777/- on 31.03.2008. The said waiver was duly approved by the Board of Directors of the Appellants vide resolution dated 18.03.2008.
• During the course of audit it was observed that the appellant had waived off a sum along with service tax. Accordingly a show-cause notice dated 18.10.2010 alleged that the waive off of the balance pertained to M/s. HPPL is nothing but consideration received and therefore, Appellants are liable for payment of service tax of Rs.2,64,57,777/-.
• Aggrieve appellant had filed an appeal.

Issue – 

• Whether the amount waived by the appellant is liable for service tax?

Order – 

• The Tribunal find that the appellant had entered into arrangement with their associates company namely M/s. Hazira Port Pvt. Ltd, by which they have claimed, they were sharing certain cost. The object of the cost sharing agreement was to identify the requirement for a joint or a common function that may be required by any of the associated enterprises namely Hazira Lng Pvt Ltd, Hazira Ports Pvt Ltd and Hazira Gas Pvt Ltd., respectively and to jointly procure and use the said services. The said agreement also required the associated enterprises to contribute towards their allocated share in cost of common function.
• The appellants have contended that they have not provided any services to their associated company. The arrangement between them and the associated company was in the nature of cost sharing. The Tribunal relied on the decision of the Hon’ble Apex Court in case of Gujarat State Fertilizers & Chemicals Ltd Vs. CCE 2016 (45) STR 489 (SC), and it was held that the arrangement of the appellant with its associate companies is in the nature of cost sharing and it would not be correct to say that the appellants are providing any services to their associate companies.
• It finds that revenue has not been able to identify any specific service, which the appellant has provided to its associate companies. In these circumstances, the Tribunal did not find that the activities in the nature of sharing cost between associate companies amount to provision of any service by one company in the agreement with to any other companies in the said cost sharing agreement.
• Hence the appeal is allowed.