Taxindiaonline.com
Taxindiaonline.com Taxindiaonline.com TIOL Tube Taxindiainternational.com
 
LOGIN
Forgot Password |  Register  
Saturday , February 13, 2016 | Updated : Feb 13, 00:03 IST
Income Tax    Customs    Excise    Service Tax    FEMA    DGFT    SEZ    Misc    Pitara    Budget   
About Us Contact Us Advertise
Taxindiaonline.com Taxindiaonline.com Taxindiainternational.com
 
 
NEWS FLASH
 
Lucknow DRI seizes 297 kg of cannabis coming from Guwahati Govt grants Sec 11C benefits to Di-Calcium Phosphate (animal feed grade) for six years period (See NT 4 in 'What's New') Industrial production growth goes down by 1.3% in December, 2015 CBDT issues transfer order of five CCITs; Aditya Vikram is new DG(Inv), Delhi + P C Mody gets Mumbai Investigation + Akhilesh Ranjan is now CCIT(5) in Delhi with addl charge of Pr CCIT(IT&TP) (See 'Transfer' in 'Pitara') JNPT extends Direct Port Delivery facility to all ACP clients (See 'Mixed Buzz') Customs Exchange Rate for Japanese Yen amended (See 'Notification 24' in 'What's New') ACC appoints Malay Kumar Sinha, Special Director, IB, as Secretary (Security) in Cabinet Secretariat (See 'Mixed Buzz') Make in India Week - Maharashtra expects huge investment in manufacturing Hopeful of passing bills on realty regulator, GST in Budget session: Venkaiah Naidu Indian exporters got tariff relief worth USD 4.4 bn through GSP in 2014: US Ambassador (See 'Mixed Buzz') SC refuses to restrain states from banning mobile internet, saying that such steps are necessary to maintain law and order Thailand accepts protocol amending TRIPS Agreement (See 'Mixed Buzz') Service tax evasion case booked by DGCEI - Makemytrip deposits Rs 42 Crore (See 'Mixed Buzz') Cus - Refusal by Appellate Commissioner to grant refund on ground that department's appeals are pending before HC would tantamount to ensuring stay against CESTAT order & is patently illegal - HC (See 'Breaking News') Customs - Board revamps SVB + Revamped Special Valuation Branch guidelines.. Better late than never!!! (See 'DDT') ST - No liability arises on appellant prior to 16.06.2005 on repairs of transformers received from various SEBs as tender process through which appellant got contract is only a 'work order' and contract for repair: CESTAT (See 'Breaking News') FTP - Procedure for export of sesame seeds to the European Union countries - Deferment of implementation (See 'DDT') VAT - Whether consequential order passed by Appellate Authority in Stay Petition is non-est in eye of law, when Appellate Authority holds that there is no jurisdiction to adjudicate issues raised? - Yes, rules HC (See 'Breaking News') Focus on CENVAT scheme and procedural simplification (See 'Budget Run-up') I-T - Whether assessee can be treated as assessee in default, for not deducting TDS on 'likely to be paid interest', which was ultimately reversed in books - NO: HC (See 'Breaking News') Are two registrations required under CE Law for a dealer? (See 'Budget Run-up') About 5300 villages electrified in last six months: PM Banks need deep surgery, says RBI Governor 1982-batch IAS officer Ramesh Abhishek appointed as DIPP Secretary Indian Railways signs MoU with Telangana for JV (See 'Mixed Buzz') Related party import cases - CBEC streamlines procedure for investigation by SVB and also for renewal of SVB orders (See Circulars in 'What's New') Lucknow DRI seizes 297 kg of cannabis coming from Guwahati Govt grants Sec 11C benefits to Di-Calcium Phosphate (animal feed grade) for six years period (See NT 4 in 'What's New') Industrial production growth goes down by 1.3% in December, 2015 CBDT issues transfer order of five CCITs; Aditya Vikram is new DG(Inv), Delhi + P C Mody gets Mumbai Investigation + Akhilesh Ranjan is now CCIT(5) in Delhi with addl charge of Pr CCIT(IT&TP) (See 'Transfer' in 'Pitara') JNPT extends Direct Port Delivery facility to all ACP clients (See 'Mixed Buzz') Customs Exchange Rate for Japanese Yen amended (See 'Notification 24' in 'What's New') ACC appoints Malay Kumar Sinha, Special Director, IB, as Secretary (Security) in Cabinet Secretariat (See 'Mixed Buzz') Make in India Week - Maharashtra expects huge investment in manufacturing Hopeful of passing bills on realty regulator, GST in Budget session: Venkaiah Naidu Indian exporters got tariff relief worth USD 4.4 bn through GSP in 2014: US Ambassador (See 'Mixed Buzz') SC refuses to restrain states from banning mobile internet, saying that such steps are necessary to maintain law and order Thailand accepts protocol amending TRIPS Agreement (See 'Mixed Buzz') Service tax evasion case booked by DGCEI - Makemytrip deposits Rs 42 Crore (See 'Mixed Buzz') Cus - Refusal by Appellate Commissioner to grant refund on ground that department's appeals are pending before HC would tantamount to ensuring stay against CESTAT order & is patently illegal - HC (See 'Breaking News') Customs - Board revamps SVB + Revamped Special Valuation Branch guidelines.. Better late than never!!! (See 'DDT') ST - No liability arises on appellant prior to 16.06.2005 on repairs of transformers received from various SEBs as tender process through which appellant got contract is only a 'work order' and contract for repair: CESTAT (See 'Breaking News') FTP - Procedure for export of sesame seeds to the European Union countries - Deferment of implementation (See 'DDT') VAT - Whether consequential order passed by Appellate Authority in Stay Petition is non-est in eye of law, when Appellate Authority holds that there is no jurisdiction to adjudicate issues raised? - Yes, rules HC (See 'Breaking News') Focus on CENVAT scheme and procedural simplification (See 'Budget Run-up') I-T - Whether assessee can be treated as assessee in default, for not deducting TDS on 'likely to be paid interest', which was ultimately reversed in books - NO: HC (See 'Breaking News') Are two registrations required under CE Law for a dealer? (See 'Budget Run-up') About 5300 villages electrified in last six months: PM Banks need deep surgery, says RBI Governor 1982-batch IAS officer Ramesh Abhishek appointed as DIPP Secretary Indian Railways signs MoU with Telangana for JV (See 'Mixed Buzz') Related party import cases - CBEC streamlines procedure for investigation by SVB and also for renewal of SVB orders (See Circulars in 'What's New')
 
Bookmark and Share
ST - Appellant providing Compliance Services - view of CBEC that ordinary meaning of management will not cover Compliance Services concurred with - If public act relying on such circulars and still charge of suppression is slapped it can be worst travesty of justice: CESTAT

By TIOL News Service

NEW DELHI, JUNE 19, 2012: THE Appellants are YOUNG and also E(a)RN(e)ST. During the period 2001-02 to 2004-05 they provided assistance as required for complying with the regulation of Reserve Bank of India, Foreign Investment Promotion Board etc. and also for filing application for import export code, returns under Income Tax Act, returns with the office of Registrar of Companies, sales tax returns etc. which activities are collectively referred to as "Compliance Services".

Revenue was of the view that “Compliance Services” would fall within the definition of Management Consultancy Service and the appellants are liable to pay Service Tax. Accordingly, a Show Cause Notice was issued on 20.10.2006 demanding service tax of Rs.3,53,05,405/-.

This widely reported case was adjudicated by the Commissioner of Service Tax, Delhi, but naturally by confirming the demand and imposing penalties galore.

Adverting to the definition of “Management Consultant”, the appellant submitted that when the relevant entry was introduced by Finance Act, 1994, industrial law practitioners, had approached the Director General of Service Tax for clarification in the matter as to whether activities in relation to complying with rules and regulations would come under the scope of "Management Consultancy Service" ; that t he Director General of Service Tax vide letter No V/DGST/21-26MC/9/99 dated 28-01-99 clarified that such activities would not be part of Management Consultancy Service ; that this view was reiterated in a letter F. No. 341/21/99-TRU dated 20-08-99 issued by TRU clarifying that practitioners who help in complying with ESI and PF Regulations would not come within the meaning of Management Consultant. The appellant further submitted that these clarifications reinforced their own interpretation that service tax was not payable on such activities and that is the reason why they were not paying service tax on the impugned activities. It is further submitted that the show cause notice issued in 20.10.06 demanding tax for the period 2001-2002 to 2004-2005 is clearly time-barred because this is a matter involving interpretation of law and they have acted bonafide by acting on the advice given by the Director General of Service Tax.

Reliance is also placed on the CBEC Circular no. 1/1/01-ST dated 27.06.2001 explaining the scope of the services covered by Management Consultancy Service and wherein it is clarified thus -

"9. Taking into account all the above points, the Board has taken a view that merger, acquisition and other form of restructuring of business organisation have emerged as key element in the modern management and as the term 'management' covers the various functions and the multifarious activities required for efficient and effective functioning of an organisation, any advisory services rendered in merger and acquisition transaction are also includible under the taxable service rendered by 'management consultant'. However, those agencies providing services as per the requirement of any statute or regulation such as Takeover Regulations of SEBI and, if their role is limited to the compliance of such act or regulations and not governed by any contractual relationship with the advisee company, then such services will not be covered under scope of 'management consultant' ."

Following decisions are also relied upon -

CCE, Chennai Vs. Futura Polyesters Ltd. ( 2011-TIOL-1404-CESTAT-MAD )

Pushpam Pharmaceuticals Company Vs. CCE ( 2002-TIOL-235-SC-CX )

Wallace Flour Mills Co. Ltd. Vs. Collector ( 2002-TIOL-216-SC-CX )

The Revenue representative relied on the decision in Parasmal Bam Vs. CCE - ( 2002-TIOL-198-CESTAT-DEL ) where it is held that even giving advise to a company on matters relating to production, marketing, financial matters etc. will come within the meaning of Management Consultancy Service as defined under Section 65(65) of the Finance Act, 1994. It is further submitted that without “Compliance Services” the receiver of the service could not have carried on with their management functions and, therefore, service tax was payable. Adverting to the definition, it is also submitted that the definition of ‘Management Consultant' is extremely broad, as it encompasses any service that is directly or indirectly provided in connection with the management of any organisation in any manner; that the latter portion of the definition includes certain specific services, which include any advice or consultancy or technical assistance relating to conceptualizing, devising, development, modification, rectification or up-gradation of any working system of any organisation; that the latter inclusive part of the definition does not restrict the scope of the initial part which defines the service. Reliance is also placed on the definition of Management given in various Dictionaries and also the decision of the Apex Court in the case of CCE Vs. Parle Exports (P) Ltd.- ( 2002-TIOL-401-SC-CX ) .

On the plea of the appellant that the demand is hit by the bar of limitation, it is submitted that the appellant did not include the amount realised by rendering such Compliance Services in their ST-3 returns and the department had no opportunity to know that they were doing such activities amounting to Management Consultancy and hence the charge of suppression is correctly invoked.

The CESTAT observed -

“14. We have considered arguments on both the sides. We find that the decisions of the Tribunal in the case of Futura Polyesters Ltd. (Supra) quoted above is clearly to the effect that most of the impugned activities could not fall under the definition of Management Consultancy Service. We are of the view that though compliance with laws is part of the responsibilities of management such responsibility per se cannot bring it into the ambit of the words "in connection with the management of any organisation" used in section 65(105)(r) and section 65 (65) of Finance Act, 1994 to tax such services. In this matter we see merit in the clarification given by CBEC in para 9 of its circular dated 27-06-2001. The decision of the Apex Court in the case of Parle Exports (P) Ltd (Supra) gives the rule that a taxing entry should be understood in the same way in which these are understood in the ordinary parlance. According to CBEC the ordinary meaning of management will not cover Compliance Services. According to the adjudicating authority ordinary meaning of management covers Compliance Services. We concur with the view of CBEC and reject the view of the adjudicating authority, since in our view every responsibility of management cannot be considered as management function. For example the management may have a responsibility to set up a canteen in a factory employing large number of workers. A person who gives advice on initial setting up of that canteen cannot be considered to be giving Management Consultancy Service. Out of the various impugned services, the services in the matters before FIPB there could be a doubt as to whether the service was in connection with management function or in connection with compliance of regulations. Since there is no such examination in the impugned order and since we find the demand to be time barred we are not dealing with this issue in detail.

15. The adjudicating authority has chosen to ignore the Circular of CBEC. But we would not like to ignore the decisions of Tribunal quoted before us. In the case of Prasmal Balm (Supra) the advice being given by the consultant was in the core functions of management namely production, marketing, finance and not for compliance services. The decisions of the Tribunal in the case of CCE Vs. Futura Polyesters Ltd. - ( 2011-TIOL-1404-CESTAT-MAD ) relates to Compliance Services and that has to be followed in this case.

16. Further this is clearly a case where the demand is time-barred because the appellants were acting on the basis of a circular issued by CBEC, invoking the powers under section 37B of Central Excise Act. If the public act relying on such circulars and still the charge of suppression is slapped on them it can be the worst travesty of justice. So there is no case for invoking suppression in this case.”

In fine the appeal was allowed both on merits as well as on the ground that the notice is hit by limitation.

The pick:

"...The adjudicating authority has chosen to ignore the Circular of CBEC. But we would not like to ignore the decisions of Tribunal quoted before us..."

(See 2012-TIOL-704-CESTAT-DEL)


POST YOUR COMMENTS
   
 
 
 
Download TIOL App
TIOL SEARCH
 
TIOL Subscriptions
 All-In-One Package
 Indirect Tax Package
 Income Tax Package
<< More Packages>>
 
   
HOME    BACK TO TOP   
             
Income Tax Customs Excise Service Tax FEMA DGFT SEZ Misc Pitara Budget
  • Notifications
  • Circulars
  • Instructions
  • SC Cases
  • HC Cases
  • ITAT Cases
  • Advance Ruling
  • Settlement
  • Other Cases
  • Directorate of Income Tax (Systems)
  • Tariff Notfn
  • CVD
  • Non Tariff Notfn
  • Circulars
  • Anti-dumping Notfn
  • Safeguard Duty Notfn
  • SC Cases
  • HC Cases
  • Cestat Cases
  • Advance Ruling
  • Settlement
  • Drawback Cases
  • MISC Circulars
  • Tariff Notfn
  • Non Tariff Notfn
  • Circulars
  • SC Cases
  • HC Cases
  • Cestat Cases
  • Advance Ruling
  • Clean Energy Cess Notfn
  • Excise Amendment
  • MISC Circulars
  • 37B Order
  • Commr.(A) Order
  • Settlement
  • Tribunal
  • Notifications
  • Circulars
  • SC Cases
  • HC Cases
  • Cestat Cases
  • Advance Ruling
  • FAQ
  • Finance Act, 1994
  • Commr. (A) Orders
  • 37B Order
  • Removal of Difficulty
  • VCES
  • Accounting Head
  • Miscellaneous
  • Exchange Manual
  • Fema Notifications
  • SC Cases
  • HC Cases
  • RBI Notifications
  • RBI Circulars
  • Act
  • Rules
  • Regulations
  • Master Circulars
  • PMLA Notifications
  • Depository Scheme
  • Press Note
  • Notifications
  • Circulars
  • Public Notices
  • Trade Notice
  • FTDR Amendment 2010
  • Notifications
  • Instructions
  • Act 2005
  • Rules 2006
  • DGEP
  • State Acts
  • State Policy
  • MISC
  • SC Cases
  • HC Cases
  • VAT Cases
  • Service News
  • Promotion
  • Transfer
  • Deputation Posts
  • Cadre Review
  • Transfer Policy
  • Training Circulars
  • Recruitment Rules
  • Pay Commission
  • Service Cases
  • The Insider
  • MISC
  • Budget Speeches
  • Union Budgets
  • Economic Surveys
  • TRU - D. O. Letter
  • Finance Acts
  • Finance Bill
  • Budget Circular
  • A Taxindiaonline Website. Copyright © 2015 Taxindiaonline.com Pvt.Ltd. All rights reserved. | Powered by 4th Dimension