Taxindiaonline.com Taxindiaonline.com Taxindiainternational.com HRindiaonline.com
 
LOGIN
Forgot Password |  Register
Thursday , April 17, 2014 | Updated : Apr 17, 00:20 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
 
EC raps Azam Khan + Amit Shah for making controversial speeches TP: No Cost - No Guarantee? (See 'TII Edit' in Taxindiainternational.com) Indian Industry is used to grow in lax standard environment: Cab Secretary (See 'Mixed Buzz') Kolkata Airport Customs seizes 24 karat gold worth Rs 33 lakhs from two pax CBI sets up dedicated Sports Integrity Unit to probe sports frauds SC observes BCCI should probe IPL fixing scam Several posts of Secretary fall vacant; ACC orders addl charge Six killed in Karnataka bus fire + 476 drowned in South Korean boat mishap COFEPOSA - A Little Delay will not result in quashing Detention Order (See 'DDT' Column) Alleged red sanders smuggler does not get relief in Supreme Court; COFEPOSA Detention confirmed (See 'Breaking News') CBEC hikes tariff value of gold & silver but reduces for Crude Soya oil and RBD Palmolein (See NT 31 'What's New') Income tax - Whether provisions of Sec 10A enlarge ambit of term 'computer programme' by including process of management of electronic data - YES: ITAT (See 'Breaking News') Public Peeing - Not even God could solve - What can a High Court do? (See 'DDT') CX - Refund - assessee gives up right to claim interest before Adjudication authority - Assessee is not barred from claiming interest at appellate stage - No estoppel against law: CESTAT (See 'Breaking News') He/She/? - The Third Gender (See 'DDT') Central Excise - Valuation - cylinder testing charges are not includible in assessable value of liquid chlorine: CESTAT (See 'Breaking News') Applications invited for post of Director (Anti-Smuggling) in CBEC (See 'Deputation' in Pitara) CX - Whether CENVAT credit on inputs can be allowed to be availed and further passed on to buyers despite activity of slitting and pickling on CR coils having been held by HC as not amounting to manufacture - Matter referred to TM: CESTAT (See 'Breaking News') SC grants status of Third Gender to eunuchs; Amnesty welcomes it Govindacharya urges EC to curb use of black money India born poet Vijay Seshadri bags 2014 Pulitzer Prize Secretary, Economic Affairs, Arvind Mayaram, designated as Finance Secretary Kota CBN arrests one person with heroin Just because assessee is liable to pay VAT on sale involved in supply of goods at canteen, it cannot be held that it is not liable to payment of service tax: High Court (See 'Breaking News') Assessee undertakes not to claim interest on refund - No estoppel! (See 'DDT' Column) World Trade to grow by 4.7% in 2014: WTO (See 'Mixed Buzz') Income tax - Whether income from letting out property is to be treated as business income merely because property is commercial in nature and rental is exorbitantly high - NO: ITAT (See 'Breaking News') Arrest under Service Tax - Kanda Rameshbabu Naidu case (See 'ST se GST tak' Column) Provisional Anti Dumping Duty on Cast Aluminium Alloy Wheels (See 'DDT') ST - During audit certain discrepancy was found in tax payment and immediately appellant paid same along with interest - no intention to evade tax - penalties imposed u/s 76, 77 & 78 set aside: CESTAT (See 'Breaking News') CENVAT Credit on inputs contained in scrap generated during manufacture of exempted goods - Assessee is entitled to credit - waste and scrap are 'final products' - Supreme Court (See 'DDT') CX - Notification having character of exemption cannot be forced upon an assessee if it does not suit him - Liberal and strict construction of an exemption provision is to be invoked at different stages of interpreting it: HC (See 'Breaking News') EU, Japan & US protest against Indonesian ban on export of mineral ores (See 'Mixed Buzz') Stay order passed by Bench in matter of applications filed by main appellant cannot be held to lay down any binding precedent of ratio - Pre-deposit ordered - Tribunal by Majority (See 'Breaking News') CBI Cashier in CBI Net (See 'DDT') Various Opinion Polls indicate thin Majority for BJP-led NDA Turkey suspects tax evasion by Twitter; directs Twitter to open office and start paying taxes Parliament competent to impose Service Tax on Restaurants and hotels - Single Judge Kerala HC order cannot be accepted: Bombay HC (See 'Breaking News') Yet another attack on PM; Book by former Coal Secretary describes him as weak PM ST - SC Judgment in Mafatlal cannot be applied to such an extent so as to totally override and brush aside provision like Sec 11B with rule of limitation carved out therein - Refund claim time barred: HC (See 'Breaking News') ST - Works Contract - Appellant cannot be compelled to pay ST under Composition Scheme or value service part by resorting to Rule 2A & thus be held ineligible for CENVAT availed on cement or TMT bars used for factory shed - Appeals allowed: CESTAT (See 'Breaking News') Excise Valuation and Sales Tax Retention ... Oh No, Not again! (See 'Guest Column') I-T - Whether marginal underutilization of FSI can be a valid ground for rejecting assessee's claim for deduction u/s 80IB (See '2014-TIOL-483-HC') UN Chief urges for universal legal climate deal by year-end (See 'Mixed Buzz') CX - Appellant, a manufacturer of tyres - sale of tubes & flaps to dealers in replacement market as trading activity - Credit taken on tubes inserted into tyre an cleared to OEM - no penalty: HC (See '2014-TIOL-556') EC under attack: Pawar says EC going 'overboard'; Azam Khan of SP says EC acting on behest of Congress Party IMF reform becoming major bone of contention between G-20 and USA ST - service provided by appellant to customers by facilitating fore-closure of loans clearly falls outside ambit of business auxiliary service: CESTAT (See 'Breaking News') Major OECD countries trim tax cre
 
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
   
 
 
TIOL SEARCH
 
TIOL Mobile App
TIOL Subscriptions
 All-In-One Package
 Indirect Tax Package
 Income Tax Package
<< More Packages>>
 
   
             
Income Tax Customs Excise Service Tax FEMA DGFT SEZ Misc Pitara Budget
  • Notifications
  • Circulars
  • SC Cases
  • HC Cases
  • ITAT Cases
  • Instructions
  • Advance Ruling
  • Settlement
  • Other Case
  • Directorate of Income Tax (Systems)
  • Tariff Notfn
  • Non Tariff Notfn
  • Circulars
  • SC Cases
  • HC Cases
  • Cestat Cases
  • Settlement
  • Advance Ruling
  • Safeguard Duty Notfn
  • Anti-dumping Notfn
  • Drawback Cases
  • Tariff Notfn
  • Non Tariff Notfn
  • Circulars
  • SC Cases
  • HC Cases
  • Cestat Cases
  • Settlement
  • Advance Ruling
  • Excise Amendment
  • Clean Energy Cess Notfn
  • MISC Circulars
  • Commr.(A) Order
  • Notifications
  • Circulars
  • SC Cases
  • HC Cases
  • Cestat Cases
  • Miscellaneous
  • Advance Ruling
  • FAQ
  • Finance Act, 1994
  • Commr. (A) Orders
  • Removal of Difficulty
  • VCES
  • Accounting Head
  • Exchange Manual
  • Fema Notifications
  • SC Cases
  • HC Cases
  • RBI Notifications
  • Act
  • Rules
  • Regulations
  • Master Circulars
  • RBI Circulars
  • Notifications
  • Circulars
  • Public Notices
  • Trade Notice
  • FTDR Amendment 2010
  • MISC
  • State Acts
  • Notifications
  • Instructions
  • Act 2005
  • Rules 2006
  • DGEP
  • State Policy
  • SC Cases
  • HC Cases
  • VAT Cases
  • Deputation Posts
  • Service News
  • The Insider
  • Transfer
  • Promotion
  • Recruitment Rules
  • Transfer Policy
  • Training Circulars
  • Service Cases
  • MISC
  • Pay Commission
  • Cadre Review
  • Budget Circular 2013-14
  • Union Budgets
  • Economic Surveys
  • Budget Speeches
  • Finance Acts
  • Finance Bill
  • TRU - D. O. Letter
  • A Taxindiaonline Website. Copyright © 2014 Taxindiaonline.com Pvt.Ltd. All rights reserved. | Powered by 4th Dimension