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Cus - Valuation - Set Top Boxes imported by appellants are not leviable to CVD on RSP/MRP basis in terms of Sec 4A of the CEA, 1944 except for Set Top Boxes actually sold: CESTAT (See 'Breaking News') FM takes off for Ankara to attend G-20 FMs Meet; IMF positive about growth prospects in India MAT on FIIs - CBDT communicates Govt decision to field formations; to amend I-T Act to give benefits to FIIs having no PE in India (See Instruction No 9) Govt Servants - Assets vs Liabilities - PM needs to take his call (See 'The Cob (Web)' Column) CX - Circular 77/99 based on which demand has been made alleging that CENVAT credit lying in account would lapse upon conversion from DTA to EOU does not elaborate under what provision unutilized credit will stand lapsed : CESTAT (See 'Breaking News') A Company standing guarantee for a Subsidiary Company – Lender Bank can initiate winding up proceedings against guarantor company: High Court (See 'DDT') ST - In absence of any addl evidence of there being larger subscriber base, differential ST liability for period Jan 2006 to Sept 2009 has to be held as being worked out on presumptions and assumptions: CESTAT (See 'Breaking News') ITAT President transfers 12 Members including Nine with immediate effect (See 'ITAT' in TIOL Library) I-T - Whether if 3 separate contracts are entered into but all were integral parts of composite contract, invoices raised separately can be subjected to TDS u/s 194C - NO: HC (See 'Breaking News') FTP - Applicability of Para 5.10 (d) of HoP relating to third party exports under EPCG Scheme (See 'DDT') Sales Tax - Whether in order to prove that a sale is export sale, important link to be proved is that local sale or purchase is inextricably linked with that of export of goods - YES: HC (See '2015-TIOL-2018') Arvind Subramaniam says economic growth moving in right direction SEBI to regulate Commodity Derivatives Market from Sept 28 (See 'Mixed Buzz') CBDT issues transfer order of 13 CITs (See 'Transfer' in 'Pitara') CBDT Extends Due Date For E-Filing Returns Upto Sept 7, 2015 (See 'Mixed Buzz') CX - Allegation of Revenue is that as activity of appellant does not amount to manufacture, therefore, appellant not liable to pay duty - as appellant has paid to Govt what amount is collected from customers as duty, therefore, provisions of sec 11D are not applicable: CESTAT (See 'Breaking News') Cabinet okays Marginal Fields Policy for development of hydrocarbon discoveries (See 'Mixed Buzz') Cabinet approves reimbursement of losses incurred by NAFED, STC & MMTC for import of pulses (See 'Mixed Buzz') MCA extends due date for filing of cost audit to Sept-end (See Circular in 'TIOL Library') Nine CITs (who are on deputation) get proforma promotion + 29 PCITs of 1987 batch promoted on ad hoc basis now promoted on regular basis WTO Panel set up over dispute between Indonesia and EU over biodiesel ST - Even if it is held that there was service element in form of supervision of erection & commissioning of plant supplied, said service was manifestly rendered free of cost and thus no liability can arise: CESTAT (See 'Breaking News') The MAT Controversy - Under the mat - Govt accepts AP Shah Committee Report (See 'DDT' Column) Income tax - Whether assessee can claim deduction u/s 10A by making suo motu disallowance of reimbursement of expenses made by it - NO: ITAT (See 'Breaking News') Take Pride in the job - CBEC Chief to Staff (See 'DDT') One-day strike against proposed changes in labour laws impacts normal life in some States like Kerala & West Bengal VAT - Whether assessee has to pay one time tax, if Department has detained goods on ground that no e-transit pass or transit pass: HC (See '2015-TIOL-2011') Govt accepts Shah Committee Report; No MAT on FIIs or FPIs prior to 1.4.2015 Strike call by CTUs on Sept 2 - CBDT asks field formations to make necessary arrangements to keep offices open New Revenue Secretary invites suggestions for tax reforms (See 'Mixed Buzz') India to join UN-sponsored Better Than Cash Alliance (See 'Mixed Buzz') Nikkei India Manufacturing PMI shows slower growth in August Cus - Valuation - Set Top Boxes imported by appellants are not leviable to CVD on RSP/MRP basis in terms of Sec 4A of the CEA, 1944 except for Set Top Boxes actually sold: CESTAT (See 'Breaking News') FM takes off for Ankara to attend G-20 FMs Meet; IMF positive about growth prospects in India MAT on FIIs - CBDT communicates Govt decision to field formations; to amend I-T Act to give benefits to FIIs having no PE in India (See Instruction No 9) Govt Servants - Assets vs Liabilities - PM needs to take his call (See 'The Cob (Web)' Column) CX - Circular 77/99 based on which demand has been made alleging that CENVAT credit lying in account would lapse upon conversion from DTA to EOU does not elaborate under what provision unutilized credit will stand lapsed : CESTAT (See 'Breaking News') A Company standing guarantee for a Subsidiary Company – Lender Bank can initiate winding up proceedings against guarantor company: High Court (See 'DDT') ST - In absence of any addl evidence of there being larger subscriber base, differential ST liability for period Jan 2006 to Sept 2009 has to be held as being worked out on presumptions and assumptions: CESTAT (See 'Breaking News') ITAT President transfers 12 Members including Nine with immediate effect (See 'ITAT' in TIOL Library) I-T - Whether if 3 separate contracts are entered into but all were integral parts of composite contract, invoices raised separately can be subjected to TDS u/s 194C - NO: HC (See 'Breaking News') FTP - Applicability of Para 5.10 (d) of HoP relating to third party exports under EPCG Scheme (See 'DDT') Sales Tax - Whether in order to prove that a sale is export sale, important link to be proved is that local sale or purchase is inextricably linked with that of export of goods - YES: HC (See '2015-TIOL-2018') Arvind Subramaniam says economic growth moving in right direction SEBI to regulate Commodity Derivatives Market from Sept 28 (See 'Mixed Buzz') CBDT issues transfer order of 13 CITs (See 'Transfer' in 'Pitara') CBDT Extends Due Date For E-Filing Returns Upto Sept 7, 2015 (See 'Mixed Buzz') CX - Allegation of Revenue is that as activity of appellant does not amount to manufacture, therefore, appellant not liable to pay duty - as appellant has paid to Govt what amount is collected from customers as duty, therefore, provisions of sec 11D are not applicable: CESTAT (See 'Breaking News') Cabinet okays Marginal Fields Policy for development of hydrocarbon discoveries (See 'Mixed Buzz') Cabinet approves reimbursement of losses incurred by NAFED, STC & MMTC for import of pulses (See 'Mixed Buzz') MCA extends due date for filing of cost audit to Sept-end (See Circular in 'TIOL Library') Nine CITs (who are on deputation) get proforma promotion + 29 PCITs of 1987 batch promoted on ad hoc basis now promoted on regular basis WTO Panel set up over dispute between Indonesia and EU over biodiesel ST - Even if it is held that there was service element in form of supervision of erection & commissioning of plant supplied, said service was manifestly rendered free of cost and thus no liability can arise: CESTAT (See 'Breaking News') The MAT Controversy - Under the mat - Govt accepts AP Shah Committee Report (See 'DDT' Column) Income tax - Whether assessee can claim deduction u/s 10A by making suo motu disallowance of reimbursement of expenses made by it - NO: ITAT (See 'Breaking News') Take Pride in the job - CBEC Chief to Staff (See 'DDT') One-day strike against proposed changes in labour laws impacts normal life in some States like Kerala & West Bengal VAT - Whether assessee has to pay one time tax, if Department has detained goods on ground that no e-transit pass or transit pass: HC (See '2015-TIOL-2011') Govt accepts Shah Committee Report; No MAT on FIIs or FPIs prior to 1.4.2015 Strike call by CTUs on Sept 2 - CBDT asks field formations to make necessary arrangements to keep offices open New Revenue Secretary invites suggestions for tax reforms (See 'Mixed Buzz') India to join UN-sponsored Better Than Cash Alliance (See 'Mixed Buzz') Nikkei India Manufacturing PMI shows slower growth in August
 
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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)


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