Taxindiaonline.com Taxindiaonline.com Taxindiainternational.com HRindiaonline.com
 
LOGIN
Forgot Password |  Register
Monday , March 30, 2015 | Updated : Mar 30, 23:58 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
 
India about to enter into high trajectory growth orbit, says President Mumbai CBI nabs Income Tax Officer accepting bribe Election Commission organises consultation on 'Political Finance & Law Commission Measures' (See 'Mixed Buzz') TRAI seeks feedback on over-the-top services (See 'Mixed Buzz') President confers Bharat Ratna on Madan Mohan Malviya posthumously Service tax e-payment can be made till midnight of March 31; RBI extends banking hours till 8 pm tomorrow (See Cir 182 in 'What's New') 14 % Service Tax not with effect from 1st April 2015 – Nagpur Commissioner’s Clarification (See 'DDT') CX - while incorporating provision into existing statute, Legislatures are fully aware of position of law - Pre-deposit mandatory even in respect of orders passed prior to 06.08.2014 and appeals filed thereafter: CESTAT (See 'Breaking News') DRI alone seizes over 200 kg gold on All India basis in past 72 hours CX - Digital Records – Board Proposes to issue Notification and Circular – Invites Feedback (See 'DDT') I-T - Whether insertion of Explanation to Sec 80-IB(9) vide Finance Act, 2009 with retro effect explaining meaning of term 'undertaking' is unconstitutional and ultra vires to Article 14 of Constitution - YES: HC (See 'Breaking News') Interest on differential duty consequent to final assessment (See 'Guest' Column) ST - Work undertaken is harvesting & transporting sugarcane to factory for which labour is employed - Service brought under tax net under Manpower Recruitment envisages supply of labour per se - Demand not sustainable: CESTAT (See 'Breaking News') Registration - Netizens frustrated by ACES (See 'DDT') I-T - Whether sec 127(2)(a) is a machinery provision and CIT is having power of transfer even without assigning any reason: HC (See '2015-TIOL-767') In one of biggest foreign cigarette seizures in India DRI seizes 3.21 Cr sticks worth Rs 23.3 Crore from six containers at Adani Hazira Port Govt releases Rs 385 Cr to AP and Rs 150 Cr to Telangana on Finance Commission recommendations Brazil orders probe into allegations of tax officials collecting bribes of USD 5.9 bn from banks and corporate Blood Sugar test mandatory for every pregnant woman: Minister (See 'Mixed Buzz') Income tax - Whether turnovers of Ss 80IB and non-80IB units are to be clubbed together for determining profits eligible for deduction u/s 80HHC - YES: ITAT (See 'Breaking News') ISRO puts one more Navigation Satellite in orbit; scheduled to launch one more (See 'Mixed Buzz') Whether sec40(a)(ia) can be invoked when assessee deposited TDS on the remittance of Rs. 8,60,713/- in next F.Y but before filing the return of income u/s 139(1)(See '2015-TIOL-326') India Carpet Expo 2015 attains new heights (See 'Mixed Buzz') CX - Valuation -Denial of deduction of trade & turnover discount which had been passed on to customers through credit notes - Demand not sustainable: CESTAT (See '2015-TIOL-573') Saina Nehwal becomes first Indian shuttler to be ranked No 1 in world ranking India can attract much greater FDI if it sorts out tax issues, says Japanese financial analyst Govt okays Defence proposals worth Rs 10,000 Crore Kolkata DRI makes history; seizes 87 kg gold worth Rs 23.5 Crore coming from Myanmar by road; Two Hyundai car occupants arrested VAT - Whether once an article is classified and put under specific entry, basis of such classification is not open to question - YES: HC (See 'Breaking News') PM: Govt aims to extend reach of Piped Natural Gas to one crore houses (See 'Mixed Buzz') CX - Goods got manufactured by appellant as a Loan Licensee through other manufacturers & goods manufactured for Loan Licensees as a job worker is not to be included while computing aggregate value of clearances for determining SSI exemption limit: CESTAT (See 'Breaking News') RBI releases improved prudential norms for NBFCs I-T - Whether if assessee is possessed with mixed funds which include its own funds in sufficient quantity, a general presumption has to be made that its own funds were utilized for giving advances: HC (See '2015-TIOL-754') ISRO gets Gandhi Peace Price for 2014 (Mixed Buzz')
 
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
   
 
 
Subscribe to TIOLTube
Download TIOL App
TIOL SEARCH
 
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
  • MISC Circulars
  • Tariff Notfn
  • Non Tariff Notfn
  • Circulars
  • SC Cases
  • HC Cases
  • Cestat Cases
  • Settlement
  • Advance Ruling
  • Excise Amendment
  • Clean Energy Cess Notfn
  • MISC Circulars
  • 37B Order
  • Commr.(A) Order
  • CESTAT
  • Notifications
  • Circulars
  • SC Cases
  • HC Cases
  • Cestat Cases
  • Miscellaneous
  • Advance Ruling
  • FAQ
  • Finance Act, 1994
  • Commr. (A) Orders
  • 37B Order
  • Removal of Difficulty
  • VCES
  • Accounting Head
  • Exchange Manual
  • Fema Notifications
  • SC Cases
  • HC Cases
  • RBI Notifications
  • Act
  • Rules
  • Regulations
  • Master Circulars
  • RBI Circulars
  • Depository Scheme
  • Press Note
  • 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
  • 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