ST - Support services provided by appellant to run business of clients by way of assistance in marketing, in obtaining loans from FIs, training of their personnel do not fall within category of 'Consultancy Service' let alone 'Management Consultancy Service' - Appeal allowed: CESTAT
By TIOL News Services
MUMBAI, AUG 27, 2014: THE CCE, Pune confirmed a service tax demand of Rs.77,96,803/- against the appellant by classifying the services rendered by them under "Management Consultancy Service" for the period 01/04/2001 to 30/06/2003 along with interest and penalties.
The appellant is before the CESTAT and submits that they had entered into administrative support agreement with various Tata companies for providing following services:
i) Support for Land Acquisition and Development
ii) Employees benefit Administration (Provident Fund, Superannuation, Gratuity)
iii) Liaison with Banks and Financial institutions
iv) Legal and Taxation Support Services
v) Providing Common Training Facilities
vi) Communication Infrastructure advisory services
vii) Support for manpower recruitment
viii) Support for maintaining Industrial Relations
ix) Provide Sales and distribution Network
x) Knowledge base of Indian material and supplier base
And that they had started discharging service tax liability on these various services under the category of "Business Auxiliary Services" (BAS) with effect from 01/07/2003 which classification was accepted by the department. As such the department cannot take a different stand for the period prior to 01/07/2003 as "Business Auxiliary Service" has not been carved out of "Management Consultancy Service". Furthermore, they received a consideration of 0.5% of the net sales turnover of the clients for the services rendered and this would indicate that the payment is made in the nature of commission and Management consultancy service does not operate on commission basis. Reliance is placed on the decisions in CCE Vs. Arvind Narayan Prasad Nopany - 2008-TIOL-1115-CESTAT-AHM and Maini Industrial Consultants Vs. CCE - 2006-TIOL-640-CESTAT-BANG in support of this contention.
The Revenue representative supported the order of the adjudicating authority by placing reliance on the decision in HSBC Securities & Capital Markets (I) Pvt. Ltd. Vs. CST, Mumbai - 2013-TIOL-1869-CESTAT-MUM wherein it was held that executory function incidental to advisory function would come within the scope of "Management and Consultancy Service".
The CESTAT while placing reliance on the decisions cited by the appellant and distinguishing the case law cited by the Revenue observed -
++ From a perusal of the agreements entered into with various clients it is seen that the appellant is rendering administrative support services. They do not give any advice or consultancy as to how to run an organization. The services rendered by them mainly relates to support services to run the business of their clients by way of assistance in marketing assistance, in obtaining loans from financial institutions, liaisoning with the government agencies for getting various permissions, training of their personnel and so on.
++ These services which are support services for the business do not fall within the category of "Consultancy Service" let alone "Management Consultancy Service".
Holding that prior to 01/07/2003, the services rendered by the appellant do not merit classification under "Management Consultancy Service" the demand confirmed against the appellant by such classification was set aside as being clearly unsustainable in law.
The appeal was allowed.
In passing : Also see Essel Corporate Services 2014-TIOL-832-CESTAT-MUM & DupharInterfran Ltd. 2014-TIOL-263-CESTAT-MUM.
(See 2014-TIOL-1608-CESTAT-MUM)
