ST - Financial advisory services provided by CRISIL does not fall under category of 'Management Consultancy Services' : High Court
By TIOL News Service
MUMBAI, SEPT 25, 2017: THIS is a Revenue appeal.
The respondent is registered under the category of 'Credit Rating Agency' since 1998.
Apart from credit rating activity, they also undertook certain financial advisory services in respect of energy, banking, development, finance, transport and urban infrastructure, disinvestment and risk management.
And on these services they started paying Service Tax under the head of "Banking and Other Financial Services" w.e.f. 16.08.2002 when the term 'body corporate' was included in addition to banking and non-banking financial companies as the provider of such services. This was accepted by the department without any qualms for some time.
Later, a SCN dated 20.02.2003 was issued demanding Service Tax of Rs.1,50,42,302/- for the period 1999-2000 to 2001-02 by proposing to classify the financial advisory services rendered by the appellant under the category of 'Management Consultancy Service'.
The matter reached the CESTAT and while allowing the appeal it was observed -
++ On the services in question, the appellant has been paying Service Tax under the head of "Banking and Other Financial Services" w.e.f. 16.08.2002 and the Department had accepted the same. That being so, we do not understand how for the previous period the Department can demand Service Tax on the very same activity under the category of 'Management Consultancy Service'.
++ Advisory service of the appellant is clearly covered under clause (f) of the definition [ of "Banking and Other Financial Services" which reads - Advisory and other auxiliary financial services including investment and portfolio research and advice, advice on mergers and acquisitions and advice on corporate restricting and strategy ]. ( HSBC Securities & Capital Markets (I) Pvt. Ltd - 2008-TIOL-1241-CESTAT-MUM & Punjab Venture Capital Ltd. - 2008-TIOL-754-CESTAT-DEL relied upon)
++ Onplain reading of definition of 'Management Consultancy Service' it is seen that in the inclusion clause, services of any advice consultancy or technical assistance relating to conceptualising devising, development, modification, rectification or up-gradation of any working system of any organisation falls under the definition of 'Management Consultancy Service'. From the facts of the present case, these services were not provided by the appellant for any organisation.
++ The department has not raised any objection in classifying the advisory services under "Banking and Other Financial Services" by the appellant. Therefore, department cannot take stand that the same service prior to 16.08.2002 was falling under 'Management Consultancy Service' and after 16.08.2002 it is classifiable under "Banking and Other Financial Services" .
++ Advisory service provided by the appellant does not fall under the category of 'Management Consultancy Service', however, it is correctly classifiable under "Banking and Other Financial Services" . Therefore, the same was not taxable prior to 16.08.2002.
We reported this order as - 2016-TIOL-2643-CESTAT-MUM.
Aggrieved, the department filed an appeal before the Bombay High Court.
After extracting the definition of BOFS effective from 16 August 2002, the High Court observed -
“6. From the definition of Banking and other Financial Services, it is clear that Financial Advisory Services were included as a part of the said services. Insofar as "Management Consultancy Services" are concerned these have at all times been under the Finance Act and chargeable to service tax. This would be the case even after the inclusion of Advisory and Auxiliary Financial Services under "Banking and other Financial Services" on 16th August 2002. The definition of "Management Consultant" has also remained unchanged. The department has also not raised any objection to classifying the Financial Advisory Services under "Banking and other Financial Services". We are, therefore, of the view that it is not open for the Appellant to take a contrary stand viz. that the Financial Advisory Services were falling under "Management Consultancy Services" prior to 16th August 2002. The Appellate Tribunal have also observed that the Board Circular dated 7th October 1998 categorically clarified that information and advisory services, if any, rendered by credit rating agency would not attract service tax. We accordingly are of the view that the Appellate Tribunal has arrived at correct finding that the advisory services provided by the Respondent does not fall under category of "Management Consultancy Services" and is correctly classified under the "Banking and other Financial Services", and hence the same was not taxable prior to 16th August 2002.”
The Revenue appeal was dismissed.
In passing:
[F. No. B11/1/2002-TRU Dated 1-8-2002]
| 5.1 The definition of "banking and other financial service" has been amended to extend the levy of service tax to body corporate other than those already specified earlier, providing specified services. The levy on body corporate, which have come into tax net as a consequence to this amendment, will be effective only from 16-8-2002. It may be noted that as a result of this amendment, all body corporate providing the specified "banking and other financial service" will come under the tax net…. |
Never give advice - sell it! - Quips & Quotes
(See 2017-TIOL-1993-HC-MUM-ST)
