At, Customs Excise Service Tax Appellate Tribunal South Zonal Bench At Chennai
By, THE HONORABLE JUSTICE: SULEKHA BEEVI C.S.
By, MEMBER AND THE HONORABLE JUSTICE: B. RAVICHANDRAN
For Petitioner: Ramesh Sharma, Consultant And For Respondents: A. Cletus, Addl. Commissioner (AC)
1. The appellant is aggrieved by the order dated 18.12.2008 of Commissioner of Service Tax, Chennai. The appellants are engaged in various consultancy services and were registered with the department for payment of service tax under Management Consultancy Service and Others. The dispute in the present case relates to some part of their activities which are essentially with reference to giving opinion, updates on tax, legal position, filing of tax returns under various statutes relating to Income Tax, Service Tax, Sales Tax etc. under various auxiliary services with reference to compliance of these tax laws by the client. Revenue entertai
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ned a view that these activities are to be covered under the category of Management Consultant in terms of section 65(105)(r) r/w section 65(65) of Finance Act, 1994. Accordingly, proceedings were initiated against the appellant which resulted in the impugned order. The original authority held that the activities as narrated above are directly or indirectly are in connection with the management of any organization in any manner and accordingly the tax entry will apply to the appellant. He confirmed that tax liability of Rs. 66,53,315/- along with a penalty of Rs. 67 lakhs under section 78 of the Finance Act, 1994.
2. The Ld. counsel appearing for the appellant strongly contested the findings of the impugned order. He submitted that they are having expertise in overall management consultancy for improving the organisation of the client as well as in tax matters. Wherever they are engaged in consultancy services, they are discharging service tax. However, wherever they are engaged in advising or assisting the clients in various tax matter with reference to specific levy of Income Tax, Service Tax, Sales Tax etc., they are not paying service tax on these considerations as these activities are not management consultancy activities. These are more in the nature of tax compliance advice of specific tax laws. These legal services are advisory in nature and cannot be considered as management consultancy service. He relied on certain case laws in support of his submission.
3. The Ld. AR opposes the appeal and submitted that the definition of management consultant is wide enough to cover all such advises which are either directly or indirectly, in connection with management of any organization in any manner. Advising on tax relating matters are also with reference to management of an organisation and as such the original authority is correct in holding that tax liability of the appellant. Advice relating to tax laws is nothing but promotion of financial management of an organization.
4. We have heard both sides and have perused the appeal records.
5. Management Consultant is defined as below: management consultant means any person who is engaged in providing any service either directly or indirectly, in connection with the management of any organization in any manner and includes any person who renders any advice, consultancy or technical assistance, relating to conceptualizing, devising, development, modification, rectification or upgradation of any working system of any organization
6. The nature of services, now in dispute are mentioned in the impugned order as opinion and updates including assistance to the client in fiscal compliance with the legal requirement of various tax laws. This no doubt may involve advisory/consultancy work also. However, the scope of the statutory definition is more focused on management consultant who is engaged in providing consultancy for an organization to improve the working system of any organization. The legal assistance either for direct planning or compliance is within the ambit of various tax laws has no direct relevance to working or improving any organization of the client in order to avoid penal consequence. It may indirectly keep the organization within the ambit of legal promotion work for their further business. This by itself will not make the consultancy or advisor in tax matters management consultant.
7. In this connection, we refer to the decision of the Tribunal in the case of Ernst & Young Pvt. Ltd. Vs. Commissioner of Service Tax, New Delhi : 2012 (27) STR 461 (Tri. Del.). The Tribunal examining a similar dispute observed as follows:-
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 27-6-2001. 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.
8. In view of the above discussion and analysis, we find no merit in the impugned order. Accordingly, the same is set aside and the appeal is allowed with consequential relief if any.
(Dictated and pronounced in open court