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Issues involved: Service tax demand, limitation period for demand, management consultancy services, liability to service tax.
Service tax demand and limitation period: The Revenue appealed against the Commissioner of Central Excise (Appeals) dropping the service tax demand raised on the respondents for the period 16-10-1998 to 31-3-1999, claiming it was barred by limitation. The appellants, registered as share brokers, were found to be acting as consultants for merger & acquisitions of companies. Despite receiving payment for these services, they failed to pay service tax. The Assistant Commissioner communicated their liability to pay service tax in November 1999. A show cause notice was issued in September 2001, after the CBEC clarified in June 2001 that advisory services in merger and acquisition transactions are taxable under management consultancy services. The Tribunal agreed with the Commissioner (Appeals) that the demand was barred by limitation as the respondents were not aware or should have been aware of their liability to pay service tax, thus rejecting the appeal. Management consultancy services and liability to service tax: The High Court directed the CBEC to clarify whether financial advisors providing services in merger and acquisition transactions are considered management consultants liable to service tax. The CBEC's circular confirmed that such advisory services are taxable under management consultancy services. The Tribunal held that since the respondents were not aware of their liability to pay service tax for providing financial advisory services for mergers and acquisitions, the extended period of limitation cannot be applied against them. Therefore, the demand for service tax was considered barred by limitation, upholding the decision of the Commissioner (Appeals) and rejecting the appeal.
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