2004 (8) TMI 710 - AT - Central Excise

Classification of Management consultant services - Liability of the appellant for Service Tax on amounts recovered for management consulting services provided to another company - non-compliance with Service Tax regulations - Penalty - HELD THAT - None of the heading as per the certifications would cover the definition of Management Consultancy Service rendered costs. Therefore the levy of Service Tax on these cost cannot be upheld as arrived in the impugned order. Service Tax is in any case not payable on reimbursement/out of pocket expenses charged on actuals as per the clarifications Trade Notices of the department. When an existing Tariff definition remains the same then the introduction of new Tariff entry would imply that the coverage under the new Tariff for purpose of Tax is an area not covered by the earlier entry. The new entry is extension of the scope of coverage if Service Tax and not carving out of a new entry from the erstwhile entry of Management Consultancy Service . Therefore it has to be held that in the facts of this case the levy of Service Tax on Staff Costs defined by BWIL under the heading Management Consultancy Service cannot be upheld. Levy on such costs could be as on Business Auxiliary Service which was not a Taxable Service prior to 2003 and appellants is not a service provider as Management Consultant. Once that is found and the appellant cannot be classified as a Service Provider under management Consultant Levy of Service Tax cannot visit prior to 2003 or after 2003 under a Management Consultant . The Tribunal set aside the orders allowing the appeal with consequent relief. It was held that since there was no levy of Service Tax on the appellant for the services provided the penalties imposed demand of tax and interest were all to be set aside. Appeal to be allowed with consequent relief.

Summary

Issues involved:
The issues involved in this case include the liability of the appellant for Service Tax on amounts recovered for management consulting services provided to another company, penalties imposed for non-compliance with Service Tax regulations, and the classification of the services provided by the appellant.

Summary of Judgment:

Liability for Service Tax on Management Consulting Services:
The appellant, engaged in the manufacturing and sale of pharmaceuticals, was held liable for Service Tax on amounts recovered for management consulting services provided to another company. The authorities imposed a Service Tax of Rs. 1,12,97,893 on various management costs. However, after thorough examination, it was found that the costs incurred did not fall under the definition of "Management Consultancy Service." The Tribunal ruled that Service Tax is not payable on reimbursement/out-of-pocket expenses charged on actuals and that the levy of Service Tax on these costs cannot be upheld.

Penalties Imposed:
The appellant was penalized for failure to register under Service Tax regulations, delay in payment of tax, non-filing of returns, and interest payment. However, since the levy of Service Tax itself was not justified, the penalties imposed were deemed unwarranted and were set aside.

Classification of Services Provided:
The Tribunal analyzed the nature of services provided by the appellant and concluded that they did not qualify as "Management Consultancy Service." Instead, the services more appropriately fell under "Business Auxiliary Service." As the appellant could not be classified as a Service Provider under Management Consultant, the levy of Service Tax on staff costs defined by the other company was deemed invalid.

Conclusion:
The Tribunal set aside the orders, allowing the appeal with consequent relief. It was held that since there was no levy of Service Tax on the appellant for the services provided, the penalties imposed, demand of tax, and interest were all to be set aside.

In summary, the Tribunal ruled in favor of the appellant, stating that the levy of Service Tax on the management costs was unjustified, penalties were unwarranted, and the services provided did not fall under the category of "Management Consultancy Service."