2014 (1) TMI 1787 - AT - Service Tax

Services received from the foreign agencies - classified as scientific or technical consultancy services or management or business consultancy service? - Held that - Services provided by the overseas banks to the Petitioner clearly fall within the ambit of banking and financial services defined in Section 65(12) and enumerated to be a taxable service u/s 65(105)(zm) of the Act. Banking or financial services are inter alia defined to mean other financial services, namely, transfer of money indulging telegraphic transfer, mail transfer and electronic transfer, letter of credit, bill discounting facilities and alike provided by a banking company or a financial institution including a non-banking company or a financial institution including a non-banking company or any other body corporate or commercial concern - On a true and fair construction of the services provided by the overseas banks, through the intervention of the Petitioner s local bank, it cannot be gainfully contested that the overseas bank provided banking and financial services to the Petitioner. Appeal rejected - decided against appellant.

Summary

Issues:
1. Waiver of pre-deposit and stay of liability to service tax, interest, and penalties.
2. Classification of services received from foreign agencies as scientific or technical consultancy services.
3. Classification of services provided by overseas banks as banking and financial services.
4. Crediting the amount remitted under management or business consultancy service towards scientific or technical consultancy service.

Analysis:
1. The appellant sought relief from pre-deposit and stay of liability to service tax, interest, and penalties confirmed by the assessment order. The demand of tax assessed under the reverse charge mechanism for 'scientific or technical consultancy' services received from foreign providers was contested.

2. The contention was made that the services received should be classified as 'management or business consultancy' rather than 'scientific or technical consultancy' as defined under Section 65(65) and Section 65(92) of the Finance Act, 1994. The adjudicating authority upheld the classification based on the nature of services provided by foreign agencies like Dada, specializing in regulatory affairs and pharmacovigilance services, among others.

3. The judgment analyzed the classification of services provided by overseas banks to the appellant as falling within the scope of 'banking and financial' services under Section 65(12) and Section 65(105)(zm) of the Act. It was determined that the services indeed constituted banking and financial services, thereby rejecting the appellant's claim for waiver of pre-deposit on this aspect of the demand.

4. Regarding the amount remitted under the category of 'management or business consultancy' service, which was classified as 'scientific or technical consultancy' by the adjudicating authority, the appellant argued for crediting this amount towards the disputed service. The Tribunal found merit in this argument and granted waiver of pre-deposit and stay of further proceedings subject to certain conditions, including remittance of the service tax assessed within a specified timeframe.

5. The judgment emphasized the importance of complying with the conditions set forth for the waiver of pre-deposit and stay of proceedings. Failure to meet these conditions would result in the rejection of the appeal. However, upon compliance, the balance liability would be stayed during the pendency of the appeal, thereby concluding the disposition of the stay application.