2011 (6) TMI 279 - AT - Service Tax

Taxability under Managemnt Consultancy Service - income from two categories -manufacturing liquor using brand name of the appellants and received royalty and second source is from concerns who were providing facility of manufacture to the appellant for manufacture of liquor by it under its own brand name using the liquor license of the former - Held that - Board clarified stating that in the first category case service tax is chargeable on Intellectual property service provided. Second category cases may fall under Business Auxiliary Service. The letter of Board rules out taxing of the receipts of the appellants under the category of Management Consultancy Service . Also drawing attention to the letter F. No. 532/70/2009-TRU dated 30.10.2009 learned Counsel submits that the profit arising out of manufacture of liquor by the appellant using manufacturing facility of other shall not be chargeable to service tax. - Prima facie, pre-deposit is not warranted in the present case for hearing of the appeal.

Summary

Issues:
1. Interpretation of service tax liability on the appellants for providing Franchise service or Management Consultant service.
2. Validity of the de novo order issued by the learned Commissioner.
3. Consideration of CBEC letters and Board's clarification in determining the tax liability.
4. Compliance with the show cause notice and the relevance of the Board's letter in the adjudication process.

Analysis:
1. The appeal before the Tribunal involved a dispute regarding the nature of services provided by the appellants, whether falling under Franchise service or Management Consultant service. The appellants contended that they were not Management Consultancy service providers but were involved in agreements with manufacturers and facility providers in the beverage industry. The Tribunal considered the details of these agreements and the revenue generated from them to determine the correct classification of services provided.

2. The learned Commissioner issued a de novo order after the matter was remanded by the Tribunal. The appellants had also filed a stay application against the service tax demand. The Tribunal scrutinized the de novo order and the arguments presented by both parties to assess the validity of the order and the stay application.

3. The Tribunal considered the communication issued by the CBEC and Board's clarification regarding the taxation of different modalities of manufacture in the beverage industry. The Board's letters highlighted the distinction between Intellectual Property service and Business Auxiliary Service, providing guidance on the taxability of receipts in specific scenarios. The Tribunal examined these communications to determine the applicability of service tax in the appellants' case accurately.

4. The issue of compliance with the show cause notice was crucial in the adjudication process. The Tribunal emphasized the importance of the notice as the foundation of adjudication, ensuring that the order aligns with the allegations and charges specified in the notice. The mention of the Board's letter in the Tribunal's order raised questions about the relevance of alternative pleas and the necessity for decisions to be based on factual evidence and applicable laws. The Tribunal dispensed with the requirement of pre-deposit for the appeal, indicating a preliminary satisfaction with the arguments presented.

This detailed analysis of the judgment highlights the key legal issues addressed by the Tribunal concerning service tax liability, compliance with procedural requirements, and the significance of relevant communications in determining the correct classification of services provided by the appellants.