2013 (2) TMI 106 - AT - Service Tax

Demand of service tax u/s 73(a) - Management Consultant - Market Research Agency - Services rendered to their parent-company are - Observation of business activities of the Associate - Companies and licenses of BOSCH in India, as well as those of their competitors - Cultivation of contacts with the Associate Companies - Assistance with respect to the exchange of technical, economical and other information between BOSCH and its licensees - Attending to the personnel of BOSCH delegated to India and to other visitors - Entering into contract with new applicants for licenses - Observation and surveillance of markets - Revenue argued that adjudicating authority after examining the nature of activities undertaken by the respondent for the benefit of the German company under the relevant Service Agreement - Held that - None of the above functions could fall within the ambit of the statutory definition of Management Consultant nor can any of them be brought within the scope of Market Research Agency . In favour of assessee

Summary

Issues:
- Dropping of demand of service tax and connected penalties based on the nature of services provided by the respondent.
- Interpretation of functions performed by the respondent under the Service Agreement.
- Analysis of whether the functions performed fall within the scope of taxable services as per the Finance Act, 1994.

Analysis:
The appeal filed by the Department was directed against the dropping of a demand of service tax and connected penalties by the original authority. The demand of service tax was based on the respondent working as a "Management Consultant/Market Research Agency" and providing taxable services to their parent company during a specific period. The adjudicating authority confirmed the demand of service tax and imposed penalties, which was challenged by the respondent in an appeal. The learned Commissioner (Appeals) ruled in favor of the respondent, leading to the Department's present appeal.

The functions discharged by the respondent under the Service Agreement were crucial in determining whether they constituted services of a Management Consultant/Market Research Agency. The appellant argued that the functions performed by the respondent, such as observing business activities, cultivating contacts, providing assistance with information exchange, attending to personnel, entering contracts, and market observation, fell within the scope of Management Consultant/Market Research Agency services. However, upon examination, the Tribunal found that none of these functions aligned with the statutory definitions of "Management Consultant" or "Market Research Agency."

After analyzing the nature of functions performed by the respondent and assessing whether they could be categorized as taxable services, the Tribunal concluded that none of the functions could be considered as falling within the purview of taxable services. Consequently, the Tribunal dismissed the appeal filed by the Department, as they found no merits to support the demand of service tax and connected penalties.