2013 (12) TMI 1324 - AT - Service Tax

Demand of service tax - Management consultancy - Licence for manufacture of lubricating oil and providing assistance for making sale - Held that - taxing entry in Section 65(105)(r) of the Finance Act, 1994, brings management consultancy service into the fold of service tax. Mandate of this entry is that service provided by management or business consultant in connection with the management of any organisation or business in any manner shall be management consultancy. This taxing entry read with the enabling definition in Section 65(65) of Finance Act, 1994 requires a service provider necessarily to be a management consultant and its principal activity should be so. Service Tax can be levied on the economic activity if such activity is declared by law taxable. By no stretch of imagination any activity can be taxed. In absence of existence of management consultant there is no scope to call the appellant as management consultant when terms of the agreement is read - Decided in favour of assessee.

Summary

Issues:
1. Whether providing assistance for the manufacture and sale of lubricating oil constitutes management consultancy service for the purpose of service tax liability.

Analysis:
The case involved a dispute regarding the nature of services provided by the appellant in an agreement with another company for the manufacture of products under a brand name. The appellant contended that the services rendered, including granting permission for manufacturing and providing marketing assistance, did not amount to management consultancy and therefore were not taxable. The revisional authority, however, took a different view and held that management consultancy services were indeed provided.

Upon review, the Tribunal examined the show cause notice and found that it failed to establish how the elements of management consultancy service were present in the arrangement. The Tribunal noted that the revisional authority had based its decision on an assumption without providing a proper basis for the allegation of management consultancy service. The appellant had been paying service tax under the category of intellectual property service, further supporting the argument that management consultancy was not the nature of service provided.

The Tribunal referred to the relevant taxing entry in the Finance Act, 1994, which defines management consultancy service for the purpose of service tax. It emphasized that for a service to be classified as management consultancy, the service provider must be a management consultant, and the principal activity should reflect this. The Tribunal concluded that in the absence of evidence establishing the appellant as a management consultant, the revision order was unfounded. Therefore, the Tribunal set aside the revision order and allowed the appeal in favor of the appellant.