2014 (1) TMI 613 - AT - Service Tax

Waiver of pre deposit - Stay of recovery - Management or Business Consultancy Service - Demand under reverse charge mechanism - Taxability of legal services - Held that - No good reason to hold that these invoices were raised by Management Consultant. Prima facie, the description of services given in these invoices can squarely fit in the definition of legal services . By and large, under cover of these invoices, appellant was receiving services such as due diligence in respect of corporate entities considered for mergers/acquisitions, framing of terms and conditions of various agreements, conveyancing and the like. Prima facie, these services cannot be considered to be services in the nature of advice or consultancy in relation to financial management of the appellant - Following decision of Sobha Developers Ltd. Vs Commissioner of Central Excise, Bangalore 2010 (7) TMI 597 - CESTAT, BANGALORE - Stay granted.

Summary

Issues:
1. Whether the demand for service tax and education cesses under the Head Management or Business Consultancy Service is justified.
2. Whether the services received by the appellant from foreign law firms qualify as legal services or management consultancy services.

Issue 1:
The appellant sought waiver of predeposit and stay of recovery for the adjudged dues, including service tax and education cesses amounting to Rs. 99,81,669. The demand was based on the reverse charge mechanism under Section 66 A of the Finance Act 1994. The appellant argued that the services received from foreign law firms were primarily legal services used in relation to mergers, acquisitions, and investments, and hence not taxable during the disputed period. On the other hand, the Revenue contended that the services provided by the foreign firms constituted Management or Business Consultancy under Section 65(105) of the Finance Act.

Issue 2:
Upon reviewing the invoices and services provided by the foreign law firms, the Tribunal found that the services rendered were more in line with legal services rather than advice or consultancy related to financial management. The invoices reflected services such as due diligence for mergers/acquisitions, drafting agreements, and conveyancing, which were indicative of legal services. The Tribunal noted a clear distinction between legal services and management consultancy services based on the nature of advice and assistance provided. Referring to a previous case involving Sobha Developers Ltd., where waiver was granted against a similar demand, the Tribunal concluded that the legal services received by the appellant were not taxable during the disputed period. Therefore, the Tribunal granted the waiver and stay as requested by the appellant.

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