2014 (3) TMI 543 - AT - Service Tax

Management Consultancy Service or not - appellant was streamlining distribution, C & F arrangements, arranging bank and finance, rearranging human resources department, pay roll function and overall restructuring of general administration etc - Demand of service tax - Held that - The above mentioned terms of the agreement clearly show that the activities undertaken by the appellant is adviser in nature. The definition of the Management Consultancy Services includes any person who is engaged in providing any service, either directly or indirectly in any manner and also includes rendering any consultancy or technical assistance, relating to conceptualizing, devising, development, modification, rectification or upgradation of any working system of any organization. The clause 2 of the agreement clearly shows that he activities are advisory in nature and therefore there is no infirmity in the impugned order - Decided against assessee.

Issues:
1. Appeal against Order-in-Appeal passed by Commissioner (Appeals) regarding service tax demand under 'Management Consultancy Service'.
2. Contention of the appellant that services provided were Business Support Service, not Management Consultancy Service.
3. Appellant's argument of being under a bona fide belief that Management Consultancy Service was not provided, making the demand time-barred.
4. Challenge to the sustainability of penalties imposed.
5. Interpretation of the terms and conditions of the agreement between the parties to determine the nature of services provided.

Analysis:
1. The appellant contested the demand of service tax under 'Management Consultancy Service,' arguing that they provided Business Support Service, not falling under the purview of service tax until 1.5.2006. The appellant relied on the terms and conditions of the agreement to support their claim. However, the tribunal noted that the demand was indeed for Management Consultancy Service, as per the definition under Section 65(53) of the Finance Act, 1994. The tribunal examined the agreement dated 5.5.2001 between the parties, which outlined services such as streamlining distribution, finance functions, human resources, and general administration. These activities were deemed advisory in nature, falling within the scope of Management Consultancy Service. Therefore, the tribunal dismissed the appeal.

2. The appellant also argued that they were under a bona fide belief that Management Consultancy Service was not provided, making the demand time-barred. However, the tribunal found that the activities undertaken by the appellant, as per the agreement terms, clearly aligned with the definition of Management Consultancy Services. Since the services provided were advisory in nature, the tribunal concluded that there was no merit in the argument of being under a bona fide belief. Consequently, the appeal was dismissed.

3. Additionally, the appellant challenged the sustainability of the penalties imposed. The tribunal considered the clauses of the agreement and the nature of services provided to determine the validity of the penalties. As the services rendered were deemed to fall under Management Consultancy Service, the tribunal upheld the penalties imposed under Sections 75A, 76, 77 & 78 of the Finance Act, 1994. Therefore, the contention regarding the penalties was not accepted, and the appeal was dismissed based on the nature of services provided as per the agreement terms.

4. In conclusion, the tribunal analyzed the terms and conditions of the agreement between the parties to ascertain the nature of services provided. Despite the appellant's arguments and contentions, the tribunal found that the activities undertaken were indeed advisory in nature, aligning with the definition of Management Consultancy Service. Therefore, the appeal against the Order-in-Appeal passed by the Commissioner (Appeals) was dismissed, and the demand for service tax under Management Consultancy Service, along with the penalties imposed, was upheld.

← Previous Next →