2014 (6) TMI 136 - AT - Service Tax

Nature of services provided to group companies - Management Consultancy Services - adjudicating authority has dropped the demand on the ground that the activity of Liaisoning & Representation are not consultancy services - Penalty u/s 76, 77 & 78 - Invocation of extended period of limitation - Held that - there is no agreement for providing various services. Similarly, there is no invoice to understand the nature of service. However, going through the list of various activities, we note that what is being done is not executory routine or operational functions but the management function wherein the respondent is advising their other group companies to handle a particular issue in a particular manner and they also undertake such discussion with various other organizations such as financial organizations, banks, BCCI, Govt. bodies etc. - activities covered under the definition of management consultant. - Decided against the assessee. Respondents had not taken the registration with the Service Tax department during the said period and therefore, no returns or documents were filed. There was no reason for the respondents not to take the registration. Facts were suppressed from the department. In view of these facts, we find that the conditions stipulated under the proviso to Sec. 73(1) of the Finance Act, 1994 are fulfilled and we therefore hold that the extended period of limitation has been correctly invoked. In view of the said position, penalty under Sec.78 is imposable. We, accordingly, imposed penalty under Section 78, equal to the duty amount. Penalty under Sec.76 as per the provisions existing at that point of time would be leviable. Similarly, penalty under Sec.77 would also be leviable - Decided in favor of Revenue.

Summary

Issues:
Demand of service tax under "Management Consultancy Services" for activities related to liaisoning and representation.

Analysis:
1. The respondent, a group company, provided various services to three group companies during August 2002 to April 2005. These services included liaising with government authorities, administrative support, financial arrangements, compliance assistance, legal agreements, and more.

2. A demand notice was issued for service tax under "Management Consultancy Services." The adjudicating authority dropped the demand stating that liaisoning and representation are not consultancy services. The revenue appealed this decision.

3. The respondent argued that their services were executor in nature, not consultancy, citing various judgments. The revenue contended that activities like issuing FCCBs and coordinating for cricketing rights fall under management consultancy services.

4. The definition of "Management Consultant" under Section 65(65) of the Finance Act, 1994, includes providing services related to management, advice, consultancy, and technical assistance. The Tribunal found that the respondent's activities involved advisory functions connected to management, thus falling under management consultancy services.

5. Case laws submitted by the respondent were deemed distinguishable. The Tribunal noted that the services provided by the respondent were different from those in the cited cases, which did not apply to the present situation.

6. The Tribunal held that the extended period of limitation was correctly invoked due to the respondent's failure to register with the Service Tax department, leading to suppressed facts. Penalties under various sections were imposed accordingly.

7. Ultimately, the appeal of the Revenue was allowed, upholding the demand for service tax under "Management Consultancy Services."

This judgment highlights the interpretation of "Management Consultancy Services" in connection with various activities performed by a group company for its subsidiaries, emphasizing the scope of advisory functions and the applicability of service tax in such scenarios.