2014 (7) TMI 370 - AT - Service Tax

Management consultancy service - Commissioner held that the activity of the Respondent is not covered by the definition of Management Consultancy Services as the Respondent as holding company are maintaining the activities of subsidiary companies in which they have 70% to 100% stock is in their own interest and it cannot be called a service has been provided to the subsidiary companies - Invocation of extended period of limitation - Penalty - Held that - The Respondent as holding company of their subsidiary companies, are monitoring their performance regularly and take timely corrective actions in case of slippages, provide technology up-gradation plan, research and development plan, customer s project execution plan etc. in order to diagnose the operational problems and provide solutions in time. The services being provided by the Respondent are clearly covered by the definition of Management Consultancy Services under section 65(65) of the Finance Act, 1994. CST, Mumbai Vs. Essel Corporate Services Pvt. Ltd. reported in 2014 (6) TMI 136 - CESTAT MUMBAI . impugned order setting aside the service tax demand is not correct. Extended period of limitation - since the Respondent are a Public Section Undertaking, the longer limitation period for demand of non-paid service tax under proviso to section 73(1) would not be invokable, as in the circumstances of the case the allegation of wilful mis-statement, suppression of facts or deliberate contravention of the Rules to evade the payment of service tax, cannot be made against the Respondent. Therefore the service tax demand would be confined only to normal limitation period. In view of the circumstances of the case, the penalty also has to be waived by invoking Section 80. - Decided partly against Revenue.

Summary

Issues:
- Whether the services provided by the Respondent to their subsidiaries qualify as 'Management Consultancy Services' under section 65(65) of the Finance Act, 1994?
- Whether there exists a service provider and client relationship between the Respondent and their subsidiaries?
- Whether the penalty under sections 75A, 76, 77, and 78 is imposable on the Respondent?

Analysis:

Issue 1:
The Respondent, a Public Sector Undertaking, provided services to their subsidiaries, charging them as 'Management Consultancy Services.' The Department contended that these services were taxable under section 65(105)(V) read with section 65(65) of the Finance Act, 1994. Show Cause Notices were issued for recovery of service tax amounts. The Additional Commissioner confirmed the demands, but the Commissioner (Appeals) set aside the orders, stating that the activity did not fall under 'Management Consultancy Services.' The Tribunal disagreed, finding that the services provided by the Respondent to monitor performance, provide technology plans, and diagnose operational problems clearly fell under the definition of 'Management Consultancy Services.' The Tribunal also noted a similar view taken in a previous case. However, due to the Respondent being a Public Sector Undertaking, the longer limitation period for demand of non-paid service tax was not applicable, and penalties were waived under Section 80.

Issue 2:
The Department argued that there was a service provider and client relationship between the Respondent and their subsidiaries. The Tribunal, however, found that as the Respondent and their subsidiaries were independent entities, the relationship did exist. The Tribunal referenced a Coordination Bench decision supporting this view. Consequently, the impugned order setting aside the service tax demand was set aside, and the original adjudication orders were restored within the normal limitation period, with interest imposed under section 75.

Issue 3:
Regarding penalties under sections 75A, 76, 77, and 78, the Tribunal ruled that they were not imposable on the Respondent. Therefore, the penalties were not restored, and the appeals were disposed of accordingly, with only the service tax demands within the normal limitation period upheld along with interest.

This detailed analysis of the judgment provides a comprehensive understanding of the issues involved and the Tribunal's decision on each aspect of the case.