2014 (9) TMI 252 - AT - Service Tax

Classification of service - administrative support agreement with various Tata companies - Management Consultancy Service or not - appellant started discharging service tax liability on these various services under the category of Business Auxiliary Services (BAS) with effect from 01/07/2003. - dispute for the period prior to 01/07/2003 - Held that - it is seen that the appellant is rendering administrative support services. They do not give any advice or consultancy as to how to run an organization. The services rendered by them mainly relates to support services to run the business of their clients by way of assistance in marketing assistance, in obtaining loans from financial institutions, liaisoning with the government agencies for getting various permissions, training of their personnel and so on. These services which are support services for the business do not fall within the category of Consultancy Service let alone Management Consultancy Service . - prior to 01/07/2003, the services rendered by the appellant do not merit classification under Management Consultancy Service . - demand set aside - decided in favor of assessee.

Summary

Issues:
Classification of services under "Management Consultancy Service" for the period prior to 01/07/2003.

Analysis:
The appeal challenged an Order-in-Original confirming a service tax demand against the appellant for the period 01/04/2001 to 30/06/2003 under "Management Consultancy Service" along with interest and penalty. The appellant argued that they provided various support services, not consultancy, and had already classified services as "Business Auxiliary Services" post-01/07/2003, which the department accepted. The appellant contended that their activities were in the nature of Business Auxiliary Services, involving liaison work, training, and support for administration, not consultancy. They highlighted that the consideration received was based on a percentage of net sales turnover, indicating a commission-based payment, not typical of management consultancy services. The appellant cited tribunal decisions supporting their stance.

The Revenue argued that the services provided by the appellant should be classified as technical assistance falling under "Management Consultancy Service," citing a tribunal decision where executory functions incidental to advisory functions were classified as such. They contended that since the appellant was providing executory functions, the classification under "Management Consultancy Service" was appropriate.

The Tribunal analyzed the services rendered by the appellant and their agreements with clients, noting that the appellant provided administrative support services without offering advice on organizational management. The services primarily involved support for clients' business operations, such as marketing assistance, obtaining loans, liaising with government agencies, and training personnel. The Tribunal found that these support services did not align with consultancy services, let alone management consultancy services. They distinguished the Revenue's reliance on a previous tribunal decision involving advisory services in financial management, emphasizing that the present case did not involve similar facts. Therefore, the Tribunal concluded that the services provided by the appellant before 01/07/2003 did not fall under "Management Consultancy Service," rendering the demand unsustainable in law. As a result, the appeal was allowed, setting aside the impugned order.