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2014 (10) TMI 457 - AT - Service TaxExtended period of limitation - Management consultancy service - levy of service tax on sub-contractor - Held that - It is also seen that the Trade Notice No. 53-CE/97 dated 04.07.1997 in its para 4.4 quoted earlier clearly creates an impression that sub-consultants are not required to pay service tax. Even if the contention of the Ld. AR is conceded that the said Trade Notice does not reflect the correct legal position, it is totally reasonable to accept the appellants contention that at the material time, the said Trade Notice very much existed and was a valid and authorised guide to the trade. Indeed, the CBEC s circular dated 23.08.2007 consolidated the various clarifications issued in the past and superceded the past circulars. That does not mean that the past circulars were necessarily held to be invalid for the period during which they existed. Thus it is untenable to allege suppression/wilful mis-statement of fact to evade duty in the wake of the said Trace Notice. Therefore, the demand beyond the normal period is prima facie unsustainable - Partial stay granted.
Issues:
Service tax liability on management consultancy services provided by sub-consultants, applicability of CBEC circulars, taxability of consideration received in foreign exchange, withdrawal of previous circulars, suppression of facts, demand beyond normal period, pre-deposit requirement, waiver of remaining tax, interest, and penalty pending appeal. Analysis: 1. Service Tax Liability on Sub-Consultants: The case involved a dispute regarding the service tax liability of sub-consultants providing management consultancy services. The appellants contended that they were sub-consultants providing services to main consultants, and as per a Board Circular from 1997, sub-contractors were not required to pay service tax. However, the Revenue argued that the withdrawal of the 1997 Circular in 2007 meant that sub-consultants were not exempt from paying service tax. The Tribunal noted the conflicting interpretations but leaned towards the appellants' argument, emphasizing the validity and authority of the 1997 Circular at the relevant time. 2. Taxability of Consideration Received in Foreign Exchange: Another crucial issue was the taxability of the consideration received by the appellants in convertible foreign exchange. The appellants argued that no service tax was leviable on this amount. The Tribunal agreed with this contention, highlighting that consideration received in free foreign exchange would not merit taxability. This decision favored the appellants' position and contributed to the overall assessment of the tax liability. 3. Withdrawal of Previous Circulars and Suppression of Facts: The Tribunal acknowledged the withdrawal of the 1997 Circular by a subsequent circular in 2007. However, it emphasized that the past circulars were not necessarily held invalid for the period they were in force. The Tribunal found it unreasonable to allege suppression or willful misstatement of facts by the appellants to evade duty, especially considering the existence and validity of the 1997 Circular during the relevant period. This analysis played a significant role in assessing the demand beyond the normal period and determining the sustainability of the tax demand. 4. Pre-Deposit Requirement and Waiver of Remaining Tax: Considering the facts and circumstances of the case, the Tribunal ordered a pre-deposit of a specific amount within a stipulated time frame. Upon compliance with this pre-deposit requirement, the Tribunal waived the remaining service tax, interest, and penalty pending the appeal's disposal. This decision provided a balanced approach by ensuring partial pre-deposit while granting relief on the remaining tax liabilities during the appeal process. In conclusion, the judgment by the Appellate Tribunal CESTAT New Delhi addressed various complex issues related to service tax liability, applicability of circulars, taxability of foreign exchange consideration, withdrawal of previous circulars, and pre-deposit requirements. The detailed analysis and considerations presented in the judgment reflect a thorough examination of the legal and factual aspects of the case, ultimately leading to a reasoned decision in favor of the appellants on key issues.
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