2014 (12) TMI 499 - AT - Service Tax

Management Consultancy Services - Deputation of executives - fees received for that work were not declared in the ST-3 returns - Held that - From the nature and description of the service rendered it is obvious that the charges have been collected on account of deputation of staff. It is also clear that the staff so deputed has to look after various assignments given to them by the group companies and they are not doing any activity assigned by the appellant to them. Service of deputation of staff does not come under the category of Management Consultancy Service but falls under Manpower Recruitment or Supply Agency Service - services rendered by the appellant in the case before us does not fall under the category of Management Consultancy Service but comes under the category of Manpower Supply Agency Service which came under tax net effective from 16-6-2005. Since the period involved in the present case is from October 1998 to January 2002 much prior to the introduction of levy on Manpower Supply or Recruitment Agency Service the demand raised in the impugned order does not sustain - Following decision of Sterlite Optical Technologies Ltd. v. Commissioner of Central Excise Vapi 2008 (12) TMI 72 - CESTAT AHMEDABAD and Carborandum Universal Ltd. v. Commissioner of Central Excise Chennai 2009 (12) TMI 184 - CESTAT CHENNAI - Decided in favour of assessee.

Summary

Issues:
- Whether the appellant's activity of deputing staff falls under the category of 'Management Consultancy Service' or 'Manpower Supply Agency Service' for the purpose of Service Tax liability.

Analysis:

Issue 1: Classification of Services
The appellant, a consultancy firm, was under scrutiny for not declaring fees received for deputing staff in their service tax returns. The department issued a notice demanding service tax on the consideration received for deputation of staff. The appellant argued that they provided 'Management Consultancy Service' to clients and deputed staff to group companies, recovering wages and service charges. The Revenue contended that deputation of staff was related to 'Management Consultancy Services.' The Tribunal analyzed the nature of services based on debit notes issued by the appellant, which clearly indicated charges for deputation of staff to undertake assignments for group companies. Referring to precedents like Glaxo Smithkline Pharmaceuticals Ltd. and Daurala Organics, the Tribunal held that deputation of staff did not fall under 'Management Consultancy Services' but under 'Manpower Supply Agency Service.'

Issue 2: Legal Precedents
The Tribunal cited various decisions where similar issues were addressed. In the case of Glaxo Smithkline Pharmaceuticals Ltd., it was held that sharing of staff for functions was not 'Management Consultancy Services.' Similarly, in Daurala Organics and Carborandum Universal Ltd., the Tribunal ruled that deputation of staff did not fall under 'Management Consultancy Service.' The Tribunal emphasized that the appellant's services were akin to 'Manpower Supply Agency Service,' which only became taxable from June 16, 2005, whereas the demand in this case pertained to a period before that date.

Conclusion:
Considering the precedents and the nature of services provided by the appellant, the Tribunal concluded that the appellant's activities did not constitute 'Management Consultancy Service' but rather 'Manpower Supply Agency Service.' As the demand was for a period prior to the introduction of tax on 'Manpower Supply or Recruitment Agency Service,' the appeal was allowed in favor of the appellant.