2014 (12) TMI 598 - AT - Service Tax

Classification of services - Management Consultancy service or Business support services - nature of services are executionery or management consultancy - various activities like assisting the client in various field, advising the client on various aspects including liaising with various government departments, advising and assisting to solve various problems - Bring to the attention of the Company any improper or wrongful use of the Company s name, patents, trademarks, emblems, designs, models etc. - providing legal assistance - Held that - A careful perusal of the appellants services to M/s. Transocean and M/s. Tide Water makes it clear that the appellants were advising the clients about various aspects relating to Management. The services are not executionery in nature and are clearly advisory in nature. The definition of Management Consultant is so worded that the services performed by the appellants clearly fall within its scope and for that one only has to read the definition of Management Consultant . - Decided against the assessee. The appellants attempt to elucidate the meaning of Management Consultancy by reference to meaning of the word Management is not really germane because the expression Management Consultant and Management Consultancy Service are clearly defined in the Finance Act 1994 itself and therefore one doesn t have to, indeed one cannot, look beyond the statutory definition for the purpose of classification in this case. Regarding the appellants contention that the said services would be appropriately covered in the category of support services of business or commerce, or Business Consultancy Service, the same is not tenable because as per the definition of support service for business or commerce, the activities covered thereunder are essentially executionery in nature. - Decided against the assessee. Export of services or not - amounts paid by the ONGC to be treated as receipt in foreign currency or not - Held that - The ratio of the judgment of Supreme Court in the case of JB Boda 1996 (10) TMI 70 - SUPREME Court is that for treating such payments as payments received in foreign exchange, RBI s nod should be there which is absent in the present case. It is pertinent to mention that once the RBI is taken in the loop, such transactions will not go unnoticed for the purpose of the relevant data bases of India s international trade and foreign exchange transactions and will also not remain under the radar of the laws relating thereto. Thus, the impugned payments made by ONGC to the appellants do not merit to be treated as payments received in foreign exchange. - However benefit of export extended where actual foreign exchange received by the assessee. - Decided partly in favor of the assessee. Nature of services provided under the sales representative agreements to Helicopter Asia(PTE) - Held that - As is evident from the sales representative agreements the appellants role includes promotion of the services recipients goods/services and is thus clearly different from that of a commission agent. - Their claim for exemption under Notification No. 13/2003-ST on the ground of being commission agent is obviously untenable. - Decided against the assessee. Extended period of limitation - Held that - Mere presumption of non-taxability can never be equated to reasonable belief in that regard. Thus, the conclusion is inescapable that they deliberately did not take registration and pay the impugned service tax with a view to escaping the liability and when caught, pretended to be having reasonable belief about the non-taxability. Thus invocability of extended period and mandatory penalty is unexceptionable. - Decided against the assessee.

Issues Involved:
1. Classification of services rendered to Transocean and Tide Water.
2. Classification of services rendered under 'sales representative agreements'.
3. Allegation of willful misstatement/suppression of facts.
4. Applicability of exemption for services paid in convertible foreign currency.
5. Simultaneous imposition of penalties under Sections 76 and 78.
6. Computation of the impugned demand.

Detailed Analysis:

1. Classification of Services Rendered to Transocean and Tide Water:
The appellants were accused of providing Management Consultancy Services to Transocean and Tide Water. The services included advising on commercial aspects, assisting in obtaining work, and advising on government regulations, among others. The Adjudicating Authority classified these services under Management Consultancy Service, invoking the definition under Section 65(65) and Section 65(105)(r) of the Finance Act, 1994. The appellants argued that their services were executionary rather than advisory and should be classified under Business Support Service or Business Consultancy Service, which came into effect later. However, the Tribunal found that the services were advisory in nature and directly connected with the management of the companies, thus falling under Management Consultancy Service.

2. Classification of Services Rendered Under 'Sales Representative Agreements':
The services rendered under 'sales representative agreements' to companies like Helicopter Asia were classified as Business Auxiliary Service. The appellants contended that these services were export of service and should be exempt. The Tribunal held that the services clearly involved the promotion of the service recipients' goods/services, fitting the definition of Business Auxiliary Service under Section 65(19) of the Finance Act, 1994. The claim for exemption under Notification No. 13/2003-ST as commission agents was rejected as the appellants did not meet the definition of a commission agent.

3. Allegation of Willful Misstatement/Suppression of Facts:
The appellants were accused of willful misstatement/suppression of facts for not registering, filing returns, or paying service tax. They claimed a bona fide belief of non-liability. The Tribunal found no basis for this belief as the appellants did not provide evidence of seeking legal advice or consulting professionals. The Tribunal concluded that the appellants deliberately avoided registration and payment of service tax, justifying the invocation of the extended period and mandatory penalty.

4. Applicability of Exemption for Services Paid in Convertible Foreign Currency:
The appellants argued that services paid in convertible foreign currency were exempt from service tax. The Tribunal agreed that services paid in foreign currency were exempt, except for payments received from ONGC in Indian Rupees. The Tribunal cited the Supreme Court judgment in J.B. Boda and Co. Pvt. Ltd. Vs. CBDT, emphasizing that payments in Indian Rupees cannot be treated as foreign exchange without RBI's involvement.

5. Simultaneous Imposition of Penalties Under Sections 76 and 78:
The appellants argued that penalties under Sections 76 and 78 could not be simultaneously imposed. The Tribunal agreed, citing several judgments from the Punjab & Haryana High Court, and set aside the penalty under Section 76 while reducing the penalty under Section 77 to Rs. 1000.

6. Computation of the Impugned Demand:
The appellants questioned the computation of the demand, which was addressed by the Adjudicating Authority. The Tribunal noted that the appellants did not provide documentary evidence to dispute the computation during the adjudication process, thus rejecting this plea at the appellate stage.

Conclusion:
The Tribunal partially allowed the appeal, modifying the impugned order to reduce the confirmed demand to Rs. 2,07,96,620/- along with interest and a mandatory equal penalty. The penalty under Section 77 was reduced to Rs. 1000, and the penalty under Section 76 was set aside.

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