2015 (5) TMI 534 - AT - Service Tax

Invocation of extended period of limitation - Whether the appellant a Government of Karnataka undertaking/Organization is liable to pay service tax on the processing fee (according to them) collected by them is liable to service tax under Management or Business Consultancy Services or not - Held that - According to the definition any person engaged in providing any service either directly or indirectly in connection with the management of any organization or business in any manner is providing Management or Business Consultancy Service. The inclusive portion coming thereafter can be considered as an expansion of the definition and therefore any service provided in connection with the management or business is liable to tax. Management of business no doubt would start right from identification of a place to set up business and it cannot be said that management will start only after everything is done. Therefore when the appellant collects processing fee for various services which are required for setting up of industry we can take a view that it amounts to rendering of the service of business consultancy. Nevertheless being a Government organization and further there can be two views as whether the service provided by the appellants is Management or Business Consultancy or not and therefore it may not be appropriate to invoke extended period. Therefore in our opinion the demand cannot be sustained beyond the normal period of limitation. - Decided partly in favour of assessee.

Summary

Issues involved:
Whether the appellant, a Government of Karnataka undertaking, is liable to pay service tax on the processing fee collected by them under 'Management or Business Consultancy Services' or not.

Analysis:
The case revolved around determining if the appellant, a government organization, was liable to pay service tax on processing fees collected by them. The appellant's activities included providing assistance to investors in handling investment processes, disseminating information, facilitating industrial activities, and supporting entrepreneurs in setting up industries. The issue was whether these activities fell under 'Management or Business Consultancy Services' for service tax purposes. The demand for service tax of Rs. 2,58,40,805/- for the period from October 2006 to March 2012 was contested by the appellant. The tribunal noted that post-July 2012, with the introduction of the negative list, the appellant might not be liable to pay service tax at all.

The definition of 'Management or Business Consultancy Service' under Section 65(105)(r) of the Act was crucial in determining liability. The tribunal emphasized that the definition encompassed any service provided in connection with the management of an organization or business. Despite the appellant's argument that they did not provide consultancy services, the tribunal held that any service related to business management, including activities before the actual setup of industries, could be considered as business consultancy services. The tribunal highlighted that the definition extended to services provided directly or indirectly in connection with business management.

Considering the nature of the appellant being a government organization and the differing interpretations regarding whether their services constituted Management or Business Consultancy, the tribunal concluded that it might not be appropriate to invoke the extended period for tax liability. Ultimately, the tribunal upheld the liability to pay service tax for the normal period with interest on the processing fees received from investors and entrepreneurs. The penalties imposed were deemed unsustainable, and the appeal was disposed of accordingly.

In summary, the tribunal determined the appellant's liability to pay service tax on processing fees collected by them, emphasizing the broad definition of 'Management or Business Consultancy Service' and considering the nature of the appellant's services in assisting investors and entrepreneurs. The judgment highlighted the importance of adhering to statutory definitions and limitations in tax assessments, ultimately providing clarity on the tax liability of the appellant for the specified period.