2015 (9) TMI 990 - AT - Service Tax

Classification of service - Maintenance, management and repair service or Management Consultancy Service - Held that - The description of the services in the show cause notice itself would show that the appellants are actually managing services in the first category and in the second category the consultancy and integration is entirely relatable to hardware and software in information technology. The show cause notice itself states that under managed service, HP takes over the entire responsibility of managing, maintaining, improving upon the procurement and replacement of IT components so as to keep the IT environment functioning properly keeping in account the business requirement of the client. Appellants are only managing the services and the consultation is only in relation to IT and therefore, in our opinion, the activities are not covered by Management Consultancy Service at all. Since on the basis of facts and application of law to the facts, we find that the services provided cannot be considered as Management Consultancy Service - Decided in favour of assessee.

Summary

Issues: Classification of services under "Management Consultancy Service" for Service Tax liability.

In this case, the appellants, engaged in IT product manufacturing and services, were faced with a demand for Service Tax by the Revenue for the period from November 2004 to March 2007, amounting to Rs. 38,03,08,837. The dispute arose concerning the classification of two lines of activities, namely 'managed service' and 'consulting and integration service,' as either falling under "Management Consultancy Service" or not. The Revenue contended that these services should be classified as such, leading to the imposition of interest and penalties under various sections of the Finance Act.

The appellants provided detailed descriptions of the services they offered, including data center and facility management, server management, network management, help desk services, vendor management, asset management, consulting, and integration services. The appellants argued that their services were related to managing IT infrastructure and providing consultancy and integration services for hardware and software requirements, which were not taxable under "Management Consultancy Service" until May 16, 2008. They also highlighted that they had been paying taxes under the category of 'Business Support Service' since April 2006. The department, however, maintained that the services fell under "Management Consultancy Service" based on previous Tribunal decisions and Supreme Court rulings.

The Revenue argued that the services provided by the appellants were indeed management services, emphasizing the responsibilities undertaken by the appellants in hardware/software installation, maintenance, troubleshooting, coordinating with vendors, and advising clients to meet their business requirements. The Revenue pointed out that the agreements entered into by the appellants clearly outlined the nature of services provided, including analysis, design, planning, development, programming, consulting, implementation, training, support, maintenance, and project management.

Upon considering the submissions from both sides, the Tribunal analyzed the definition of "Management Consultancy Service," which involves providing services related to the management of an organization, advice, consultancy, or technical assistance in conceptualizing, devising, developing, modifying, or upgrading working systems. The Tribunal concluded that the appellants' services were primarily focused on managing IT services and providing consultancy related to hardware and software in the IT sector, which did not align with the definition of "Management Consultancy Service." Therefore, the Tribunal allowed the appeal, ruling in favor of the appellants and providing consequential relief, if any, based on the observations made.

In conclusion, the Tribunal's judgment centered on the proper classification of the appellants' services under the Service Tax regime, ultimately determining that the activities did not fall under the purview of "Management Consultancy Service," leading to a favorable outcome for the appellants.