2008 (5) TMI 78 - AT - Service Tax

Services regarding selection of right supplier, control over quality of the bags, effective delivery schedule, to manage with the latest inventories etc. impugned services are relating to market development, marketing, sales and not being related to advice consultancy or technical assistance hence these services cannot be treated as Management Consultancy Services, but have to be read as Business Auxiliary Services, which admittedly became liable to duty only w.e.f. 1-7-2003

Summary

Issues:
Determining whether services provided fall under Management Consultancy or Business Auxiliary Services.

Analysis:
The dispute in the appeal revolves around the classification of services provided by the respondents as either Management Consultancy or Business Auxiliary Services. The respondents had a contract with a cement company to provide various services related to supplier selection, quality control, delivery schedules, cost monitoring, market trends, customer feedback, and more. The appellate authority analyzed the definitions of Management Consultant and Business Auxiliary Service under the Finance Act, 1994. It was concluded that the services rendered by the respondents align more with activities such as evaluation of customers, processing orders, customer management, tracking delivery schedules, and marketing assistance, falling under Business Auxiliary Services rather than management of an organization or technical assistance. Consequently, the appeal was allowed in favor of the respondents.

The Commissioner (Appeals) also referred to a circular by the Central Board of Excise and Customs clarifying that services like evaluation of customers, processing orders, customer management, and logistics fall under Business Auxiliary Services. The circular highlighted that services related to acquiring customers and processing orders are covered under service tax. Furthermore, the Tribunal cited precedents in cases like M/s. Telephone Cables Ltd. and M/s. Galxo Smithkline Consumer Healthcare Ltd., where it was established that services concerning market development, sales, and marketing, not involving consultancy or technical advice, are categorized as Business Auxiliary Services. This classification was deemed applicable from July 1, 2003. Based on these interpretations and precedents, the Tribunal upheld the decision of the Commissioner (Appeals) and dismissed the Revenue's appeal.

In conclusion, the judgment clarified the distinction between Management Consultancy and Business Auxiliary Services based on the nature of services provided by the respondents. The decision relied on statutory definitions, circulars, and previous rulings to determine the appropriate categorization of the services in question, ultimately leading to the rejection of the Revenue's appeal.