2008 (6) TMI 159 - AT - Service Tax

Corporate advisory services, due diligence services, advisory services on acquisition of share of listed companies, etc. - services provided will prima facie not fall within the definition of management consultancy services - Prima facie services is in the nature of assistance to corporate advisory services - it cannot be said that services rendered by them related to either conceptualizing, devising, developing, modifying or upgrading of any working system of any organization stay granted

Summary

Issues:
1. Waiver of pre-deposit of service tax and penalties
2. Nature of services provided by the applicants
3. Application of limitation for service tax demand

Analysis:
1. Waiver of pre-deposit of service tax and penalties:
The Appellate Tribunal heard arguments regarding the waiver of pre-deposit of service tax amounting to Rs. 53,88,163 and penalties imposed under various sections of the Finance Act, 1994. The demand was confirmed for the period 2000-01 on the grounds that the applicants were providing management consultancy services. The applicants contended that the services provided were not within the scope of management consultancy services but rather related to merchant banking services. They argued that the service tax demand was not sustainable on merits and that the demand raised was barred by limitation due to an earlier audit conducted by the service tax department. The Tribunal found prima facie merit in the contention that the services provided did not fall within the definition of management consultancy services. Therefore, the Tribunal dispensed with the pre-deposit of service tax and penalties pending the appeal.

2. Nature of services provided by the applicants:
The nature of services provided by the applicants was a key point of contention. The Tribunal noted that the services in question included corporate advisory services, due diligence assistance, divestment support, and advisory services related to share acquisitions. The applicants argued that these services were not related to the conceptualization or development of organizational systems, which are essential components of management consultancy services. The Tribunal found merit in the argument that the services provided were more aligned with merchant banking services rather than management consultancy services. This analysis influenced the decision to waive the pre-deposit of service tax and penalties.

3. Application of limitation for service tax demand:
The issue of limitation for the service tax demand was also debated during the proceedings. The Department argued that the audit conducted earlier was limited to stock broking and that the applicants had not disclosed relevant information to enable the Department to raise the demand within the statutory period of limitation. The Department contended that the extended period of limitation was rightly applied in this case. However, the Tribunal found that the applicants had not suppressed any information during the audit, and therefore, the extended period of limitation was not applicable. This finding further supported the decision to dispense with the pre-deposit of service tax and penalties.

In conclusion, the Tribunal ruled in favor of the applicants by waiving the pre-deposit of service tax and penalties, citing prima facie evidence that the services provided did not fall within the definition of management consultancy services and that the demand was not sustainable on merits. The decision was influenced by the nature of services provided and the application of limitation for the service tax demand.