2009 (6) TMI 59 - AT - Service Tax

Stay Various services (a) Streamlining Distribution, C&F Arrangements; (b) Arranging Banking and Finance Function; (c) Rearranging Purchasing of raw materials for DUPHAR PHARMA and processing/transferring and the information technology to DUPHAR PHARMA; (d) Rearranging Human Resources Department, payroll function and related compliance in the name of DUPHAR PHARMA; (e) Formulating/arranging accounting and taxation related compliance; (f) Assistance in loan licensing and manufacturing arrangements; (g) Overall restructuring of General administration for DUPHAR PHARMA. Demand within the category of management consultant service Held that stay granted in part.

Summary

Issues:
1. Whether services rendered after a demerger can be considered as "Management Consultancy Services."
2. Interpretation of the Support Agreement dated 5-5-2001.
3. Definition of a Management Consultant under the Finance Act, 1994.
4. Comparison of the services provided with the definition of Management Consultancy Services.
5. Examination of case laws to determine the nature of services provided.

Analysis:
1. The issue in this case revolves around whether the services rendered post-demerger can be classified as "Management Consultancy Services." The applicants are required to pay service tax, interest, and penalties as per the impugned order upheld by the Commissioner (Appeals).

2. The Support Agreement dated 5-5-2001 outlines the services provided by the applicants to M/s. Duphar Pharma, including streamlining distribution, finance functions, human resources, accounting, and overall restructuring. The agreement also mentions commercial information provision and additional assistance as required.

3. A Management Consultant is defined under section 65(65) of the Finance Act, 1994, as a person engaged in providing services related to managing an organization. The definition includes providing advice, consultancy, or technical assistance regarding various aspects of organizational management.

4. The Tribunal analyzed the services provided by the applicants in connection with the Support Agreement. The broad definition of a Management Consultant encompasses various functions related to organizational management, such as production, finance, and marketing. The Tribunal referred to a Board order clarifying the term 'Management' to cover advisory services on any management aspect.

5. The Tribunal considered various case laws cited by the applicants to support their claim that the services provided do not fall under Management Consultancy Services. Each case was examined on its merits, with decisions based on the nature of activities and services rendered. The Tribunal concluded that based on the activities performed and the Support Agreement, the services provided to M/s. Duphar Pharma are prima facie covered within the definition of Management Consultancy Services.

6. Consequently, the Tribunal directed the applicants to pre-deposit a specified amount towards service tax within a stipulated period. Failure to comply would result in the vacation of stay and dismissal of the appeal. The decision was made after a thorough examination of the nature of services provided and their alignment with the definition of Management Consultancy Services under the Finance Act, 1994.