2017 (9) TMI 796 - HC - Service Tax

Classification of services - Merger and Acquisition Services - whether classified under the head Banking and other Financial Services or under the head Management Consultancy Services? - Held that - Merger and Acquisition Services having been introduced for the first time as a separate category under Banking and other Financial Services with effect from 16th July 2001 would show that the said service was never a part of Management Consultancy Services which has been in existence at all times - Merger and Acquisition is highly technical and a restrictive term and cannot be related to the managing of the affairs of the organisation which would come within the definition of Management Consultant . The decision of Division Bench of this Court in Indian National Shipowners Association 2010 (12) TMI 12 - Supreme Court of India would apply in the present case partially since that case has considered the issue of introduction of a new entry viz. mining service in the Finance Act and held that the levy of service tax on this service would be after the insertion of the new entry. Service tax is payable on Merger and Acquisition Services only upon its insertion in the Banking and Financial Services with effect from 16th July 2001 and was not leviable prior thereto - appeal dismissed - decided against Revenue.

Summary

Issues:
1. Whether service tax is payable on "Merger and Acquisition Services" under the category of "Management Consultancy Services" prior to 16th July 2001?
2. Whether the introduction of "Merger and Acquisition Services" as a separate category under "Banking and Financial Services" from 16th July 2001 affects the taxability of these services?

Issue 1:
The Appeals challenged the impugned orders by the Customs, Excise and Service Tax Appellate Tribunal regarding the taxability of "Merger and Acquisition Services" under "Management Consultancy Services" before 16th July 2001. The Respondent, engaged in advisory services, had not paid service tax on these services. The Adjudicating Authority classified the services as taxable under Management Consultancy Services, demanding service tax. The Commissioner (Appeals) upheld the order but waived penalties. The Appellate Tribunal allowed the Assessee's appeal, leading to the current challenge. Mr. Jetly, representing the Appellant, argued that "Merger and Acquisition Services" fall under the definition of "Management Consultancy Services" and are taxable. He relied on a board circular clarifying the taxability of such services. He cited a Tribunal order supporting the taxability of advisory services in finance. The Court, however, held that "Merger and Acquisition" is technical and restrictive, not falling under "Management Consultancy Services" definition, and taxable only from 16th July 2001.

Issue 2:
The second issue revolved around the impact of introducing "Merger and Acquisition Services" as a distinct category under "Banking and Financial Services" from 16th July 2001 on their taxability. Mr. Shah, representing the Respondent, argued that this separate categorization indicated that these services were not previously considered under "Management Consultant." He referenced a Division Bench decision regarding the introduction of a new entry for mining services, stating that tax liability commenced only after the insertion of the new entry. The Court agreed that the introduction of "Merger and Acquisition Services" as a separate category signified their non-inclusion under "Management Consultancy Services" before 16th July 2001. Drawing parallels with the mining services case, the Court held that service tax on "Merger and Acquisition Services" became applicable only from 16th July 2001, dismissing the Appeals.

In conclusion, the Court ruled that service tax on "Merger and Acquisition Services" was not payable under "Management Consultancy Services" before 16th July 2001 but became applicable only after their categorization under "Banking and Financial Services" from that date. The judgment highlighted the technical nature of these services and their distinct tax treatment post the specified date, ultimately dismissing the Appeals without costs.