2017 (12) TMI 15 - AT - Service Tax

Business Auxiliary Services - case of appellant is that arrangement is on principal to principal basis for which they receive consideration - Held that - the company whose accounts were verified by the appellant as part of sub-contracted work has no arrangement with the appellant. Further, even M/s. DHS have no arrangement with such company to enable the appellant to render any service on behalf of DHS - There is some element of confusion in the original authority s finding to identify the actual client itself. The appellants are providing service to M/s.DHS and DHS are their client. The company whose books are audited are not the client of the appellant. While they are clients of DHS and appellant did not render any service to the company on behalf of DHS. Demand set aside - appeal allowed - decided in favor of appellant.

Summary

Issues:
1. Whether the appellant provided Business Auxiliary Service (BAS) in terms of Section 65 (19) of Finance Act, 1994?
2. Whether the appellant is liable to pay service tax for the sub-contracted work done for M/s.DHS?
3. Whether the original authority's conclusion regarding the tax liability under BAS is legally sustainable?

Analysis:
1. The case involved a Chartered Accountant firm that entered into an arrangement with M/s.Deloite Haskins & Sells (DHS) to undertake auditing work. The Revenue alleged that the appellant provided BAS on behalf of the client and initiated proceedings to demand service tax. The original authority confirmed a service tax liability of &8377; 74,87,544/- and imposed a penalty of Rs. 75 lakhs under Section 78 of the Finance Act, 1994.

2. The appellant contended that they had a principal-to-principal arrangement with M/s.DHS, and the auditing work done was based on this arrangement. The appellant did not have any direct arrangement with the companies whose accounts were audited, and no consideration was received from these companies. The appellant argued that there was no pre-existing tripartite arrangement involving them, M/s.DHS, and the audited companies. The appellant strongly contested the findings of the original authority, stating that the conclusion lacked legal support.

3. The Appellate Tribunal noted that the original authority erred in concluding that the appellant provided services on behalf of the client. It was clarified that the appellant's services were provided to M/s.DHS, not to the companies whose accounts were audited. The Tribunal emphasized that there was no tripartite arrangement in place for the appellant to render services on behalf of the client. The confusion in identifying the actual client was highlighted, with the Tribunal stating that the appellant's clients were M/s.DHS, not the audited companies. Therefore, the Tribunal found the original order legally unsustainable and set it aside, allowing the appeal with consequential relief, if any, as per law.

This detailed analysis of the judgment highlights the key arguments, legal interpretations, and the ultimate decision of the Appellate Tribunal in favor of the appellant.