2018 (1) TMI 265 - AT - Service Tax

Levy of service tax - service of business promotion provided by it to the service recipient - whether taxable under management or business consultancy service or otherwise? - Held that - when the meaning of the business and management consultancy is provided by law is read, that does not cover land development charge within its fold to give rise to taxable event for the purpose of levy under Finance Act, 1994. Accordingly there shall be no levy on the land development charge under the category of business and management consultancy. Penalty - Held that - taking into consideration co-operation of the appellant who does not dispute the liability and has discharged the tax liability with interest, there shall not be penalty on this count under any of the provisions of the Finance Act, 1994 when order of the Authority below also does not exhibit contumacious conduct of the appellant to bring it to the ambit of Section 78 of Finance Act, 1994. Appeal allowed in part.

Summary

Issues:
1. Taxability of service of business promotion provided by the appellant-assessee.
2. Taxability of land development charges received by the appellant-assessee.

Analysis:

Issue 1: Taxability of service of business promotion
The appellant-assessee challenges the taxing of the service of business promotion provided by it to the service recipient under the category of business auxiliary service. The Revenue asserts that the service is taxable. The appellant contends that taxes and interest have been paid, and if any liability exists, penalty should not be imposed. The Tribunal finds that the service provided for the promotion of business is indeed taxable. However, due to the appellant's cooperation, acknowledgment of the liability, and payment of taxes with interest, no penalty is imposed. The Tribunal's decision is supported by the principles established in a decision of the Allahabad High Court.

Issue 2: Taxability of land development charges
The Revenue appeals against the adjudication order, arguing that the land development charges received by the appellant should be taxable under the category of management or business consultancy service. The appellant asserts that the service of land development does not fall within the scope of the alleged service as claimed by the Revenue. The Tribunal examines the meaning of management or business consultant, as provided by law, which includes various management-related activities but does not explicitly cover land development charges. The Tribunal refers to a previous case where it was held that land development charges are not a constituent of management consultancy service. It points out a legal infirmity in the adjudication process, stating that the agreement between the parties was not examined to determine if the land development charge was for management or business consultancy services. Consequently, the Tribunal rules that the land development charge does not fall under the category of business and management consultancy for tax purposes, leading to the dismissal of the appeal on this issue.

In conclusion, the Tribunal dismisses both appeals, except for granting relief on the penalty in relation to the business auxiliary service.