2018 (1) TMI 1057 - AT - Service Tax

Management Consultancy Service - dispute in the present case relates to some part of their activities which are essentially with reference to giving opinion, updates on tax, legal position, filing of tax returns under various statutes relating to Income Tax, Service Tax, Sales Tax etc. under various auxiliary services with reference to compliance of these tax laws by the client - Held that - The legal assistance either for direct planning or compliance is within the ambit of various tax laws has no direct relevance to working or improving any organization of the client in order to avoid penal consequence. It may indirectly keep the organization within the ambit of legal promotion work for their further business. This by itself will not make the consultancy or advisor in tax matters management consultant - appeal allowed - decided in favor of appellant.

Summary

Issues:
Interpretation of the definition of "management consultant" under the Finance Act, 1994 in the context of tax advisory services.

Analysis:
The case involved a dispute regarding whether certain tax advisory services provided by the appellant fell under the category of "management consultant" as per the Finance Act, 1994. The Revenue argued that advising on tax matters is inherently related to the management of an organization, thus falling under the definition of a management consultant. The original authority upheld this view, imposing a significant tax liability and penalty on the appellant.

The appellant, on the other hand, contended that their services were primarily focused on tax compliance advice for specific tax laws and not general management consultancy. They argued that providing advice on tax laws did not constitute management consultancy services but rather specific tax compliance advisory services. The appellant emphasized that they were discharging service tax wherever engaged in consultancy services but not for tax advisory services.

The Tribunal analyzed the definition of "management consultant" as per the Finance Act, 1994, which includes providing services in connection with the management of any organization. The Tribunal noted that while the disputed activities involved advisory and consultancy work related to tax compliance, they did not directly contribute to improving the working system of any organization, a key aspect of management consultancy. The Tribunal cited a previous case involving a similar dispute to support its interpretation.

Referring to the decision in Ernst & Young Pvt. Ltd. Vs. Commissioner of Service Tax, the Tribunal emphasized that not all responsibilities of management could be considered as management functions. The Tribunal highlighted that compliance services, such as tax advisory services, might not fall within the ambit of management consultancy services. Ultimately, the Tribunal found no merit in the impugned order, setting it aside and allowing the appeal with consequential relief, if any.

In conclusion, the Tribunal's analysis focused on the distinction between general management consultancy services aimed at improving organizational systems and specific tax compliance advisory services. The judgment clarified that providing advice on tax laws, while important for financial management, does not necessarily constitute management consultancy under the Finance Act, 1994.