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2024 (8) TMI 1337 - AT - Service TaxClassification of service provided by PwC - Chartered Accountant Services or not - Classification of service - Market Research Agency s Services or not - Export of service - Time Limitation - Interest and penalty. Classification of service - Chartered Accountant Services or not - HELD THAT - The appellant, which is a Private Limited Company i.e. an Incorporated Company, is not engaged in the practice of Chartered Accountancy and does not function as statutorily required for Practicing Chartered Accountants and the appellant is not permitted to practice as a firm of chartered accountants by the Institute of Chartered Accountants of India. Therefore, the services rendered by the appellant cannot be classified under CA Services by any stretch of imagination. Classification of service - Market Research Agency s Services or not - HELD THAT - The nature of services rendered by the appellant includes providing consultancy or advice, assistance in mergers acquisition of companies, conducting due diligence under specific situations/transactions, conducting health check or diagnostic reviews, evaluation financial viability of a transaction amongst others. Rather, the nature of services rendered by the appellant, it can be rightly classified under the category of Management or Business Consultants Services. The word management signifies ways and means for managing the organization, by any means i.e. by directions or by regulations or by administration. The word direction indicates framing of policy and the word regulation or administration indicates the standard operating procedure to be followed for achievement of the policy. The demand of Rs.1,27,90,193/- has been confirmed considering that the services are to be classified under the practicing Chartered Accountant Services and the Market Research Agency s Services; but it has not been quantified in the impugned order as to how much is the demand under each category; therefore, the impugned order is bad classifying the services rendered by the appellant under the category of Chartered Accountant Services and the Market Research Agency s Services. Export of service - HELD THAT - The appellant has entered into contract/agreement with PwC Overseas Network Firms and not with the clients of PwC Overseas Network Firms under which the appellant provides services, which can either be provided from the premises of the appellant or any other place as agreed with PwC Overseas Network Firms. The privity of contract arises between the appellant and PwC Overseas Network Firms and not between the appellant and the clients of PwC Overseas Network Firms, because the PwC Overseas Network Firms have separate agreement with its clients. The issue whether the services provided by the appellant to the Foreign Network Firms and other Foreign Companies for a consideration collected in convertible foreign exchange would be qualified for export services under Export of Services Rules, 2005 or otherwise is no more res integra and has been settled by the Hyderabad Bench of the Tribunal in the appellant s own case CCCE ST, HYDERABAD-II VERSUS PRICE WATERHOUSE (VICE-VERSA) 2018 (11) TMI 32 - CESTAT HYDERABAD where it was held that ' It is undisputed that the appellant herein rendered services to their overseas network entities as well as to their clients located outside India and the consideration for such services was collected inconvertible foreign currency. The findings of the adjudicating authority is that the services rendered by the appellant are in the form of auditing and accounting of various entities situated in India but had only forwarded the certificate to the foreign entities which is not service rendered outside India; it is also finding that the services are rendered to foreign clients, but performed wholly within India.' Time Limitation - HELD THAT - The dispute in this case involves interpretation of classification of service and eligibility for export of service and it has been held by the Hon ble Apex Court in the case of PADMINI PRODUCTS VERSUS COLLECTOR OF C. EX. 1989 (8) TMI 80 - SUPREME COURT that when the matter involves interpretation of statutory provisions, extended period of limitation cannot be invoked. Further, the extended period cannot be invoked in the present case as there is no evidence on record to show that there is any fraud or collusion or wilful mis-statement or suppression of facts or contravention of any of the provisions of law or rules made thereunder with intent to evade payment of tax. Interest and penalty - HELD THAT - When the demand of service tax itself is not sustainable, therefore, the question of interest and penalty does not arise. The impugned order is not sustainable in law and is set aside - appeal allowed.
Issues Involved:
1. Classification of services rendered by the appellant. 2. Eligibility for exemption under Export of Service Rules, 2005. 3. Computation of demand and benefit of cum-tax demand. 4. Limitation and delay in adjudication proceedings. 5. Invocation of extended period under Section 73 of the Finance Act, 1994. 6. Imposition of interest and penalty. Issue-wise Detailed Analysis: 1. Classification of Services Rendered by the Appellant: The appellant argued that their services fall under "Management or Business Consultants Services" and not under "CA Services" or "Market Research Agency's Services." The Tribunal agreed, noting that the appellant, a Private Limited Company, is not engaged in the practice of Chartered Accountancy and does not function as required for Practicing Chartered Accountants. Thus, the services rendered by the appellant cannot be classified under "CA Services." Similarly, the Tribunal found that the appellant's services, which include consultancy, mergers & acquisitions assistance, due diligence, etc., do not fall under "Market Research Agency's Services" but are more appropriately classified under "Management or Business Consultants Services." 2. Eligibility for Exemption under Export of Service Rules, 2005: The Tribunal held that the services provided by the appellant to PwC Overseas qualify as export of services. The appellant delivered reports to PwC Overseas, which used these reports to render services to their clients. This scenario qualifies as export of services as per the Export of Service Rules, 2005. The Tribunal cited several judgments, including CST Vs B.A. Research India Ltd., which support the view that services rendered in India but used by a foreign entity qualify as export of services. 3. Computation of Demand and Benefit of Cum-Tax Demand: The Tribunal noted that the demand of Rs.1,27,90,193/- was confirmed without segregating the amount pertaining to CA Services and Market Research Services separately. This lack of segregation rendered the impugned order flawed. Additionally, the appellant was not given the benefit of cum-tax demand. 4. Limitation and Delay in Adjudication Proceedings: The Tribunal found that the adjudication proceedings were barred by limitation. The show cause notice was issued on 20.04.2012, and the impugned order was passed on 29.11.2019, well beyond the statutory limit. Citing judgments from the Hon'ble Delhi High Court and Hon'ble Jharkhand High Court, the Tribunal quashed the show cause notice due to the delay. 5. Invocation of Extended Period under Section 73 of the Finance Act, 1994: The Tribunal held that the extended period cannot be invoked as there was no evidence of fraud, collusion, wilful misstatement, or suppression of facts by the appellant. The dispute involved interpretation of statutory provisions, and as per the Hon'ble Apex Court in Padmini Products Vs Collector of C.Ex., extended period of limitation cannot be invoked in such cases. 6. Imposition of Interest and Penalty: The Tribunal concluded that since the demand of service tax itself was not sustainable, the question of interest and penalty does not arise. Conclusion: The Tribunal set aside the impugned order, allowing the appeal of the appellant with consequential relief as per law. The services rendered by the appellant were classified under "Management or Business Consultants Services" and qualified as export of services. The adjudication proceedings were barred by limitation, and the extended period under Section 73 of the Finance Act, 1994, was not applicable. Consequently, the imposition of interest and penalty was also not warranted.
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