2012 (7) TMI 778 - AT - Service Tax

Advisory fees for merchant banking service - appellant submitted that service tax has been demanded on these services on the ground that these services are to be categorized under Management Consultancy Service - application for waiver of pre deposit - Held that - Circular no. 1/1/2001-ST dated 27.06.2001 issued in exercise of the powers vested in the Board Section 37B to ensure that there is uniformity in the classification of excisable goods in this case service tax - the appellant have made out a case to show that the appellants had a bona fide belief that the services rendered by them were not taxable prior to 16.07.2001 thus,pre-deposit is required to be waived and stay against recovery of the dues during the pendency has to be granted.

Issues:
Service tax demand on various services including advisory service, merchant banking service, underwriting of government securities/treasury bills, recovery of expenses of insurance claim, and recovery of bad debts. Applicability of service tax prior to July 16, 2001. Classification of services under 'Management Consultancy Service' or 'Banking and Other Financial Services'. Imposition of penalties. Prima facie case for waiver of pre-deposit and grant of stay.

Analysis:

1. Service Tax Demand on Various Services:
The judgment addresses the confirmation of a service tax demand amounting to Rs. 2,65,91,471 on services provided by the appellants during the period from April 2000 to December 2001. The services in question include advisory service, merchant banking service, underwriting of government securities/treasury bills, recovery of expenses of insurance claim, and recovery of bad debts. A show-cause notice was issued on 20.10.2004, leading to the demand and penalties imposed.

2. Applicability of Service Tax Classification:
The counsel for the appellant argued that the services rendered by them should not be categorized under 'Management Consultancy Service' but under 'Banking and Other Financial Services'. The appellant claimed to have started paying service tax after July 2001 for services falling under the latter category. The definitions of 'Management Consultancy Service' and 'Banking and Other Financial Services' were extensively discussed to support the appellant's position.

3. Circular Issued by the Board:
The judgment highlights a Circular issued by the Board on 27.06.2001 under Section 37B of the Central Excise Act, 1944, applicable to service tax matters. The Circular listed several services, including those related to merger and acquisition, under 'Management Consultancy Service', making them liable to service tax. The issuance of this Circular indicated a need for clarification due to divergent practices, suggesting a lack of uniformity in service tax classification.

4. Prima Facie Case for Waiver of Pre-deposit:
Considering the complexity of the issues involved and the need for detailed examination during the final hearing, the Tribunal focused on determining whether there was a prima facie case for waiving the pre-deposit and granting a stay on recovery of dues. The Tribunal acknowledged the appellant's bona fide belief regarding the non-taxability of services before July 16, 2001, as evidenced by the need for the Circular issued by the Board.

5. Decision and Grant of Stay:
In the interest of justice and pending further detailed consideration of law and facts, the Tribunal decided to waive the pre-deposit and grant a stay against the recovery of dues. This decision was made to ensure fairness and allow for a thorough examination of the legal and factual aspects involved in the case.

Overall, the judgment delves into the intricacies of service tax classification, the significance of the Circular issued by the Board, and the Tribunal's decision to grant a stay based on the prima facie case presented by the appellant.

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