2013 (12) TMI 1020 - AT - Service Tax

Demand of service tax - Extended period of limitation invoked - Suppression of facts - Evasion of tax - Management Consultancy Service - penalty under Section 76, 77 and 78 - Held that - nature of service is purely advisory in nature. All the advices are relating to the financial restructuring relating to business of various clients. It is true that in few cases in addition to advices, certain executor functions have also been carried out. However, ongoing through such agreements, we find that these executor functions have been carried out. We are therefore of the view considered view that main function has been advisory in nature and not execution, execution seems to be incidental to the advisory functions. The appellant was registered as stockbroking service and the audit would confine to the duty payments made relating to stock broking service. In any case audit period and the period under the present show cause notice are different. The demand in the present case is after the audit period. The other contention raised by the appellant is that the Board Circular itself states that a doubt has been raised and under the circumstances extended period cannot be invoked. We have gone through the said order. It appears that a public notice was issued on 18.2.2001 and in response to that certain agencies have represented and it is in that context that the said order was issued to clarify the doubts of such agencies. Appellants have not produced any evidence which indicate that they had such doubt and for they have approached the departmental authorities for clarification about their service tax liability on this aspect. In fact, after issue of the clarification 37-B Order, it was the duty of appellant to pay the tax for the past period (at least normal period) or challenge the order. This itself indicates willful intention to evade service tax. Appellants had not undertaken any registration relating to Management Consultancy Service and thus suppressed their activity from the departmental and therefore they have contravened the provisions of Service Tax Act and Rules with a willful intention to evade duty. Under the circumstances we consider that they have satisfied the requirements of Section 73 of the Finance Act, and extended period is correctly invoked and are also liable to penalty under Section 76, 77 and78 of the Finance Act, 1994 - Decided against assessee.

Issues Involved:
1. Leviability of Service Tax under "Management Consultancy Service" for various transactions conducted by the appellant.
2. Classification of services provided by the appellant.
3. Applicability of the extended period for raising the demand.
4. Nature of services provided: advisory vs. executor.
5. Impact of the introduction of "Banking and Other Financial Services" (BOFS) on 16.07.2001.
6. Validity of invoking extended period under Section 73 of the Finance Act, 1994.

Issue-wise Detailed Analysis:

1. Leviability of Service Tax under "Management Consultancy Service":
The core dispute revolves around whether the services provided by the appellant during July 2000 to June 2001 fall under "Management Consultancy Service." The appellant argued that their services were not advisory but executor in nature, and thus not taxable under the said head. However, the Tribunal found that the services were primarily advisory, with any executor functions being incidental. The Tribunal concluded that the services provided were indeed covered under "Management Consultancy Service," as they involved financial restructuring advice.

2. Classification of Services Provided by the Appellant:
The appellant contended that their services should not be classified under "Management Consultancy Service" since a specific provision for taxing such services under "Banking and Other Financial Services" (BOFS) was enacted from 16.07.2001. The Tribunal, however, held that the definition of "Management Consultant" is broad and includes any advisory services related to the management of an organization. The Tribunal also referenced an expert opinion from the Indian Institute of Management, Ahmedabad, which supported the view that financial advisory services in mergers and acquisitions are part of management consultancy.

3. Applicability of the Extended Period for Raising the Demand:
The appellant argued that the extended period could not be invoked due to a 2001 Board circular clarifying doubts about the taxability of merger and acquisition services. The Tribunal rejected this argument, noting that the circular was issued in response to a public notice and did not apply to all transactions. The Tribunal also noted that the appellant had not registered under "Management Consultancy Service" and had not sought clarification from the department, indicating a willful intention to evade tax.

4. Nature of Services Provided: Advisory vs. Executor:
The appellant claimed that their services were executor in nature and thus not taxable under "Management Consultancy Service." The Tribunal found that the primary function of the services provided was advisory, with any executor functions being secondary. The Tribunal concluded that the services were indeed advisory and thus taxable under "Management Consultancy Service."

5. Impact of the Introduction of "Banking and Other Financial Services" (BOFS) on 16.07.2001:
The appellant argued that their services should not be taxed under "Management Consultancy Service" before 16.07.2001, as they were specifically included under BOFS from that date. The Tribunal held that the introduction of BOFS did not preclude the services from being classified under "Management Consultancy Service" before 16.07.2001. The Tribunal noted that various service tax entries are not mutually exclusive and that the classification of services must be determined according to the terms of the relevant sub-clauses.

6. Validity of Invoking Extended Period under Section 73 of the Finance Act, 1994:
The Tribunal found that the extended period was correctly invoked, as the appellant had not registered under "Management Consultancy Service" and had not paid the tax. The Tribunal noted that the appellant had willfully suppressed their activities from the department, thereby contravening the provisions of the Service Tax Act and Rules with an intention to evade duty. The Tribunal upheld the penalties under Sections 76, 77, and 78 of the Finance Act, 1994.

Conclusion:
The Tribunal dismissed the appeal, holding that the services provided by the appellant were taxable under "Management Consultancy Service" and that the extended period for raising the demand was correctly invoked. The Tribunal also upheld the penalties imposed on the appellant.

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