2014 (8) TMI 227 - AT - Service Tax

Classification of services provided in the capacity of a firm of Chartered Accountants - Management Consultant Service - Chartered Accountant s Services - Held that - No reason to find representational work exempted from tax under Notification No. 25/2006-S.T. should be classified under Management Consultant Service and taxed - only services in the nature of providing consultancy or advices for improving the Management of a business entity only will be covered by the definition and not executory type of responsibilities of management got done through another agency. - Though the definition at Section 65(65) includes any service in connection with management of any organization, the scope of the definition gets restricted to services in relation to consultancy as is evident from the name given to the service and commercial understanding of the expression Management or Business Consultancy. In the case of services for complying with the laws of the country it has been specifically ruled in the case of Ernest and Young (2012 (7) TMI 667 - CESTAT, NEW DELHI ) that the service cannot be covered by definition at Section 65(65), because such services are executory in nature and not in the nature of consultancy or advice - Decided in favour of assessee.

Summary

Issues:
Service tax liability on fees charged for services rendered for complying with different types of laws and representational services under Management Consultant Service.

Analysis:
The appellants, a firm of Chartered Accountants, were providing services related to tax compliance, representation before government authorities, etc. They were registered for service tax under Chartered Accountant's Services but not paying service tax on fees for compliance-related work and representational services. A Show Cause Notice was issued, demanding service tax for the period 1-4-2007 to 31-3-2008. After adjudication, a demand of Rs. 39,30,039/- was confirmed against the appellant along with interest and penalty.

The appellant contended that compliance-related work should not be covered under Management Consultant Service as per the definition in the Finance Act, 1994. They cited letters from the Director General of Service Tax and a Tribunal decision in a similar case. The appellant also argued that a significant part of the demand was for representational work classifiable under Chartered Accountant's Service and exempted under a specific notification.

The Revenue argued that tax compliance work falls under Management Consultancy Service as it involves advice and consultancy related to management. They asserted that any service connected with management would be covered under the relevant section of the Finance Act, 1994.

The Tribunal observed that representational work exempted under a specific notification should not be classified under Management Consultant Service for taxation. They emphasized that the definition of Management Consultancy Service covers consultancy or advice for improving management, not executory responsibilities done through another agency. The Tribunal also noted that services for complying with laws of the country are not covered under the Management Consultant Service definition as they are executory, not advisory in nature.

Consequently, the Tribunal set aside the order except for the uncontested demand of Rs. 3,53,832/- and interest. They found the short-payment to be due to clerical errors and decided not to impose any penalty. The appeal was allowed on the mentioned terms.