2016 (3) TMI 576 - AT - Service Tax

Waiver of pre-deposit - Management Consultancy Service - Export of service - Held that - applicant has filed F.I.R.C.s for the demand pertains to export of service and it has neither disputed in the show cause notice nor verified by the Adjudicating Authority. Therefore, the demand covers under the export of service and pre-deposit is allowed to be waived off. Waiver of pre-deposit - Management Consultancy Service - Services provided to foreign service recipient but nor recieved remuneration in foreign convertible exchange - Held that - these services do not qualify under Export of Service Rules as these services have been rendered by the applicant as representational services on behalf of their client by appearing before the various Authorities to defend the service recipient. Therefore, it covers under the Notification No. 25/2006, dated 13.07.2006 and the applicant is not liable to pay service tax. The pre-deposit is waived of.

Summary

Issues:
1. Service tax demand confirmation for Management Consultancy Services.
2. Classification of services provided by the applicant.
3. Applicability of Export of Service Rules, 2005.
4. Exemption under Notification No. 25/2006 dated 13/7/2006.
5. Waiver of pre-deposit.

Issue 1: Service tax demand confirmation for Management Consultancy Services:
The applicant, a firm of Chartered Accountants, faced a service tax demand of Rs. 3,26,35,901/- for the period 01/4/2010 to 31/3/2011 under the category of Management Consultancy Services. The demand was based on agreements with service recipients, alleging the applicant's engagement in Management Consultancy Services, leading to the imposition of service tax, interest, and penalties under the Finance Act, 1994. The applicant contended that a significant portion of the demand related to export of services and advisory services exempt under Notification No. 25/2006. The Adjudicating Authority's order did not consider these contentions, prompting the applicant to seek waiver of pre-deposit.

Issue 2: Classification of services provided by the applicant:
The applicant argued that their services, as Chartered Accountants, were advisory in nature and not liable for service tax. Alternatively, if classified as Management Consultancy Services, they contended that a substantial portion of the demand pertained to services provided to recipients outside India, covered under Export of Service Rules, 2005. The applicant relied on a Tribunal decision to support their position. Regarding another portion of the demand, the applicant claimed exemption under Notification No. 25/2006 for representational services provided in India.

Issue 3: Applicability of Export of Service Rules, 2005:
The applicant asserted that services provided to foreign recipients outside India, with remuneration received in foreign exchange, qualified for exemption under Export of Service Rules, 2005. The Tribunal's decision in a similar case was cited to strengthen this argument.

Issue 4: Exemption under Notification No. 25/2006 dated 13/7/2006:
The applicant sought exemption under Notification No. 25/2006 for services provided as representational services in India on behalf of foreign clients. The Tribunal found prima facie merit in this claim, indicating that the services fell under the purview of the notification, thereby exempting them from service tax liability.

Issue 5: Waiver of pre-deposit:
After considering the arguments and submissions from both parties, the Tribunal concluded that the applicant had made a case for a complete waiver of pre-deposit. The Tribunal waived the requirement of pre-deposit for the entire amount of service tax, interest, and penalties, staying the recovery during the appeal's pendency.

This judgment highlights the meticulous analysis of the nature of services provided by the applicant, the applicability of relevant rules and notifications, and the ultimate decision to grant a waiver of pre-deposit based on the merits of the case.