2016 (11) TMI 647 - AT - Service Tax

Demand - services of financing, merger and acquisition - whether taxable under the head of Management Consultancy Services? - time bar - suppression of facts - Held that - the show cause notice was issued on 10/4/2006 invoking extended period. At the time of issuance of show cause notice, unamended provisions of Section 73(a) existed prior to 10/9/2000 was not existing, therefore unamended Section 73(a) is not invokable in the present case. If this is so then the appeal of the Revenue which solely on the basis of this ground does not survive. As per amended provision of Section 73, extended period can be invoked only when there is suppression of facts. In the present case even in the Revenue s appeal there is no charge of suppression of facts and infact respondent informed the department about their service activity of merger and acquisition therefore extended period was not invokable, the Ld. Commissioner(Appeals) has rightly dropped the demand on limitation. As regard the merit of the case, we find that services undisputedly are of financing, merger and acquisition, these services were specifically brought in the definition of banking and financial services w.e.f. 16/7/2001 therefore during the period 1999-2000 these services were not taxable in other heads. Appeal dismissed - decided against Revenue.

Summary

Issues Involved:
Demand of service tax on services of financing, merger, and acquisition under Management Consultancy Services; Applicability of limitation period for demand; Classification of services under Banking and financial services.

Analysis:
1. Demand of Service Tax: The issue in the present case revolved around the demand of service tax on services of financing, merger, and acquisition under the head of Management Consultancy Services. The Ld. Commissioner (Appeals) had dropped the demand citing limitation as the appellant had informed the department about their activity in the year 2000. However, the Revenue challenged this decision, arguing that even without suppression of facts, the demand for an extended period could be made under Section 73(a) of the Finance Act, 1994 as it existed before 10/9/2000. The respondent contended that the services in question fell under Banking and other financial services, which came into effect on 16-7-2001, making them non-taxable during the period from November 1999 to March 2000.

2. Applicability of Limitation Period: The Revenue, represented by Ld. Asst. Commissioner (A.R.), reiterated that the demand was wrongly dropped on the grounds of limitation by the Ld. Commissioner (Appeals). It was argued that even before 10-9-2000, without suppression of facts, a demand could have been issued for a longer period under the provisions of Section 73(a), which was not considered in the decision to drop the demand.

3. Classification of Services: On the other hand, the Respondent's counsel argued that the demand was not sustainable on the services of merger and acquisition as they only became taxable from 16/7/2001 when they were included in the definition of banking and financial services. The Respondent cited the case of M/s. Kotak Mahindra Capital Co Ltd to support this argument. Additionally, it was emphasized that the show cause notice was issued before the amended Section 73 came into effect, which required suppression of facts for a demand beyond one year. The Respondent relied on various judgments to support their position.

4. Judgment: After considering the submissions from both sides and examining the records, the Tribunal found that the show cause notice was issued invoking the extended period when the unamended provisions of Section 73(a) were not in effect. As per the amended provision, the extended period could only be invoked in cases of suppression of facts. Since there was no charge of suppression of facts in the present case and the Respondent had informed the department about their activities, the extended period was not applicable. Furthermore, the services in question were classified under banking and financial services from 16/7/2001, making them non-taxable during the period in question. Based on these findings and settled legal positions, the Tribunal upheld the decision of the Ld. Commissioner (Appeals) to drop the demand on limitation grounds. Consequently, the Revenue's appeal was dismissed, and the cross objection of the Respondent was also disposed of.