2022 (8) TMI 541 - AT - Service Tax

Refund of service tax paid - tax paid under the head Management Consultant s Service on reverse charge mechanism - applicability of Board s Circular No. 1/1/2001-S.T., dated June 27, 2001 - HELD THAT - In the present case, the contract between the Appellant and M/s. Cotunace for mediation services to settle outstanding dues payable by the Appellant to its supplier, GCT, was in pursuance to the Order of the BIFR. In terms of such Order, M/s Cotunace was to arrive at a settlement such that the pending disputes between the Appellant and GCT are resolved and arbitration between the parties is precluded. The work of the consultant is to advise the top management in order to help them in running the organisation in more efficient and effective manner after studying the peculiar features of the existing organisation. Thus, the work of the consultant falls in the realm of thinking and giving ideas and not executing the work or performing the task himself. In the instant case M/s Cotunace have only mediated between the organisations in settling the financial dispute. As submitted by the learned Chartered Accountant for the appellant the role of M/s Cotunace was to arrive at a settlement of the pending dispute between the appellant and GCT. M/s Cotunace have not rendered any advice for running the organisation of the appellants in an effective manner. Their role was mediation /arbitration in resolving the dispute. They have only performed the work of mediator/arbitrator in resolving the dispute between the appellant and M/s GCT. Actual work performed cannot be equated with advice. Therefore, M/s Cotunace did not render any management consultancy service to the appellant. The services rendered by M/s Cotunace do not fall under management consultancy service in terms of Section 65 (65) of Finance Act, 1994 - the appellants are not liable to pay any service tax on reverse mechanism on the services rendered by M/s Contunace to the appellants. Any tax paid this regards is liable to be refunded, if otherwise in order. Appeal allowed - decided in favor of appellant.

Summary

Issues Involved:
1. Taxability of mediation services under the category of "Management Consultant's Service."
2. Eligibility for refund of service tax paid under protest.

Issue-wise Detailed Analysis:

1. Taxability of Mediation Services:

Argument by Appellant:
The appellants argued that the fees paid to M/s Cotunace for mediation services did not qualify as "Management Consultant's Service" under the Finance Act, 1994. They contended that the term "management" involves activities such as controlling, guiding, administering, or directing the affairs of an organization, which was not the case here. The mediation services provided by M/s Cotunace were purely for resolving disputes and not for advising or consulting on the management of the appellant's business.

Supporting Judgments and Definitions:
- The term "management" as defined by the Hon'ble Apex Court in R. Dalmia Vs CIT includes "the act of managing by direction, or regulation, or administration or control or superintendence."
- CBEC Circular No. 1/1/2001-S.T. states that "management" involves planning, organizing, staffing, directing, controlling, and coordinating various organizational functions.
- Black's Law Dictionary defines "mediation" as a non-binding dispute resolution method involving a neutral third party.
- The Mediation Training Manual of India describes mediation as an assisted negotiation process aimed at finding mutually acceptable solutions.

Appellant's Position:
The appellant emphasized that M/s Cotunace's role was to mediate and settle outstanding dues with GCT, which did not involve any advisory or consultancy services related to the management of the appellant's organization. They cited several case laws, including Basti Sugar Mills Co. Ltd. Vs. CCE and Swaraj Mazda Ltd. Vs. CCE, to support their claim that mediation services do not fall under the category of management consultancy services.

Department's Argument:
The Department argued that the definition of "Management Consultants" is broad and includes any service provided in connection with the management of an organization. They relied on the Tribunal's decision in S. Gurumurthy Vs. Commissioner of Central Excise and Service Tax, Chennai III, which supported their view.

Tribunal's Findings:
- The Tribunal reviewed the definitions and case laws and concluded that the term "management consultant" involves advisory services and not the physical execution of work.
- They noted that M/s Cotunace acted as a mediator to resolve a financial dispute, which is not equivalent to providing management consultancy services.
- The Tribunal referenced the case of Ghodawat Energy Pvt. Ltd., which held that mediation or arbitration does not fall under management consultancy services.
- They also cited the case of Basti Sugar Mills Co. Ltd., where it was held that mediation does not constitute management consultancy services.

Conclusion:
The Tribunal concluded that M/s Cotunace did not render any management consultancy services to the appellant. Their role was limited to mediation, which does not fall under the category of management consultancy services as defined in Section 65(65) of the Finance Act, 1994.

2. Eligibility for Refund:

Appellant's Argument:
The appellants claimed that since the mediation services provided by M/s Cotunace do not qualify as management consultancy services, the service tax paid under protest should be refunded.

Tribunal's Findings:
- The Tribunal found that the services rendered by M/s Cotunace do not fall under the category of management consultancy services.
- They held that the appellants are not liable to pay any service tax on reverse charge mechanism for the services rendered by M/s Cotunace.
- Consequently, any tax paid in this regard is liable to be refunded.

Conclusion:
The Tribunal allowed the appeal and directed that the service tax paid by the appellants under protest should be refunded.

Final Order:
The appeal was allowed, and the service tax paid under protest was ordered to be refunded to the appellants.

Pronouncement:
The judgment was pronounced in the open Court on 11.08.2022.