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TMI Blog2015 (9) TMI 316X X X X Extracts X X X X X X X X Extracts X X X X ..... al aspects and have legal and policy consequences. - It is pertinent to mention that once the RBI is taken in the loop, such transactions will not go unnoticed for the purpose of the relevant data bases of India’s international trade and foreign exchange transactions and will also not remain under the radar of the laws relating thereto. Thus, the impugned payments made by ONGC to the appellants do not merit to be treated as payments received in foreign exchange. - Decided against the assessee. Extended period of limitation - Held that:- For a service provider of this stature, something positive has to be shown to demonstrate that they had made reasonable efforts or had taken reasonable steps to ascertain legal position with regard to taxability of their impugned activities for the purpose of forming their purported reasonable belief. Mere presumption of non-taxability can never be equated to “reasonable belief” in that regard. Thus, the conclusion is inescapable that they deliberately did not take registration and pay the impugned service tax with a view to escaping the liability and when caught, pretended to be having reasonable belief about the non-taxability. Thus invocabilit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... connection with any Work; 7. Assist the Company on the importation and exportation of the drilling rigs in and out of India; 8. Advise the Company concerning commercial problems or issues which may from time to time arise with respect to any Work and, at the request of the Company and within the limitations imposed by the Agreement, use its best efforts to help to resolve favorably any such problems or issues; 9. If requested, assist the Company in preparing and collecting the Company s billings for any Work; 10. Advise the Company as requested on the purchase in India of equipment, supplies, services, dry-docking, repairs etc. that may be required in connection with any Work; 11. Advise the Company on matters of government relations, rulings and requirements, taxation and legal matters and accounting practices that may be reasonably related to any Work, provided that, if the Company requests the assistance from legal or other exports not employed by Enpro on matters concerning any Work, the cos ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ectly, in connection with the management of any organization in any manner and includes any person who renders any advice, consultancy or technical assistance, relating to conceptualizing, devising, development, modification, rectification or upgradation of any working system of any organization. The Taxable Service is defined in Section 65(105)(r) of the Act as under :- any service provided to a client, by management consultant in connection with the management of any organization in any manner . (ii) Management Consultancy is an advisory service while the service rendered by them was in the nature of executionery service. They stressed the difference between the Managerial function and operations as well as the concept of management and referred to certain judgments with regard thereto. They also contended that Management Consultancy Service is different from Business Consultancy Service which was incorporated as a taxable services w.e.f. 1-6-2007 (iii) The Order-in-Original passed by the ld. Commissioner seems to suggest that any advice or consultancy or technical assistance rendered by a service provider in connection with the business of the service ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ourt in the case of J.B. Boda and Co. Pvt. Ltd. v. CBDT - (1997) 223 ITR 271 (S.C.) and Indian Hume Pipe Co. Ltd. v. CBDT - (1987) 165 ITR 537 (Bom.) that such payment is to be regarded as payment received in foreign exchange. (viii) There is no wilful misstatement/suppression of facts on their part and the contraventions, if any, were on account of bona fide belief that they were not liable to pay service tax and that mere non-registration or non-filing of returns does not amount to suppression/wilful misstatement. They referred to several familiar judgments in this regard. (ix) No penalty is imposable in view of the fact that there was no mens rea and issue involved interpretation of Law. They quoted certain judgments in this regard including the one of DCW Ltd. v. Asstt. CCE, 1996 (88) E.L.T. 31 (Mad.). (x) Penalty under sections 76 78 cannot be simultaneously imposed as held in case of Financers v. CCE, Jaipur reported in 2007(8) S.T.R. (Tri. - Del.). 4. The Learned AR contended that the service rendered by the appellants to M/s. Transocean and M/s. Tide Water clearly fell under the category of Management Consultancy Service because the service rendered wa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... are expansionary rather than restrictive. Thus, this definition is wide enough to include advisory services rendered in connection with the management of an organization. The services rendered to M/s. Transocean and M/s. Tidewater as enumerated earlier clearly show that predominantly predominant parts of the said services were advisory (not executionery) and the advices (services) were directly connected with the management of the companies the services were rendered to. The said advices (services) rendered related to conceptualizing, devising, development, modification, rectification or upgradation of the working system of the said companies. Advices on commercial aspects, current developments, import and export policy of India, potential problems and solutions, marketing strategies, alerting them about potential misuse of their IPRs, economic political scenarios etc. were clearly applicable to and useful for the working systems of these companies (M/s. Tidewater M/s. Transocean) and thus clearly fell within the ambit of role of management consultant as defined earlier. Thus the impugned service clearly qualifies for the status of Management Consultancy Services; some of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he definition when the Management Consultant was changed into Management or Business Consultant reveals that the impugned service to M/s. ONGC is not covered under Management or Business Consultancy Service any more than it was covered under Management Consultancy Service where it is/was fully covered. 9. The appellants strenuously argued that the amounts paid by the ONGC to them should be treated as being tantamount to having been received in foreign exchange. This contention is not tenable because ONGC paid the amount in Indian Rupees. Such payments do not reflect in the Govt. records as foreign exchange received in the country nor such payments reflect in the trade statistics of import and export. These are not mere procedural aspects and have legal and policy consequences. For example such payments being in India Rupees within India would not be subject to the rigors of the requirements of various statutes e.g. Foreign Exchange Regulation Act. Similarly, as they are not reflected in international trade statistics or the foreign exchange inflow/outflow data of India, they would not form part of the data analysis for the purpose of various policy formulations. This is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ime operators. There is not a word as to what reasonable steps they took to arrive at their claimed bona fide belief; whether they sought any legal advice or whether they consulted some professional/trade associations or ascertained the industry practice. Admittedly, if the assessee fails to take registration or fails to pay service tax under a bona fide belief that they are not liable to service tax, allegation of suppression/wilful misstatement can t be sustained. But mere uttering of the words bona fide belief does not even make it a belief, leave alone bona fide belief. For example, an individual having an annual income of several lakhs of Rupees, when caught can t get away by simply claiming that he was under bona fide or reasonable belief that he was not liable to pay income tax. Bona fide or reasonable belief has to be an informed belief of a reasonable person. For a service provider of this stature, something positive has to be shown to demonstrate that they had made reasonable efforts or had taken reasonable steps to ascertain legal position with regard to taxability of their impugned activities for the purpose of forming their purported reasonable belief. Mere presumpti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cannot be entertained. 14. It is seen that the adjudicating authority has imposed penalty of ₹ 1 Crore under 78 of Finance Act 1994 while the impugned demand is only ₹ 63,80,119/-. Needless to mention that penalty under Section 78 ibid is equal to amount of service tax short paid/not paid. Further the adjudicating authority has not expressly given the option of payment of 25% of the mandatory equal penalty in case the confirmed service tax demand and interest alongwith (such) 25% of the mandatory equal penalty are paid within 30 days from the date of communication of order. Gujarat High Court in the case of Ratnamani Melals Tubes Ltd. v. CCE, Ahmedabad-II - 2013-TIOL-1124-HC-AHM-CX = 2013 (296) E.L.T. 327 (Guj.) has held as under : at no stage, either in the Order-in-Original or in the order of Commissioner (Appeals), the assessee respondent has been given the benefit of payment of reduced penalty - Court has followed a consistent view that the assessee is required to be given the option by the adjudicating authority where he is asked to pay a duty demand with interest and 25% of penalty within 30 days from the date of adjudication of the order and in such case ..... X X X X Extracts X X X X X X X X Extracts X X X X
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