9911796707
TMI Blog2015 (12) TMI 222X X X X Extracts X X X X X X X X Extracts X X X X ..... nt or not. - Appeal No. ST/27/12 - - - Dated:- 5-8-2014 - Ashok Jindal, Member (J) and P R Chandrasekharan, Member (T) For the Appellant : Shri M H Patil, Adv. Ms Padmavati Patil Ms Aparna Rao, Advs. For the Respondent :Shri Rakesh Goyal, Addl. Comm (AR) JUDGEMENT Per: Ashok Jindal: The appellant, The Indian Hotels Co. Ltd. (IHCL for short) has filed an appeal against the impugned order for demanding service tax of ₹ 4,85,98,345/- along with interest and various penalties under the Finance Act, 1994 under the category of Management Consultancy Service. 2. The brief facts of the case are that the appellant is running business of hotels in the name of IHCL. M/s. Lokhandwala Hotels Pvt. Ltd. (LHL for short) was running a hotel in the name of 'Regent Hotel' which is situated at Bandra, Mumbai. As the said hotel was incurring losses and there was a huge demand against them of about ₹ 331 Crores from various persons and of about ₹ 95 Crores from ICICI Trustship Services Ltd., the hotel business of 'Regent Hotel' was acquired by the appellants. An agreement was entered between the appellants, LHL and ICICI Trustship Service ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Service Ltd. and LHL. (c) License Agreement entered between Appellants and LHL, whereby both agreed for their mutual benefit, that Appellants would run, develop, conduct, operate, manage, renovate, modernize and expand the hotel and for which Appellants would pay 'License Fees' to LHL as specified percentage of Gross Operating Profit (GOP) as per the schedule. 6. He submits that the fact of Appellants' acquiring the hospitality, business along with the assets from LHL was published in various media like newspaper Business Line , on the Tata group website, on the hotel industry website, etc. In 2002-03, the fact of Appellants' acquiring the hotel business from LHL was reported in the Director's Report of Appellants'. Consequent to that, the name of LHL was changed to Taj Lands End Pvt. Ltd. w.e.f. 19.3.2003. On the same day, the name of the company was further changed from Taj Lands End Pvt. Ltd. to Taj Lands End Ltd. Likewise, the name of the hotel was changed from Regent Hotel to Taj Lands End w.e.f. 10,9.2002. With effect form 1.4.2006, Taj Lands End ltd. merged with Appellant pursuant to Hon'ble Bombay High Court's order dated 9. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... I-Venture From the above, it is clear that LHL continued in the name of Taj Lands End Ltd. D) The instalments, for meeting the sundry creditors taken over by I-Venture, were deposited by the Appellant in the Trust and Retention Account. This Account was established by Taj Lands End Ltd. (formerly known as Lokhandwala Hotels Pvt. Ltd. or LHL) with ICICI Bank, who was appointed to act as trustee for the Debenture holders. Under an arrangement, IHCL was instructed to deposit license fees payable under the License Agreement in this Account, which was to be utilized for payment of Debenture Redemption Installments and interest on Debentures. Any excess amount would be payable back to TLEL provided no amount for interest or redemption of Debentures was due and outstanding. (E) The submissions made hereinafter would further substantiate that the impugned order is neither sustainable on merits nor on limitation, inasmuch as: (i) that 'Regent Hotels' owned by Lokhandwala Hotels Ltd. was acquired by Appellants under Shareholders and Share Acquisition Agreement dated 9.9.2002 and name of hotel was changed from 'Regent Hotel' to 'Taj Lands End'; ii) th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Tax (TDS)-1(2), Mumbai under Section 197(1) of the Customs Act, 1961 dated 9.7.2004. ix) that Services relating to conceptualizing, devising, development, modification, rectification or upgradation of any working system of any organization are covered under the head Management Consultancy Service, based on the following judgments, which is not so in the present case: (a) Basti Sugar Mills Co. Ltd. - 2007 (7) STR 431 (T) (a1) Upheld by SC - 2012 (25) STR J-154(SC) (b) Daurala Organics - 2009 (14) STR 620 (T) (c) Sundaram Finance Ltd. 2007 (7) STR 55 (T) The ratio of the said judgments would squarely cover the present case and further the judgment in the case of Basti Sugar (supra) stands upheld by Hon'ble Supreme Court therefore any view contrary would not be permissible invoking the judicial discipline. x) that the test for coverage under Management Consultant Service is whether advice has been rendered for improving an existing organization by conceptualizing, devising, development, modification, rectification or upgradation as held in the following cases, which is not so in the present case; a) Nirulas Corner House Pvt. Ltd. - 2009 (14) STR 131 (T) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... yable, they cannot be alleged to have suppressed any information or wilfully mis-stated any facts etc; d) that extended period is invocable only when there is positive act other than mere failure on the part of assessee and there must be conscious or deliberate withholding of information by the assessee, based on the following judgments: i) Padmini Products - 1989 (43) ELT 195 (SC) ii) Chemphar Drugs - 1989 (40) ELT 285 (SC) iii) Nestle India - 2009 (235) ELT 577 (SC) e) that when legal interpretation of provisions is capable of two or more different interpretations and if assessee interprets the same to his benefit, it cannot be taken as suppression of facts or mala fides on his part, hence extended period is not invocable, as held in the following cases: i) Lanxess ABS Ltd. - 2010 (259) ELT 551 (T) ii) Neptune Equipments - 2010 (259) ELT 588 (T) f) that the inquiry was started by the Revenue Dept. in the month of March 2005, statements recorded, documents called for and all the required documents, information and statements were given during the investigation period from March 2005 to December 2005 based on which only the impugned show cause notice has bee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a penalty is not imposable at all; (xix) that when issue relates to interpretation of provisions of law, penalty is not imposable. (F) The reliance by Ld. AR on CBEC dated 27.6.2001 is misplaced, as, in that case it has been clarified by CBEC that service rendered in respect of merger and acquisition would be covered under Management Consultancy Service, although those were not one of the specified areas of Management. The issue of taking over and running and operating of an organization was not an issue for consideration before the Board. (G) The judgment of Hon'ble Delhi High Court in Bajaj Travels [2012 (25) STR 417 (Del)] and Kerala High Court judgment in Krishna Poduval [2006 (1) STR 185 (Ker)] relied upon by Ld. AR would not apply in view of specific judgment on the issue by the jurisdictional Bombay High Court in S.R. Enterprises [2008 (9) STR 123 (Bom)] as upheld by Hon'ble Supreme Court [2008 (12) STR J-133 (SC)] and Tribunal judgment in Hutchison Telecom [2006 (1) STR 80 (T)] as upheld by Bombay High Court [2008 (9) STR 455 (Bom)]. After having considered Hon'ble Kerala High Court judgment in Krishna Poduval supra, it has been held by the Hon'ble ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... otel together with the right to use all existing movables, fixed assets and facilities for the purpose of operation of the hotel. (vii) IHCL shall pay and discharge all taxes imposed or payable in law for providing the services during the term of the agreement. 10. As per these clauses, it is submitted that the appellant are having their shares in the profits of the hotel run by them but not sharing the losses incurred by the hotel, and same shall be borne by ICICI Trusteeship Services Ltd. As the appellant are not having their share in the losses of the hotel, therefore they are squarely covered by the definition of 'Management Consultancy Service.' As the activity taken over by the appellant is in connection of the management of hotel, therefore, the appellant are rightly covered under the category of 'Management Consultancy Service'. It is further submitted that as per Section 65(53) of the Finance Act, 1994, Management Consultant means any person who is engaged in providing any service, either directly or indirectly, in connection with the management of any organisation in any manner and includes any person who renders any advice, consultancy or technic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ent hotel as having expertise in the same, the said receipt can be construed as service charges recovered from them by TLEL for providing consultancy with regard to the management of the hotel TLEL. As per the agreement, LHL and IHCL from time to time will hold discussions to formulate strategies to be adopted for increasing the business of LHL to explore potential/strategies areas for business development and IHCL will provide reports and keep LHL informed of the activities carried on by IHCL at the hotel and to invite suggestion from LHL in this regard. This provision does not provide that there was a relationship between LHL and the appellant being in the nature of landlord and tenant. 13. He submits that the case law relied upon by the counsel for the appellant in the matter of Basti Sugar Mills Ltd. (supra) and Nirulas Corner House P. Ltd. (supra) have no relevance to facts of this case as in that case factory was given on lease/rent and actual owner was receiving fixed rent for the said lease/rent irrespective of the fact that tenant or operator was incurring profit or loss. However, in this case, the appellant will share only profit and loss. 14. With regard to the iss ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nsultancy Service or not. 19. As contended by the ld. counsel for the hotel in question for initially names as 'Regent Hotel' was run by LHL. As the said hotel was incurring losses, as there were huge outstanding creditors to the tune of ₹ 331 crores were required to be paid by LHL and ₹ 95 crores were payable to ICICI Trustship Services Ltd., the appellant showed willingness to buy the said hotel. In that scenario, to safeguard the interest of all parties, the appellants entered into three contracts for acquisition of the Hotel namely - a) Shareholders Agreement b) Share Acquisition and Subscription Agreement c) License Agreement In fact all the exercise done by the appellants for acquisition of the hotel in question and not to provide any Management Consultancy Service to LHL. 18. We have to examine the various clauses of the agreement to ascertain the liability of the appellant which are reproduced as under:- 4.1 In consideration of IHCL being allowed to carry on the Operation of the Hotel, IHCL shall, during the Term hereof, pay to LHL, on each payment Date the consideration ( Consideration ) comprising of - License Fees. License Fe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tually agreed between the unsecured lenders and LHL, which shall not in any event exceed 11.75% per annum. 4.2 Payment of Consideration a) The Consideration under the 1 st instalment shall be paid by IHCL to LHL on a date exactly six months from the Appointed Date. All subsequent instalments (till the 30 th Instalment) shall be paid on dates, which fall exactly six months after the payment of the immediately preceding instalment. All the aforesaid dates on which the instalments are to be paid are hereinafter referred to as Payment Dates . b) In case IHCL fails to deposit the Consideration and Additional Amount if any, on any Payment Date, IHCL shall, without prejudice to any other rights of LHL; pay for the period of delay on the Consideration at 3% over the long term prime lending rate of the State Bank of India applicable as on the relevant Payment Date. 4.3 In consideration of IHCL carrying on the Operations of the Hotel, IHCL entitled to receive and appropriate the Net Sales amount. 4.4 The Consideration and any Additional Amount shall be deposited by IHCL in the Trust Retention Account to be opened by LHL with ICICI Bank in accordance with the terms of the Tr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ut of funds, not forming a part of the Sale of Asset A/c' shall be the property of IHCL and the same would not be charged in favour of the Secured Lenders. IHCL Assets shall mean and include, but not be limited to civil, carpentry, mill work, furniture, fixtures, mechanical and electrical equipment. At the expiry of the period of the Agreement or its sooner termination, IHCL shall have the right to take away all IHCL Assets. Provided, however, that before removing such assets, IHCL shall offer to sell the same to LHL for purchase at a fair price to be mutually agreed upon and failing such mutual agreement with in 90 days from the date of such offer made by IHCL, LHL shall buy over such assets at a value arrived at in respect of the IHCL Assets pursuant to a valuation undertaken by professional valuers jointly agreed between the Parties. 6. STORES AND SUPPLIES 6.1 On the Appointed Date, IHCL shall take over by way of delivery, from LHL all the Household Supplies and Operating Supplies ( Stores Supplies ) except for circulating and logo supplies at a mutually agreed consideration. In the event any of the Stores Supplies that have been paid for and taken over by IHCL is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , at its cost, to carry on Such work as may be necessary to add to, renovate and/or to alter and/or repair and/or modernize and/or upgrade and/or construct, the Hotel as IHCL deems fit. However, IHCL shall obtain prior written approval of LHL for any major structural alterations or additions to the Hotel, which approval shall not be unreasonably withheld. Further all such work shall be carried out after obtaining necessary statutory permissions and shall be in compliance with all the applicable laws and regulations and shall not in any manner adversely affect the safety or business of the Hotel. IHCL shall obtain all requisite approvals of local and/or development authorities and such other persons concerned if required to enable IHCL to carry out the said renovation and repair work. If any additional permissions/approvals are required, IHCL and LHL shall jointly apply for the same or IHCL alone will apply for and obtain them. LHL confirms that it will do everything necessary to assist IHCL to obtain such permissions/approvals. 10.2 LHL confirms that all the assets whether moveable or immoveable created by IHCL as a result of the expansion shall at all times belong to and be own ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... every renewal of the insurance policy. It is agreed that all claims in relation to loss of assets covered by insurance shall be enforce by the Secured Lenders pursuant to the charge created thereon in their favour. The Secured Lenders shall be entitled to appropriate the outstanding loan amounts from such insurance proceeds. Separately, IHCL agrees that it shall at its cost and in its name obtain insurance policies pertaining to the moveable and immoveable assets created by IHCL under this Agreement. It is agreed that IHCL shall be the sole beneficiary under these policies. IHCL shall ensure that all the buildings and/or structures of the Hotel together with LHL's Assets and IHCL is Assets used for the purpose of the business of the Hotel are fully insured from time to time at its own cost and expenses against all the risks of fire and extended cover thereof, earthquake, flood, cyclone strikes, riots, insurgency, civil strife/commotion, terrorism, electrical fire, machinery/equipment breakdown. The Secured Lenders may at their opinion allow IHCL to utilise such proceeds from insurance obtained in respect of LHL Assets towards the replacement of the loss assets or rest ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r LHL. Save as provided herein, if any permissions are required to be obtained from any government / municipal authority, the same shall be obtained by IHCL. ......... ......... l) IHCL shall have, as provided for in this Agreement, full right and absolute authority to use, occupy, run, develop, conduct, operate, manage and/or to renovate, modernize and expand the Hotel in furtherance of this Agreement and for this purpose do all acts and deeds and advertise and promote the Hotel in any manner it may think fit without any interference of whatever nature so long as IHCL does not commit any act which would in any way adversely affect the interest of LHL during the term of this Ageement. 16.1 IHCL agrees, undertakes and declares that: a) It shall during the Term of this Agreement pay and discharge all Operating Expenses b) It shall use, occupy, run, operate, conduct, manage and maintain at its cost the Hotel in accordance with acceptable quality standards and make available to the Hotel professional expertise and Hotel related technology as may be required in the opinion of IHLC for a Hotel of this standard and reputation. c) ...... d) It shall pay and discharg ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... wever, the consideration for such sale shall not be less than the value determined by such independent valuer and LHL shall furnish to IHCL a true copy of the sale deed and a declaration from such purchaser that this Agreement shall be binding on the purchaser in all respects as if the name of the purchaser was substituted for LHL herein. Any right to exercise the option under this Section shall be exercised with the prior written consent of the Secured Lenders. 20. We find that in this case the object of the agreement is that the appellant are in the process of acquisition of hotel in question by raising funds and payments towards the owners of the hotel by way of the agreement in question. In these circumstances, appellants are managing the hotel by doing all the activities and by issuing the invoices in their own name i.e. The Indian Hotels Co. Ltd. 21. The ld. AR has submitted that the appellant are having their share in the profit of the hotel run by them, but are not sharing the losses incurred by the hotel. Therefore, it cannot be termed as licence fee or rent and he has also submitted that no prudent business entity shall offer such huge property or running commercia ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the agreement itself. We may therefore, reproduce the relevant clauses of the agreement :- 1. The party of the First Part hereby entrusts the operation of the Factory to Party of Second Part for its functioning at optimum efficiency under the overall supervision of Dr. K.R. Narang and Dr. S.K. Garg who will constitute for the purpose of day-to-day operation of the Factory, a management committee to achieve the desired results. 2. To run the Factory continuously and to achieve optimum efficiency for the full sugar season, the Party of the Second Party will identify, recruit and appoint capable and efficient, technical, administrative and financial staff, wherever required, in consultation with the Party of the First Part. 3. The staff recruited and appointed as referred in para 2 of this agreement shall be on the pay rolls of the Factory and shall be paid remuneration as employees of the Party of the First Part. 4. That the workmen and staff already employed in the Factory and the new staff appointed by the Party of the Second Part will continue to remain the employees of the Party of the First Part. 5. That both Parties have agreed that nothing contained in this ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of funds for any other purpose shall take place. 14. That the Party of the Second Part will not provide any security/guarantee for any loan/financial assistance from Banks/FI's. This obligation will remain with the Party of the First Part. 15. That the Party of the Second Part has agreed to make thorough study about technical, financial and administrative aspects of the Factory and if required take up the restructuring wherever necessary, in consultation with the Party of the First Part. 16. Both the Parties have agreed that after first year of successful operation and after obtaining necessary approvals of government authorities, financial institutions, banks, etc., wherever required, the capacity of the plant shall be expanded to 5000 TCD for which arrangement/tie-up with FI's and SDF will be responsibility of the Party of the Second Part. The scheme of expansion will be finalized and carried out under the supervision of the Party of the First Part. A scheme for better utilization of the by-products will be worked out and implemented under the new agreement to be entered separately on mutually agreed terms. 17. In consideration of technical and financial servi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... red by limitation as same has not been issued during the normal period of limitation. Therefore, the appellants succeed on limitation also. 26. In the result, the impugned order is set aside; appeal is allowed with consequential relief, if any. (Pronounced in Court on .............) Per: P R Chandrasekharan: 27. I have carefully gone through the order recorded by the learned Member (Judicial). However, I am unable to agree with the findings given therein. Therefore, I am recording a separate order. 28. The question for consideration is whether the services rendered by the appellant M/s. IHCL to M/s. LHL merits classification under 'Management Consultancy Services', and if so, liable to be taxed accordingly. The only agreement relevant for deciding this issue is the Licence Agreement entered into between LHL and IHCL dated 09/09/2002. In terms of the said agreement IHCL was required to run, develop, conduct, operate, manage, renovate and modernize and expand the hotel belonging to M/s. LHL. In terms of the said agreement IHCL was required to undertake the following operations: 16. IHCL'S CONVENANTS 16.1 IHCL agrees, undertakes and declares that: ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nsible to secure from time to time all necessary permissions, licenses or permits as may be required from the authorities concerned in order to carry on the Hotel business to the acceptable, standards in the Hotel. LHL shall render such assistance as may be required by IHCL to Obtain and keep in force or renew such licenses, permits or permissions. m) It shall pay sales tax, excise customs, octroi and other duties, dues, levies and other statutory liabilities relating to the Hotel and its operation imposed during the Term and discharge the same provided they pertain to the period after the Appointed Date. n) It shall pay provident fund contribution, ESIS contribution, gratuity, and tax deducted at source, and other duties, dues, levies and other statutory liabilities payable in respect of staff on the employment rolls of LHL on and from the Appointed Date. o) It shall exercise the powers granted under the power of attorney in the best interests of LHL. p) Whatever permissions and/or approvals required to be obtained for the purpose of implementing the terms of this Agreement will be duly obtained from time to time by it. IHCL shall take the assistance of LHL, if so requ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the agreement, it has been specifically provided that the agreement shall not be construed as a lease or rental and the premises were handed over to the appellant only for maintaining and running the hotel in terms of the agreement. When the contract specifically provides that it shall not be construed as an agreement to lease, hire or rent, this contention of the appellant also falls flat. The concerned clause specifically reads as follows: nothing contained in the agreement shall be construed as establishing or creating a relationship of employment, partnership, agency, lease, tenancy, sharing of profits or joint venture between the Parties hereto and nothing contained herein shall be construed as a sale, lease, transfer or disposal of the whole or substantial the whole of the undertaking of LHL and/or creating any interest in the immovable property in favour of IHCL. Therefore, the argument that the property was leased to IHCL, who were running the hotel is clearly unsustainable. 28.4. To understand the transaction better, the appellant was asked to furnish a copy of the agreement entered into with other parties where they were discharging service tax liability un ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e dispossessing or other proper cause of the termination of the rights of concessionaires and holders of privileges including shops for similar proper cause; (j) Maintenance of all books of control and accounts to be kept in accordance with the uniform system of accounts and requirements of law, (k) the granting and limiting of the credit of patrons of the Hotel in consultation with the Company; (l) Generally negotiating and executing of contracts necessary or desirable in connection with the operation of the Hotel in the usual course of business, (m) The purchasing of such inventories, provisions, supplies and equipment as the Consultants and Advisors may deem reasonably necessary in order to maintain and operate the Hotel property; (n) In consultation with the Company, taking of any action at law or in enquiry in the name of the Company which the Consultants and Advisors or in the name of the Company which the Consultants and Advisors shall deem necessary and proper in connection with the operation of the Hotel; (o) The making of such reasonable repairs, alterations and decorations to the Hotel as the Consultants and Advisors may deem reasonably necessary for th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt in both the cases are more or less identical. Therefore, I do not understand how in respect of one agreement, the appellant could consider it as 'management consultancy service' whereas in respect of more or less identical activities carried out in terms of another agreement, the transaction ceases to be a 'management consultancy service'. 28.5. I have also perused another agreement entered into by the appellant with Oriental Hotels Ltd. wherein also the appellant was discharging service tax liability under the category of 'management consultancy services'. The activities rendered in respect of the said agreement were also similar to those obtaining in the agreement with the Piem Hotels Ltd. and in the agreement with LHL. 28.6. It is also worthwhile to note that all the employees of LHL were used by IHCL for running of the hotel and they continued to be employees of LHL during the course of the agreement. Even new staffs who were recruited, were also employees of LHL. This provision in the agreement also makes it abundantly clear that IHCL was not undertaking activities on their own account but were rendering the services to LHL by operating/managin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt aspects. Service tax can be levied on the activity under the taxable service category of 'renting of immovable property'. The income generated from the property can be assessed to income tax for the reasoning of earning income from the property. Property tax would also be leviable for the enjoyment of the ownership of the property. All these different taxes can be levied as a percentage of the rental charged by the lessor of the property. The very same rental income can form the basis for levy of service tax, income tax and property tax. Therefore, the measure/quantum of the consideration received does not determine the nature of the tax. The nature of the tax is solely based on the activity rendered and whether the same falls within the taxable category or not? Therefore, the argument that, since the payment of consideration has been made to the appellant by way of share in profits or share in the sales income does not alter the nature of the services rendered. Therefore, the argument made in this regard by the appellant is clearly not sustainable in law. 28.8. Let us now see the statutory definitions provided in respect of 'Management Consultancy Services'. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt' and 'in any manner' are expressions of width and amplitude and includes in their scope any service in relation to the management of any organisation. The second part of the definition is the inclusive part which provides for rendering of any advice, consultancy or technical assistance in specific areas of management. 28.11. In the case of Bharat Cooperative Bank (Mumbai) Ltd. v. Coop. Bank Employees Union AIR 2007 SC 2320, the Apex Court observed as follows:- .............., when the word includes is used in the definition the legislature does not intend to restrict the definition; makes the definition enumerative but not exhaustive: That is to say, the term defined will retain its ordinary meaning but its scope would be extended to bring within it matters, which in its ordinary meaning may or may not comprise. Therefore, the use of the word means followed by the word includes in Section 2(bb) of the ID Act is clearly indicative of the legislative intent to make the definition........ In the case of V.F. G. Insurance Co. v. M/s. Fraser Ross, AIR 1960 SC 971, the Apex Court observed that when the expression means is used, generally the definiti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s are clearly in the nature of services in connection with the management of an organisation as merger and acquisition themselves are important dimension of modern management. 28.13. From the expert opinion given by the Indian Institute of Management, Ahmedabad (which is a premier organization in the country in management education and consultancy), it can be seen that running the affairs of an organisation in an organized, systematic manner is management and to effectively do this, it involves carrying out a host of activities, functions and tasks and at different levels. It would encompass the task such as planning, organizing, staffing, directing, controlling and coordinating and control. In other words, operational functions of an organization would clearly fall within the scope of management and if any service has been rendered in relation to the management of an organisation, either directly or indirectly, the same would fall within the definition of management consultancy service. 28.14. The second part of the definition deals with rendering of advice, consultancy or technical assistance. The scope of the expression 'technical assistance' was considered by thi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ndering of advice, consultancy or technical assistance. From the above decision, it can be clearly seen that the actual operation of an organisation would also fall within the scope of technical assistance . A more or less identical issue arose for consideration by this Tribunal in the case of HSBC Securities and Capital Markers (I) P. Ltd. [2014 (33) STR 530 (Tri. - Mum). In the said case, the appellant therein also undertook executor functions in addition to advisory function. It was contended that the executor functions would not come within the scope of management consultancy service. Negativing the contention, this Tribunal held that such functions also would get covered under the definition of management consultancy service, relying on the opinion given by the Indian Institute of Management, Ahmedabad, cited supra. 28.15. A similar issue came before the hon'ble apex Court in the case of Central Board of Direct Taxes vs. Oberoi Hotels (India) Pvt. Ltd. [1998] 231 ITR 148 (SC). The question for consideration was whether technical services would include managerial services or not? The issue before the apex Court was in the context of an income tax matter. The appellant O ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... .T. 522 (Tri. - LB) had an occasion to examine the scope of the term 'service' and held as follows:- The term service generally means service of any description which is made available to potential user and includes the provision of facilities. Such term has variety of meanings. It may mean any benefit or any act resulting in promoting or serving interest of the recipient. It may be contractual, professional, public, domestic, legal, and statutory etc. How it should be understood and what it means depends in the context in which it has been used in an enactment. An activity in the nature of service, whether provided individually or integrally and solely, separately or combinedly with other activities, has its Identity. Permutation and combination of activities or services do not change character of the activity or service. It may be possible that while an activity in a cluster of activities may be dominant others may not be prominent. But each activity has its identity, existence and independence and play its role. A plain and simple service contract or a composite contract comprising various activities of different nature of services do not make any difference to discer ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e the scope of 'management consultancy service'. The Supreme Court merely said that since the decision in the case of Rolls Royce Indus Power (I) Ltd. was not appealed against and the same had attained finality, the present appeal would not sustain. Therefore, it cannot be said that the hon'ble apex court laid down any ratio in the Basti Sugar Mills case. In the case of Rolls Royce Indus Power (I) Ltd. [2006 (3) STR 292] referred to in the Supreme Court's order, the issue related to an agreement in which operation and maintenance of a power plant was given to the appellant therein and the said agreement did not provide for any advice or consultancy service. The question for consideration was whether the said activity would come within the purview of 'Consulting Engineer's Service' or not? It was held that the appellant therein was undertaking only operation and maintenance of the power plant for which consideration was paid and therefore, the said activity would not come under the purview of 'Consulting Engineer's service'. The Basti Sugar Mills Co. Ltd.'s case (supra) relied upon by the appellant and the Member (Judicial) does not even c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... either by way of clear indication in the ST-3 returns or by way of letters, it cannot be said that the assessee has informed the department of its activities. 28.21 In the present case, there is one more reason. The appellant himself was discharging service tax liability under the category of 'Management Consultancy Service' in respect of almost identical activities performed for other service recipients. Therefore, the appellant clearly knew the scope of the term 'Management Consultancy Services'. However, in respect of the contract entered into with LHL, they deliberately withheld the information to the department by non-declaration. The contracts entered into with M/s. LHL in 2002 was made available to the department only in December 2005 after commencement of the investigation in the matter. Therefore, the time limit for issue of show cause notice starts from December 2005, when the department became aware of the nature of the transaction undertaken by the appellant. The hon'ble apex Court in the case of Commissioner of Central Excise vs. Mehta Co [2011 (264) ELT 481 (SC)] has held that only when the department is informed in writing and the details are ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ance Act, 1994. ii) confirmation of service tax demand invoking the extended period of time in the present case is fully justified. Consequently, demand for interest also would sustain. iii) Imposition of penalties' under Sections 76 and 77 of the Finance Act, 1994 is justified as there is a default/delay in payment of service tax and also violation of the statutory provisions governing service tax. iv) Since the matter relates to classification dispute; penalty under Section 78 is not warranted and accordingly, I set aside the same. Thus, the appeal is partly allowed. DIFFERENCE OF OPINION As both Members have a difference of opinion, therefore, Registry is directed to place the file before the Hon'ble President to refer the matter to the Third Member for deciding the following issues:- a) Whether in the facts and circumstances of the case, the activity of running, operating and managing the entire hotel business of M/s. Taj Lands End Ltd., Bandra under a 'License Agreement', from the date of agreements up to completion of final purchase of the hotel, would be covered under 'Management Consultancy Service' and service tax would be pay ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
