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TMI Blog2024 (6) TMI 306X X X X Extracts X X X X X X X X Extracts X X X X ..... rvices as detailed in the brochure and the clarification issued by the Board vide letter F.No. 177/2/2001-CX4, dated 27.06.2001 under Section 37- B Order No.1/1/2001-ST dated 27.06.2001, Commissioenr ahs conclude that the service provided by the appellant are appropriately classifiable under the category of Business and Management Consultant Services. The same issue has been considered by the Chennai Bench in case of M/S. VSL INDIA PRIVATE LIMITED VERSUS COMMISSIONER OF SERVICE TAX, CHENNAI [ 2023 (3) TMI 802 - CESTAT CHENNAI] and it was held that ' Having so concluded that the services in question do not constitute the services of a consulting engineer, the question remains as to whether these services constitute the services of a management or business consultant. We have considered the interpretation placed upon the definition of the term management or business consultant employed in section 65(65) by the Board. From that interpretation, and from the words of the statute, what emerges is that the task of management extends to all those tasks that do not constitute the core business of the enterprise, and which do not fall under other specialisations.' From the brochure o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rected against Order-In- Original No. 18-COMMISSIONER-NOIDA-2013-14, dated -12/11/2013 of the Commissioner Central Excise, Customs and Service tax Noida. By the impugned order following has been held : (i) I confirm the demand of Service tax Rs 7,41, 83,988/-, Edu Cess Rs. 14, 83,680/- and Secondary Higher Edu. Cess Rs. 7,41,839/- total Rs. 7,64,09,507/- ( Rupees Seven Crores Sixty four Lakhs nine thousand five hundred seven only), under section 73(2) of Finance Act,1994, being not paid by M/s Fox Mandal and Little Co. A-9, Sector -9, Noida during the period 2007-08 to 2009-10 Upto August2009 (ii) I confirm demand of interest on the amount of service tax as confirmed above and order to pay the same under the provision of Section 75 of the Finance Act,1994 (iii) I impose a penalty of Rs. 10,000/- (Ten Thousand Only) under section 77(a) (b) of Finance Act, 1994, ibid for their acts of omission and commission as mentioned in the preceding paras. (iv) I also impose a penalty of Rs. 7,64,09,507/-( Rupees Seven Crores Sixty four Lakhs nine thousand five hundred seven only ) under section 78 (1) of Finance Act, 1994 for their various acts of omission and commission as mentioned in the pre ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ent of tax by suppression of vital facts from the department. They never applied for obtaining service tax registration and also refrained from filing ST-3 returns during the above said period. The contraventions have been summarized as follows: (a) Section 66 of Finance Act, 1994, in as much as they failed to pay service tax on taxable services provided by them during the period April'2007 to August2009. (b) Section 68 of the Finance Act, 1994 read with Rule 6 of Service Tax Rules, 1994- They have contravened Rule 6 in as much as they have never made payment of service tax during the period April' 2007 to August 2009. (c) Section 69 of Finance Act, 1994 read with Rule 4 of Service Tax Rules 1994 in as much as they failed to make application for registration during the period April'2007 to August'2009. (d) Section 70 of Finance Act, 1994 read with Rule 7 of Service Tax Rules, 1994 in as much as they have never filed ST-'3 returns to the department during the period April'2007 to August'2009 2.5 The nonpayment of service tax was unearthed by department by causing investigation against them, hence, the provisions of Section 73(1) of Finance Act,1994 for ex ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... zm) of the Finance Act, 1994. The said category was introduced w.e.f. 01.09.2009 and accordingly the appellant sought registration under the said category and started discharging the service tax on the legal services provided w.e.f. 01.09.2009. Since, the levy of service tax on Legal Consultancy Services has introduced from 01.09.2009 therefore, it will have no retrospective effect. As per the said definition of management and business consultant, any service provided by a management or business consultant in relation to management of any business or organization shall be covered under the ambit of this category. From the definition, it is evident that in order to qualify as a Management or Business Consultant/ Management Consultant , a person must provide services which are in relation to management of any business or organization and it also includes any person who is rendering advice, consultancy or technical assistance in relation to:- Financial Management Human Resource Management Marketing Management Other Similar areas of Management without specifying and proving the provision of any service, impugned order confirmed the demand against the appellant on the Gross Value as per ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , acquisition or other forms of financial or organizational restructuring can be classified as Management or Business Consultant Services' defined under section 65(65) of Chapter V of the finance Act,1994. 23. The party's main contention is that being a law firm, the activities of Fox Mandal relate to legal advice and purely concerned with field of law and they have not provided any service in respect of commercial and canonic aspects of activities undertaken by our clients. To examine the party's contention, with respect to the allegation made in notice to show cause, it is essential to consider the activities undertaken b them and to test these with respect to relevant statutory provisions. 24. To consider the activities undertaken by the party, it is essential to party's operational area, as detailed in their broacher (RUD-5A) includes, banking firms and finance, (including project finance, capital markets consider and mutual funds,) initial public offerings, insurance, commercial disputes property law and conveyancing , corporate and commercial law, energy (including coal, oil and gas ), mining , telecommunications, intellectual property partnership, testamentar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ncies on the part of the target company, in complying with the statutory requirements (iv) Documentation - Counsels at FML have extensive experience in structuring and negotiating the relatively complicated documentation involved in M A. We have vast experience in formation of companies private as well a s public and we have formulated and drafted various documents like the Articles of Association, Memorandum of Association Technology Transfer Agreements, Shareholders Agreement, Joint Venture Agreement etc. The firm also provides requisite legal support in negotiating and finalization of the document required to close the deals The firm has a team of experts who negotiate and provide requisite legal support in closure of the transactions, including reviewing and advising on closing documents (v) Permissions and Approvals - FML advise its clients on the requisite approvals and permissions under the prevailing corporate laws and assists the client in processing the same with the concerned bodies viz RBI,FIPB seeking sector specific approvals (vi) Tax Issues - FML's core M A team also includes tax experts to advise the clients on tax planning and other related issues (vii) Post Cl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rvices were brought into the Service tax net with effect from 16.10.1998 vide notification No. 53/98-ST dated 07.10.1998 and the same was rechristened as Management or Business Consultant Services with effect from 01.06.2007. As per section 65(65) of Chapter V of the finance Act, 1994 Management or business consultant means any person who is engaged in providing any service, either directly or indirectly, in connection with the management of any organization or business in any manner and includes any person who renders any advice, consultancy or technical assistance, in relation to financial management, human resources management, marketing management, production management, logistics management, procurement and management of information technology resources or other similar areas of management In terms of Section 65(105) (r), Taxable services means any service provided or to be provided to a client (to any person with effect from 16.052008), by a management or business consultant in connection with the management of any organization or business, in any manner. 29. As above the scope and coverage is very wide. I observe that definition is in two parts, first limb is specific while ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nents or activities These may either be on the buy-side transaction assisting companies to acquire or on the sell-side assisting companies to divest, resulting into merger, acquisition or other forms of organizational restructuring:- (a) Strategic review and establishing strategic rationale for merger or. acquisition; (b) Performing financial and business analysis; (c) Target screening, identification and evaluation; (d) Financial analysis and valuation of target company or merging companies, (e) Carrying out financial and legal due diligence; (f) Detailed analysis of regulatory and tax implications and evaluation of alternative structures; (g) Deal structuring such as merger, friendly acquisition, hostile bid, asset buy-out, de- merger, slump sale etc; (h) Advising as to the means and source of financing transactions and arranging finance, if required; (i) Complying with regulatory requirements such as managing public offer under SEBI's Takeover Regulations; (j) Counseling on bidding strategy and tactics; (k) Establishing negotiating positions and assist in negotiating with the target company management; (l) Coordinating with legal counsel in finalizing the terms of the purcha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... agement; (iii) merger and acquisition are an important aspect of management of any organization today; and (iv) advisory services including financial advisory services, for merger and acquisition clearly fall with in the realm of management consulting. It is also stated by them that even though merger and acquisition is provided by a variety of agencies, known as investment banks/merchant banks, corporate finance/advisory services of commercial banks/financial institutions corporate finance/advisory services division of accounting/audit firms, specialized mergers and acquisition boutiques, strategy/general management consultants having differing organizational or ownership profile, such semantic differences in any way do not obliterate the basic nature of the services that clearly relate to management of an organisation. Accordingly the financial advisors for merger and acquisition would come under the category of 'management consultant for the reasons that the services provided by them are clearly in connection with the management of any organization 36. As above, taking into account all the above points, I am also is of a view that merger, acquisition and other form of restru ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rightly invoked for extended period of limitation and the service tax amount as detailed in para appears to be recoverable from party. I further find that the party suppressed vital information with intent to escaped assessment of service tax and hence to evade payment of service tax. Since they had not paid service tax, they are also liable to pay, interest at appropriate rate, under the provisions of section 75 of Finance Act, 1994 39. In view of the facts narrated above, it appears that M/s FML had suppressed vital information from department during the relevant period and had not applied for registration and not filed service tax returns as required under the provisions of Finance Act, 1994. If the said inquiry had not been initiated by department, non payment of service tax by M/s FML would have gone unnoticed and a huge amount of service tax would have escaped the Govt. exchequer. Thus by omission and failure on the part of M/s FML, they are liable to imposition of penalty under section 78 of Finance Act, 1994. The penalty under section 76,ibid. is not invokable as they had held liable to penalty under section 78,ibid 40. further observe that despite being engaged in providin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... anagement of any organisation or business in any manner and includes any person who renders any advice, consultancy or technical assistance, in relation to financial management, human resources management, marketing management, production management, logistics management, procurement and management of information technology resources or other similar areas of management; 15.3.2 C.B.E.C. Circular F. No. 177/2/2001-CX.4 [Section 37B Order No. 1/1/2001-ST] dated 27.06.2001 has clarified the scope of management consultant service. The relevant portion of the above Circular read as under: - 7. In this regard, the Board had consulted the Indian Institute of Management, Ahmedabad for obtaining an expert opinion on the subject matter. They have opined that the term Management is generally understood to mean running the affair of an organisation in an organised and systematic manner. To be able to do this efficiently and effectively, management typically involves carrying out a host of activities, functions and tasks and at different levels. Thus management encompasses both strategic and operational level functioning and would include tasks such as planning, organising, staffing, directing, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by the Board. From that interpretation, and from the words of the statute, what emerges is that the task of management extends to all those tasks that do not constitute the core business of the enterprise, and which do not fall under other specialisations. It appears to us that while no definition of the term management can be satisfactory, the best way to approach its construction would be negatively, i.e., by elimination. Section 65(65) too is worded widely enough to provide for this and covers financial management, human resources management, marketing management, management of information technology resources and, the crucial residuary limb other similar areas of management. In our opinion, all the services under the agreement we have referred to above will fall under one or the other of these limbs. There is some congruence, for example between financial management in the statutory definition and the financial services being rendered by the foreign entity. Similarly, marketing management brings advertising within its scope. Other services such as insurance and legal services will fall within the residuary limb, especially because these are not purported to be provided directly ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gal Consultancy Service and they are paying the service tax on these services under that category from 01.09.2009 (Legal services became taxable from this date). To examine the claim of the appellant we reproduce below the definition of the said services as per Section 65 (105)(zzzzm) of the Finance Act, 1994. 65(105) taxable service means any service provided or to be provided, - (zzzzm) (i) to any person, by a business entity, in relation to advice, consultancy or assistance in any branch of law, in any manner; (ii) to any business entity, by any person, in relation to representational services before any court, tribunal or authority; (iii) to any business entity, by an arbitral tribunal, in respect of arbitration. Explanation. For the purposes of this item, the expressions arbitration and arbitral tribunal shall have the meanings respectively assigned to them in the Arbitration and Conciliation Act, 1996 (26 of 1996); From perusal of the above definition it is quite evident that the services which are sought to be covered under the said category are essentially in nature services in relation to representation, before the legal authorities or court or the services of arbitral tri ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... antum of service tax payable certain amounts have been excluded as per the show cause notice. However we do not find any submissions made by the appellant before the original authority in regards to the correctness of the exclusions made and also no determination made by the adjudicating authority in this regards. For the redetermination of the amounts which should be subjected to tax under the category of Business and Management Consultants the issue needs to be reconsidered by the original authority for the entire period of demand. 4.8 Appellant have claimed the services provided by them would be considered as the Export of Service as in the most of the case their clients are located abroad and they are receiving the consideration in convertible Foreign Exchange. They have placed reliance on Rule 3 (2) of the Export of Services Rules to buttress their claim. Relevant rule is reproduced as under:- Rule 3: Export of Service (1) (2) The provision of any taxable service specified in Sub-rule (1) shall be treated as export of service when the following conditions are satisfied namely:- (a) such service is provided from India and used outside India, and (b) payment for such service is ..... X X X X Extracts X X X X X X X X Extracts X X X X
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