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of <h1>Joint venture not liable for service tax under Section 66A Finance Act 1994</h1> <h3>Renold Chain India (P) Ltd. Versus Commissioner of C. Ex. & S.T., Trichy</h3> The Tribunal held that the applicant-company, formed as a joint venture, was not liable for service tax under Section 66A of the Finance Act, 1994, for ... - Issues: Service tax liability u/s 66A of the Finance Act, 1994 on consultancy services received before incorporation of the company.Summary:The case involved a company formed as a joint venture between two entities, where one entity appointed consultants for legal research, financial due diligence, and market research before acquiring the business of another entity. The reports from these consultants were positive, leading to the formation of the applicant-company. The revenue contended that the payment made by the applicant-company to the appointing entity was for 'Management or Business Consultancy Services,' thus attracting service tax u/s 66A. A show cause notice was issued, resulting in a confirmed service tax demand against the applicant.The advocate for the applicant argued that the services provided by the consultants were not within the defined category and were availed by the parent company before the decision to acquire the business. The advocate emphasized that the service was rendered by entities in the UK to an entity in the UK, and the expenditure was transferred to the books of the newly formed company for assessing the investment's profitability. It was asserted that as the applicant-company did not exist when the services were rendered, it cannot be considered the recipient of the services, and therefore, the tax liability should not apply.On the other hand, the Revenue argued that the applicant-company was formed due to the services rendered by the consultants to the appointing entity, and since the expenditure was transferred to the applicant-company's books, it implied the applicant was the recipient of the services and liable for service tax u/s 66A.After considering both sides, the Tribunal found merit in the applicant's argument that the services were received before the company's incorporation, and thus, the applicant could not be considered the recipient of the services. Consequently, the demand under Section 66A was deemed not maintainable. The Tribunal granted a waiver of pre-deposit for the admitted appeal and stayed the collection of dues during the appeal's pendency.
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