2014 (12) TMI 43 - AT - Service Tax

Appellant wins appeal: Services not taxable as Management Consultancy, export payments exempt. Show cause notice time-barred.

The Tribunal ruled in favor of the appellant on all issues. The services provided were not classified as Management Consultancy Services, payments for ... Chartered accountants Services or Management consultancy Services - Whether the appellant is covered under the category of Management Consultancy Services for the services provided by him - Held that:- The appellant is a practicing Chartered accountant and has been registered with the authorities as such. We find that during the period prior to 1.8.2002, the Chartered Accountant services were liable to be taxed and Notification No. 59/98-ST dtd 16.8.1998 specifically exempted the taxable services provided by the practicing Chartered Accountant or a Company Secretary or a Cost Accountant; services which are rendered to a client other than taxable services which were enumerated in the said Notification. In our considered view, the interpretation put forth by the appellant of the said notification are acceptable, as the services which are in question in this case are not covered under the said Notification 59/98-ST till 1.8.2002. The Tribunal has been holding that only services in the nature of providing consultancy or advices for improving the Management of a business entity only will be covered by the definition and not executory type of responsibilities of management got done through another agency. For example collection of bad debts is a responsibility of a Management. If somebody is engaged for collecting bad debts the person engaged cannot be considered to be providing Management or Business Consultancy Services. Though the definition at Section 65(65) includes any service in connection with management of any organization, the scope of the definition gets restricted to services in relation to consultancy as is evident from the name given to the service and commercial understanding of the expression ‘Management or Business Consultancy’. Impugned orders are unsustainable and liable to set aside and we do so - Following decision of Sridhar & Santhanam [2008 (12) TMI 104 - CESTAT CHENNAI] - Decided in favour of assessee. Export of services - Held that:- Appellant has been taking a consistent plea before the lower authorities that the services rendered by them are in respect of the clients situated abroad are in the form of export of services. The said plea of the appellant was supported by documentary evidence of receipt of the amounts for consideration by the appellant’s bank in freely convertible foreign exchange and credited to the appellant s account in Indian Rupees. One such example which we find is in respect of an amount received by Union Bank of India and credited to the appellants account, was as per the direction of Netwest Bank which indicated a credit of amount in Pounds and converted into Indian Rupee, is sent to account of appellant in Union Bank of India. Services were rendered by the appellant to a person or a client situated abroad, in itself qualifies as export of service and the export of services are not taxable. In our considered view, appellant has made out a strong case in his favour in respect of non payment of service tax on the services which are exported - Decided in favour of assessee. Issues Involved:1. Whether the services provided by the appellant fall under the category of Management Consultancy Services.2. Whether the amounts received by the appellant for export of services are exempt from service tax liability as having been received in convertible foreign exchange.3. Applicability of limitation period for issuing the show cause notice.Issue-Wise Detailed Analysis:1. Classification of Services under Management Consultancy Services:The appellant, a practicing Chartered Accountant firm, was scrutinized for providing services categorized under Management Consultancy Services. The appellant argued that the services rendered, such as Information Memorandum Valuation, Valuation of Business, Review of Housing Loan, Partner Search Assignment, and Syndication of Working Capital, do not fall under Management Consultancy Services as they do not involve advisory or consultancy for improving management but are executory in nature. The Tribunal agreed, citing precedents such as B.S.R. & Co. v. CCE, Gurgaon and Ernst & Young Pvt Ltd v. CST, which clarified that only services providing consultancy or advice for improving management qualify under Management Consultancy Services. The Tribunal concluded that the services in question were not advisory or consultative and thus did not fall under Management Consultancy Services.2. Exemption for Export of Services:The appellant contended that the services provided to clients abroad should be considered as export of services and thus exempt from service tax. The Tribunal noted that the appellant received payments in convertible foreign exchange, which were credited to their account in Indian Rupees. The Tribunal accepted the appellant's argument, supported by documentary evidence such as payment debit advice from Netwest Bank, indicating receipt of foreign currency. The Tribunal held that services rendered to clients abroad qualify as export of services and are not taxable, thus exempting the appellant from service tax liability for these transactions.3. Applicability of Limitation Period:The appellant challenged the show cause notice issued on 20th October 2006, arguing it was time-barred as it was issued 15 months after submitting the required details to the authorities. The Tribunal referred to precedents such as Agro Pack v. CCE, Surat and Shree Ram Multi Tech Ltd v. CCE Ahmedabad, which support the view that when audits have been conducted and authorities are aware of the issues, invoking a larger period for issuing a show cause notice is not justified. The Tribunal found merit in the appellant's argument and concluded that the demand was hit by limitation.Conclusion:The Tribunal set aside the impugned orders, ruling in favor of the appellant on all issues. The services provided did not fall under Management Consultancy Services, the amounts received for export of services were exempt from service tax, and the show cause notice was time-barred. The appeals were allowed, and the orders were pronounced in court on 13/11/2014.