Management consultancy service requires advice only, not operational control; restaurant agreement was treated as a franchise-type arrangement.

A restaurant agreement was analysed to determine whether the appellants were providing management consultancy service or operating under a franchise-type arrangement. The operative distinction was that management consultancy covers advice, consultancy or technical assistance, whereas the agreement showed the appellants exercising operational control, prescribing standards, supervising restaurant operations, deploying staff, and enforcing binding directions. On that basis, the activity was treated as actual management rather than consultancy, and the service tax demand could not be sustained under the management consultancy category.

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Issues: Whether the appellants' activities under the restaurant agreement amounted to management consultancy service liable to service tax, or whether the arrangement was in substance a franchise-type business arrangement.

Analysis: The statutory definition of management consultant contemplates a person engaged in providing advice, consultancy or technical assistance in connection with the management of an organisation. The agreement, however, showed that the appellants were not merely advising on management matters; they were controlling the manner of operation of the restaurant, prescribing standards, supervising preparation and sale of items, deploying their own staff, and enforcing compliance with binding directions. Such an arrangement went beyond advisory consultancy and amounted to actual operational management. The terms of the agreement were also consistent with a franchise model, particularly in view of the representational use of the brand, business concepts, quality control, and payment structure.

Conclusion: The appellants were not rendering management consultancy service and the demand could not be sustained under that category.

Final Conclusion: The appeals succeeded and the service tax demand and penalties were set aside, with the activity treated as falling outside management consultancy service.

Ratio Decidendi: A person who exercises operational control and performs the management function itself does not render management consultancy service, because consultancy is limited to advice, consultancy or technical assistance and does not include binding directions or actual management of the organisation.

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