Service tax demand fails where management fee entry alone does not prove taxable management consultancy service.

A service tax demand based solely on an accounting entry describing receipts as "Management Fee" was held unsustainable because the department did not reliably establish that management consultancy service had actually been rendered or correctly classified. The assessee's explanation that any activity, if proved, would fall under Business Auxiliary Service introduced from 1 July 2003 was not effectively rebutted. On that evidentiary record, the demand failed and the consequential interest and penalties were also set aside.

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Issues: Whether the amount shown as 'Management Fee' could be treated as consideration for taxable management consultancy service for the material period, and whether the service tax demand, interest and penalties were sustainable.

Analysis: The liability was founded only on the accounting entry describing the receipt as 'Management Fee', without a reliable finding on the actual nature of the activity performed or evidence establishing that management consultancy service had in fact been rendered. The assessee's explanation that the activity, if any, would fall under Business Auxiliary Service introduced only from 1 July 2003 was not effectively rebutted. In the absence of substantiation of the taxable service and its classification under the alleged category, the demand and consequential penalties could not stand.

Conclusion: The service tax demand, interest and penalties were held unsustainable and were set aside in favour of the assessee.

Final Conclusion: The assessee's appeal succeeded and the revenue appeal failed, as the alleged management consultancy levy was not established on the material on record.

Ratio Decidendi: A service tax demand cannot be sustained merely on an accounting description of receipts; the department must establish by reliable evidence the actual taxable service rendered and its correct classification.

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