2009 (12) TMI 184 - AT - Service Tax

Tribunal upholds service tax demands for management consultancy services, waivers penalties

The Tribunal upheld service tax demands of Rs. 4,73,786.80 and Rs. 3,44,130 for the periods in question related to management consultancy services. ... Management or business consultant’s service- The adjudicating authority confirmed the demand of service tax for the relevant periods against the assessee on the ground that the assessee had provided management consultancy services. He had also imposed penalties under section 76, 77, 78 upon the assessee. On appeal, the Commissioner (Appeals) upheld the action of the adjudicating authority. Held that- deputation of staff comes under ‘manpower supply services’ and not under ‘management consultancy services’ was acceptable. Further for such services assessee paying service tax under ‘manpower supply services’ for the subsequent period after the same had been bought under tax net. Accordingly, that part of demand was to be set aside. As regards the balance amounts, the assessee had expressed its willingness to pay these amounts hence the balance amount of tax was tax was to be confirmed. In terms of section 80, the penalty imposed u/s 76, 77 and 78 were to be waived. Issues:Service tax demands for two different periods - October 1998 to March 2000 and April 2000 to September 2001, related to management consultancy services, waiver of penalties imposed.Analysis:The appeals addressed demands totaling Rs. 11,97,041 and Rs. 8,75,064 for the respective periods, concerning the provision of management consultancy services. The appellants contested the demands, arguing that a portion related to deputation of staff, not taxable under management consultancy services. They agreed to pay the balance but requested penalty waivers due to a genuine belief that their activities did not attract service tax. The Department agreed that deputation of staff did not fall under management consultancy services. The Tribunal found Rs. 7,23,254 and Rs. 5,30,934 related to staff deputation, setting aside these demands. The remaining amounts were confirmed for payment by the appellants.The Tribunal waived penalties for staff deputation as it did not constitute management consultancy services. For the remaining tax amounts, penalties were waived under Section 80 of the Finance Act, 1994, considering the pre-existing contracts and the appellants' reasonable cause for non-compliance with the new service tax levy on management consultancy services. Consequently, demands of Rs. 4,73,786.80 and Rs. 3,44,130 were upheld, while penalties were set aside. The appeals were partly allowed, with demands and penalties adjusted accordingly.