Held No

DAURALA ORGANICS Versus COMMISSIONER OF CENTRAL EXCISE, MEERUT [2009 -TMI - 33739 - CESTAT NEW DELHI]

Facts of the Case:

The appellant is a manufacturer of chemicals and they have deputed some officials and staff to another group company and the deputed personnel were engaged in day-to-day activities viz. purchase, sale and like activities of the group company. Personnel were continued to be paid by the appellant-company and the appellant-company recovered amounts representing salary and other allowances of personnel deputed to the group company.

The original authority held that, the activities of the appellant in deputing/providing personnel, as above, would come under the category of "management consultant" and confirmed demand of Service Tax and imposed penalties. The Commissioner (Appeals) has upheld the order of the original authority.

Decision of the Tribunal

We find that the facts of the present case are substantially the same and akin to the facts of the case mentioned in Basti Sugar Mills Co. Ltd. v. Commissioner of Central Excise, Allahabad [2007 -TMI - 1549 - CESTAT,NEW DELHI] and Sara Services & Engineers P. Ltd. v. CCE, Meerut [2008 -TMI - 30858 - CESTAT NEW DELHI]. The case of Parasmal Bam v. CCE, Indore [2005 -TMI - 87 - CEGAT, NEW DELHI], relied upon by learned DR, decides an issue that, there is no particular qualification prescribed for a "management consultant" and, therefore, the same is not directly relevant to the present case.

In view of the above, we agree with the submissions of the learned advocate for the appellants and hold that during the relevant period the activities of the appellants do not fall under the category of  "management consultant", and accordingly allow the appeals with consequential relief.

Management consultancy classification: deputation of employees to group company not taxable as management consultancy under service tax rules. Deputation of personnel to an affiliated company where the sending company retains payroll responsibility and the deputed staff perform routine operational tasks (purchase, sale and similar activities) does not constitute management consultancy for service tax classification; the conclusion rests on the functional character of the services and consistency with precedent addressing similar deputation arrangements.