TaxTMI 
TaxTMI 
2016 (2) TMI 221
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.... fees for mergers and acquisitions, software development project fees, fees on services provided by appellants subsidiary. 2. The facts are that the appellant had provided various types of professional financial services and recovered fees for the same under different heads, that is, Advisory fees, Retainership fees, Advisory fees for Mergers and Acquisitions ( hereinafter referred as M&A), fees for Merchant Banking services ( hereinafter referred as MBS), Management fees earned by appellants subsidiary, fees for underwriting Government securities and some other minor fees. The Departments stand is that all services except Underwriting services and services related to Stockbroker services are covered under Management Consultancy Service. However the appellant's stand is that they were liable to pay service tax only from August-2001 under the category of Banking and Financial services which were brought into the service tax net from 16-07-2001. The period of dispute is April 2000-Dec 2001 for the M&A and MBS services and Jan-Dec 2001 for the other services. The SCN was issued in Oct 2004. 3. The Ld. Counsel Mr Rohan Shah at the outset submits that they have a very strong ca....
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....he levy proposed vide above SCN 17. 19.08.2002 DSPML filed appeal from above Adjudication Order to the Commissioner (Appeals) 18. 31.12.2002 Order of Commissioner Appeals holding the levy as barred by limitation and therefore unsustainable 19. 02.05.2003 Department appealed Commissioner (Appeals) order to CESTAT 20. 23.02.2007 CESTAT dismissed Department's appeal on limitation ground 21. 09.07.2001 TRU to clarify amendments in the forthcoming budget including introduction of Banking and Financial Services (BFS) 22. 16.07.2001 Introduction of Service tax category of BFS Proceedings No. 2 (presently under consideration) 23. 18.07.2002 Audit by Service tax Section of Central Excise Commissionerate 24. 14.11.2002 DSPML's letter submitting quantitative details of fees received 25. 20.10.2004 Show Cause Notice proposing levy of Service tax on several activities undertaken from April, 2000 to Dec, 2001 (1999-2003 for underwriting) 26. 24.12.2004 DSPML's Reply to above Show Cause Notice 27. 10.02.2005 24.02.2005 24.03.2005 29.03.2005 02.01.2007 26.02.2009 02.04.2009 DSPML's additional ....
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....7B within four months from today. Department not to act till Board decides, the Ld.Counsel drew our attention to the Writ Petition filed before the High Court by them in which the prayer was only to, inter alia, not to recover any service tax or insist on procedural compliance for Petitioners activities specified at para 4(iii) of this Petition.. He submits that when the High Court Order is read with the petition, it appears that there was no bar on issue of show cause notice. 3.1 The Ld. Counsel contends that once show cause notice was issued on 17.9.2001 demanding duty of Rs. 31.73 lakhs on activity of advise rendered in relation to M&A for the period 16.10.1998 to 31.3.1999, and all the activities being in the knowledge of the department, the subsequent demand issued on 20.10.2004 for the period April 2000 to December 2001 on several activities undertaken becomes time barred as all the information was already available with the department. He relies on Nizam Sugar Factory Vs. Collector of Central Excise A.P. 2006 (197) ELT 465 (SC). He also places reliance on the judgment of the Tribunal in the case of Steel Cast Ltd. Vs. Commissioner of Central Excise, Bhavnagar 2009 (1....
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.... variance with the facts in the judgements cited. Here we find that, amongst many petitioners who may have represented to the Board in pursuance of the High Court Order 07.11.2000, one petitioner were the appellant. In pursuance to the High Court Order, the CBEC gave a clarification dt. 27.6.2001 stating that the said services are in the nature of Management Consultancy Services. Having received this clarification in pursuance of High Court Orders, the appellant who themselves had approached the High Court cannot turn their back to the High Court directions and now take a stand that the confusion was still prevailing and, therefore, they could not deposit the tax for the period April June 2001. We may even say that this would, in a way, amount to not complying with the spirit of High Courts Order. It is a different matter that the Banking service was introduced from 1.7.2001, which covered under its ambit the various financial services rendered by the appellant. But the question remains why the appellant after pursuing with the High Court which ordered the CBEC to issue a circular which was done, chose not to pay service tax under the category of Management Consultancy Servi....
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....nd it is in that context that the said order was issued to clarify the doubts of such agencies. Appellants have not produced any evidence which indicate that they had such doubt and for they have approached the departmental authorities for clarification about their Service Tax liability on this aspect. In fact, after issue of the clarification 37-B Order, it was the duty of appellant to pay the tax for the past period (at least normal period) or challenge the order. In the present case it was the duty of the appellant to pay the tax for April-June 2001 after receiving Board's clarification dt. 27.6.2001 which was issued on the directions of the Honble High Court of Bombay. 5.2 The judgment in the case of Nizam Sugar Factory was delivered in a different context. The issue there related to the duty on production of impure carbon doixide emerging as a bye-product. A show cause notice was issued for the period February 1978 to September to 1982 on 28.2.1984. Subsequently, another show cause notice was issued covering the years 1982-1983 to 1986-1987 invoking the extended time period. The Honble Apex Court held that once the first show cause notice was issued, the second s....
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.... UOI - 2009 (14) STR 289 (BOM) 3) Commissioner of Central excise versus Sundram finance - 2007 (7) STR 55 (TRI - Chennai) 6.2 On the M&A services he submits that the Commissioner held the demand to be time-barred. On merits he submits that the services are not covered under the management consultancy services and were liable to service tax post introduction of banking and other financial services with effect from 16.07.2001 and from that date the company had paid service tax. According to him the said service deals only with management of an organisation or system of an organisation. If held otherwise, various entries in the service tax law would become otiose, such as services provided by chartered accountants (section 65 (83)), cost accountants (section 65 (84), company secretaries (section 65 (85), etc. Most noteworthy is the fact that the definition of management consultancy service remained the same even after introduction of banking and other financial services. If Commissioner's contention was accepted, then the clauses (iii) and a part of clause (vi) respectively of the taxing entry banking and other financial services will get nugatory. He relies on the judg....
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....rtant is to determine whether the service being provided is covered under the definition of the earlier service. He invites reference to the letter of JS (TRU) dated 28.02.2006 stating that some newly specified services may also contain services which are presently covered under some of the existing services. The scope and coverage of individual services is to be interpreted strictly in accordance with the statutory provisions. He relies on the Principal Bench decision of the Tribunal in the case of Jetlite India Ltd vs CCE New Delhi - 2010 (21) STR 119 and on the case of HSBC Securities and Capital markets (supra). 7.1 Regarding the software development project services, he submits that the Adjudicating authority, while dropping the demand, has not explained why the service is not covered under the Management Consultant Service. Further submits that where an income is booked in the account of the Principals and is not apportioned separately as per shareholding pattern of the subsidiary, it cannot be said that the subsidiary has provided the service. 7.2 Regarding the reliance by the appellant on the case of Glaxo Smith Kline (supra), he submits that the same pertains to prov....
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.... (v) Asset management including portfolio management, all forms of fund management, pension fund management, custodial depository and trust services, but does not include cash management. (vi) Advisory and other auxiliary financial services including investment and portfolio research and advice, advice on mergers and acquisitions and advice on corporate restructuring and strategy; and (vii) Provision and transfer of information and data processing." Section 65A is also reproduced below: 65A. Classification of taxable services - (1) For the purposes of this chapter, classification of taxable services shall be determined according to the terms of the sub-clauses (105) of section 65. (2) When for any reason , a taxable service is prima facie, classifiable under two or more sub-clauses of clause (105) of section 65, classification shall be effected as follows :- (a) the sub-clause which provides the most specific description shall be preferred to sub-clauses providing a more general description. (b) composite services consisting of a combination of different services which cannot be classified in the manner specifi....
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...., the services rendered by the members of the 1st petitioner were not taxable. Creation of new entry is not by way of amending the earlier entry. It is not a carve out of the earlier entry. Therefore, the services rendered by the members of the 1st petitioner cannot be brought to tax under that entry. In our considered view the very term management consultancy refers to a consultancy regarding the affairs of an organization and not to activities of merchant banking which find specific mention in the definition of banking services. Reliance is placed on the Hon'ble Supreme Court judgment in the case of Balaji Enterprises Vs. Collector of Central Excise 1997 (92) ELT 3 (SC) in which it was held that - "11. The legislature recognised that `Waste and Scrap could not be brought to tax as aluminium in crude form. If `Waste and Scrap was already included in Item No. 27(A), there would not have been any need for making the entry (aa). The amendment left sub-item (a) of Item 27 untouched. Moreover, every type of waste and scrap was not made taxable after the amendment made on 1-3-1981. Only the type of waste and scrap mentioned in Explanation III were subjected to duty. Sludge, dro....
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....publish the consolidated financial statement is a statutory requirement on the basis of a listing agreement with SEBI. The Commissioner has rightly held that nowhere it is alleged that the appellant received the said amount. The reliance is placed by Revenue on 96/7/2007-ST dt. 23.8.2007 is incorrect. The circular does not relate to the issue at hand. The circular merely clarifies that sub-contractor of a contractor is essentially a taxable service provider himself. In the present case, the subsidiary is the service provider and therefore tax, if any is payable by the subsidiary. Therefore, we hold that service tax is not payable on this amount. 8.5. Service tax has been confirmed on services performed in relation to software development projects. Revenues appeal says that the adjudicating authority has not discussed how the services are not classifiable under Management Consultancy Services. Whereas we find that revenue has not given any sustainable reason to show that the service is not covered under Consulting Engineer Service. It is seen that vide Notification No.4/99 dt. 28.2.99 the taxable service provided by consulting engineer in relation to computer software was exempt....
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....ting of the service rendered by the service recipient to the others and there must be tangible evidence to establish the same. In case of subsequent entry mere fact of display of logo of the service recipient would lead to presumption about promotion and advertisement of the business of the client. Such a presumption is not available in case of earlier entry. However, we find that in the case of Indian National Shipowners Association, the Honble Mumbai High Court held that the introduction of a new entry would pre-suppose that there was no earlier entry covering the said services. Our views discussed in para 8 above would hold in the case of M & A services also. The whole concept of management consultancy as related in the definition of Management Consultant does not give an impression that specific service such as Mergers and Acquisitions is covered by it. As we have discussed above, the concept of Management Consultancy is clearly consultancy and technical assistance in the running of the affairs of an organization. The definition itself refers to various aspects of the working system of any organization. Whereas Mergers and Acquisitions is a highly technical and restrictive ....
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....with advertisement will be an advertising agency. Any interpretation leading to absurdity has to be avoided. 15. Our above view also gets support from the fact that another head of sale of space or time for advertisement and sponsorship services stands created for the purposes of service tax w.e.f. 1-5-06. However, the taxable services in relation to sponsorship services specifically excluded sponsorship of sport events. As such, we find that a subsequent entry having been enacted covering the activity without any change of the existing entry, has to be interpreted as if the earlier existing entry did not cover the subsequently created entry. If the subsequent entry was covered by the earlier entry, there was no reason or scope to create the present entry especially when the rate of tax in respect of both the entries remains unchanged. Certainly, creation of new entries was not by way of bifurcation of the earlier entry inasmuch as the earlier entry relating to advertisement remains unchanged without any change in the tax rate. As such, the introduction of new tariff entry do imply that the coverage in the new tariff for the purposes of tax was an area not covered by the....