AI Drafter 
TaxTMI 
TaxTMI 
2017 (12) TMI 1653
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....leged was in respect of six half yearly returns for the periods ending March 1999, September 1999, March 2000, September 2000, March 2001 and September 2001. A demand was made for interest and penalty. 3 Generally, before commencing assignment, the appellant has a written understanding with its clients specifying the nature of services and the consultancy fees for the same. Agreement typically narrates the nature of expenses that may be incurred incidental or ancillary to providing consultancy services that would be claimed as reimbursement from the clients. According to the case of the appellant, such agreements do not necessarily give an extensive list of all expenses which are required to be reimbursed by the clients. The expenses are in the nature of the expenses incurred on travel, lodging and boarding, courier, stationery, telephone and other communications. These expenses are referred as Out of Pocket Expenses (OPE). According to the case of the revenue, the appellant could not provide satisfactory explanation and supportive documents for OPE of an amount of Rs. 35,68,38,421/out of total sum of Rs. 40,82,55,661/for the period between October 1998 to March 2003. Accordingl....
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....lowing issues were considered by the CESTAT: (1) Disallowance of abatement of traveling, lodging and boarding expenses on account of insufficient documentary evidence. (2) Liability to pay service tax on miscellaneous expenses incurred on items other than traveling, lodging, boarding and described an infrastructural and establishment expenses. (3) Liability to service tax in respect of payments received in foreign exchange (4) Liability to service tax on expenses incurred in procuring core document and borrowing other services from Head Office and other McKinsey entities for which no recovery was made from clients and service tax has been charged as agent of the principal. (5) Liability to service tax on expenses incurred on core documents and borrowed service charges of which recovery was made from the client. (6) Limitation. 9 As far as first issue relating to travel, lodging and boarding expenses to the extent of Rs. 35,68,38,421/is concerned, CESTAT passed an order of remand. Even on the second issue concerning miscellaneous expenses incurred on items other than traveling,lodging,boarding described as infrastructural and ....
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....he expenses incurred on core documents and borrowed service charges for which recovery was made only by the appellant from the clients. The learned senior counsel submitted that irrespective of the normal location of the service providers or service receivers, levy of service tax can be made when the service is rendered in India, the even if the service providers do not have offices in India. He, therefore, submitted that if the service is rendered outside India, provisions relating to levy of service tax are not applicable. Relying upon the circular dated 8th October 2001 issued by the Central Board of Excise and Customs, he would urge that the services provided beyond the territorial limit of India are not liable to service tax. He submitted that this legal position arises as the legislature is not competent to make extra territorial law. He placed reliance on the decision of the Apex Court in the case of Popatlal Shah Vs. State of Madras 1953 Vol.IV STC 188. He submitted that in the case in hand, foreign entities have rendered valid services/market research services outside India and hence, no service tax is payable in respect of services rendered. He pointed out the alternative....
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....lysis which could be used in connection with management of any organization and therefore, cannot be levied in the taxable category of management consultancy services. Lastly, he submitted that in view of the aforesaid submissions, even issue of limitation will have to be reconsidered by passing an order of remand. 14 The learned counsel for the respondent supported the impugned Judgment and Order and submitted that the impugned Judgment and Order is based on findings of fact and hence, no interference is called for. 15 We have given careful consideration to the submissions. At the outset, we may note here that in the written submissions, the learned senior counsel has referred to the ground taken in paragraph 2.2.9(c) of the appeal preferred before the CESTAT and contended that the said ground is not taken into consideration. It is not the case of the appellant that the said ground was agitated before the Appellate Tribunal and was not considered. If the case of the appellant is that the ground was agitated but has not referred and considered, the remedy of the appellant is before the Appellate Tribunal. Hence, the said contention does not merit any consideration. 16 Comi....
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....ent for services rendered in connection with the management of any organization in any manner. Thus, the service tax is required to be charged on the gross amount charged by the management consultant to his client. The CESTAT has recorded following finding on this aspect. "...Core documents and other borrowed services are essentially one which form necessary input for providing the management consultancy services. When a client engage Mckinsey at a high premium, he does so because he knows that Mckinsey has branches all over world and therefore it will have the benefit of research undertaken all over the world by it and therefore it cannot be expected of him to pay for the data which has been procured by the appellant from its Head Office and other Mckinsey entities. No material has been produced before us to show that such data is normally supplied by the client and they merely act as an agent of the client for procuring such data/services. The fact that the clients have been charged only Rs. 21,96,35,580/as against Rs. 89,27,55,541/absorbed by the appellant themselves, shows that these charges are massive and that they are normally not provided by the client. If that wou....
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....on to financial management, human resources management, marketing management, production management, logistics management, procurement and management of information technology resources or other similar areas of management of any working system of any organization. As narrated earlier, we are dealing with the expenses incurred on core documents and borrowed service charges for which recovery was made from the client. The claim of the appellant as regards expenses incurred on core documents and borrowed service charges for which no recovery was made from the clients has been already accepted by the Appellate Tribunal under the impugned Judgment. 21 In our view, the Appellate Tribunal rightly applied a test whether the expenses which were normally required to be incurred by the client were incurred by the consultant on the request of the client. If answer to the said question is in the affirmative, then the expenses will become eligible for abatement. As stated earlier, there is a concession by the appellant that the charges recovered towards expenses paid to the head office in respect of the core documents and borrowed service charges can be charged to service tax. It is in this ....
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....ance placed by the appellant on the decision of the House of Lords in the case of Custom and Central Excise Commissioner vs. Plantiflor Limited (supra) has no application. 23 The contention sought to be raised is that the amount recovered from the customers is in the nature of reimbursement of expenditure and not for providing of service. This factual contention is not agitated before the Tribunal as there is no reference to the such contention raised in the impugned Judgment. Therefore, the same cannot be raised in this appeal. 24 On limitation, initially the learned counsel for the revenue had shown inclination to accept the prayer of the appellant for remand. But subsequently, he has supported the impugned Judgment on the said aspect. In paragraph 7 of the impugned Judgment, the CESTAT held thus: "7....We find that the period under dispute is from October 1998 to March 2003. Section 70 was amended in 16.7.2001 and amended section empowered the assessee to assess tax due himself and thereafter to furnish return in the prescribed manner. Section 71 provides that the Superintendent of the Central Excise may on the basis of information contained in the return filed by....