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2023 (3) TMI 802
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....e appellant with requisite technical assistance in the fields of consultancy, advisory, operation and other services, as per the terms contained in the above agreement; it was also clear that the above services were to be provided by the VSL group as such, including M/s. VSLI and all other subsidiary and affiliate companies with whom separate service agreements could be entered into. Thus, an agreement was signed between the appellant and M/s. VSL, Hong Kong for providing assistance in managerial, financial, sales, marketing, controls and audit, taxes, personnel and training and technical services. 3. A Memorandum of Understanding (MOU) dated 01.01.2008 was drawn between the appellant and M/s. VSLI, which appears to be in furtherance to the earlier agreements between the two parties. 4. It appears that there was an audit of accounts of the appellant by the Internal Audit Group of the Service Tax Commissionerate wherein: (i) wrong availment of exemption under Notification No. 18/2002-S.T. dated 16.12.2002 by wrongly classifying the services imported from its group companies and (ii) non-inclusion of TDS in the taxable value of services received from outside India, were noticed....
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....ces respectively. The above services appear to have been classified by the appellant as falling under the category of "Consulting Engineer" services. Thus, the Revenue entertained a doubt that, by claiming the above services as Consulting Engineer Services, which itself was wrong, the appellant had wrongly availed the exemption benefit of Notification No. 18/2002-S.T. ibid. and thus, it was proposed to re-classify the services involved under Management or Business Consultant Services / Architect Services / Supply of Tangible Goods Services and thereby demanding Service Tax of Rs.94,15,417/- (Service Tax + Education Cess + Secondary and Higher Education Cess), for the period from October 2008 to July 2009, as detailed at Annexure-I to the Show Cause Notice. 6.3.2 It is the further case of the Revenue that the appellant had credited the value mentioned in the invoices to the accounts of the AE in their books of account whereas the appellant had paid the Service Tax for the invoices received from the AE only for the amounts credited in the accounts of their AE, which, according to the Revenue, was contrary to the Explanation under Section 67 read with Explanation under Rule 6(1) of....
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....Order-in-Original, is that the exemption envisaged is service-specific and not a general exemption and hence, the services received by the appellant under Consulting Engineer Service was an afterthought, just to avail the benefit of the exemption Notification ibid. He thus concluded that the adjustment of R&D Cess sought by the appellant against the Service Tax liability was without any legal sanctity. 8.3 On the next issue of includability of TDS and the allegation of short payment of Service Tax on TDS component involved in the payment made to the appellant's AE, the Adjudicating Authority has referred to clauses 10(A), 10(C), 10(D) and 10(E) of the agreement dated 03.03.2006 to conclude that in terms of Section 67 of the Act read with Rule 7 of the Valuation Rules, the appellant was required to pay Service Tax on the gross consideration payable to its AE and not on the net amount paid as claimed by the appellant. 8.4 With regard to the invoking of extended period of limitation, the Commissioner has held that there was clear wilful mis-statement in ST-3 return inasmuch as the appellant had declared that it was not claiming any exemption, without further declaring anywhere i....
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.... professional/technical expertise towards architectural/engineering projects undertaken by the appellant. (iii) The payment of R&D Cess was clearly with a reasonable belief that the nature of service was professional / technical only. (iv) Even if the services received were not classifiable under Consulting Engineer Service, still the exemption envisaged under Notification No. 18/2002-S.T. was available, irrespective of the nature of such taxable services. (v) Without prejudice, even if the services are classifiable under Management or Business Consultant Service / Architect Service, both the above services would fall under Rule 6 (5) of the CENVAT Credit Rules (CCR), 2004, as observed by the Adjudicating Authority and therefore, the authority himself has accepted that the issue is revenue neutral. (vi) He relied on the following case-law in this regard: - (a) M/s. The Oberoi Rajvilas & ors. v. Commissioner of Central Excise, Jaipur [2018 (5) TMI 1715 - CESTAT, New Delhi] (b) M/s. Lemon Tree Hotels Pvt. Ltd. v. Commissioner of Service Tax, Chennai [2018 (1) TMI 1215 - CESTAT, Chennai] (c) M/s. Beekay Engineering Corpora....
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....) M/s. Shervani Indus. Syndicate v. Commr. of C.Ex., Cus. & S.T., Allahabad [2009 (14) S.T.R. 486 (Tri. - Del.)] (c) Commr. of C.Ex. & S.T., Raipur v. Shree Nakoda Ispat Ltd. [2019 (22) G.S.T.L. 276 (Tri. - Del.)] 14. We have considered the rival contentions and we have also gone through the various decisions / orders relied upon by the rival parties. 15.1 First we shall consider the definitions of "consulting engineer" and "management or business consultant" in the context of its taxability in terms of Section 65 (105) of the Finance Act, 1994. In addition, we also refer to the Trade Notice No. 53 CE (Service Tax)/97 - C.No. CE-20/41/ST/Trade Notice/97 dated 04.07.1997, Notification No. 18/2002-S.T. dated 16.12.2002, Section 3 of the Research and Development Cess Act, 1986 and C.B.E.C. Circular F. No. 177/2/2001-CX.4 (supra), which are relevant in order to decide the first issue. 15.2.1 "Consulting Engineer" has been defined in Section 65 (31) of the Finance Act, 1994, as under: - "(31) "consulting engineer" means any professionally qualified engineer or any body corporate or any other firm who, either directly or indirectly, renders any advice, consulta....
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....g organisational structure around functions such as marketing, manufacturing, research and development and finance and/or business area such as product groups or geographical markets. Thus management of any organisation involves carrying out a wide variety of clearly defined activities across a number of organisational sub-units in a coherent and coordinated manner. Since the expression "Management" is an inclusive term, 'management consultant' would also be equally encompassing expression and would include any adviser who renders services on any aspect of management. They have further opined that financial advisory services rendered in merger and acquisition transactions are clearly in the nature of services in connection with the management of an organisation as merger and acquisition themselves are important dimension of modern management." 15.4 Trade Notice No. 53 CE (Service Tax)/97 - C.No. CE-20/41/ST/Trade Notice/97 dated 04.07.1997 has clarified the scope of the term "consulting engineer" as having wide amplitude, to include any one or more of the following categories: - "(i) Feasibility study. (ii) Pre-design services/project. (iii) Basic desi....
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....ent to the amount of cess paid on the said transfer of technology under the provisions of Section 3 of the Research and Development Cess Act, 1986 (32 of 1986)." 15.6.2 The same was reiterated by the Board vide Notification No. 14/2012-Service Tax dated 17.03.2012 and further, it came to be rescinded vide Notification No. 34/2012-Service Tax dated 20.06.2012. 16.1 C.B.E.C. Circular F. No. 177/2/2001-CX.4 (supra) refers to the consultation of the Board with the Indian Institute of Management, Ahmedabad before issuing the Circular, through which the Board has clarified the scope of management consultant service and this has been specifically considered at paragraph 6.3 of the impugned order. A perusal of the scope of management consultant service, as clarified by the board, leads to the irresistible conclusion that "Management" is generally understood to mean as activities or services related to running the affairs of an organization/business; which typically involves carrying out a host of activities, functions and tasks and at different levels; including tasks such as planning, organising, staffing, directing, controlling and coordinating; management also involves designing o....
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....or more disciplines of engineering." 17.2 Therefore, a service provider cannot be treated as a consulting engineer, and a service cannot be classified as a consulting engineer's service, unless it is inextricably linked to or, by itself actually is, engineering of whatever discipline. 18. From the evidence on the record, particularly clauses from the agreement dated 03.03.2006 which are extracted in the Show Cause Notice, it is clear that the services rendered extend far beyond engineering to areas like procurement management, purchase negotiations, supplier selection, management information systems, trading and problem source identification, finance, advertising and communication, legal services, insurance, etc. As Krishna Iyer J. put it in CIT v. T. N. Aravinda Reddy [1980] 120 ITR 46 (SC), "The purpose is plain; the symmetry is simple; the language is plain. Why mutilate the meaning by lexical legalism?" To treat legal, advertising, finance and insurance services as being linked to engineering would be to play this game of lexical legalism or, as Krishna Iyer J. put it in the same case, "linguistic distortion." 19. Having so concluded that the services in question do no....
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....terestingly, the issue of revenue neutrality was considered by the Hon'ble Apex Court in M/s. Star Industries v. Commissioner of Customs, (Imports), Raigad - 2015-TIOL-234-SC-CUS. Hon'ble court after considering rival contentions, held as under: "... 35. ....It was submitted by the learned counsel for the assessee that the entire exercise is Revenue neutral because of the reason that the assessee would, in any case, get Cenvat credit of the duty paid. If that is so, this argument in the instant case rather goes against the assessee. Since the assessee is in appeal and if the exercise is Revenue neutral, then there was no need even to file the appeal. Be that as it may, if that is so, it is always open to the assessee to claim such a credit. 36. We, thus, do not find any merit in this appeal and dismiss the same with cost." 21.2 We must also refer to the CESTAT larger Bench order in the case of M/s. Jay Yuhshin Ltd. v. Commissioner of Central Excise, New Delhi [2000 (119) E.L.T. 718 (Tribunal - LB)], wherein it has been categorically held by the Learned 5-Member Bench that the issue of Revenue neutrality being a question of fact, the is to be establ....
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....essee 'grossed up' the TDS, it is understood to mean that the assessee has indeed received only the amount as agreed towards value/consideration and the expenditure towards TDS are met by the assessee. So, when such TDS is not received from the non-resident since it is not towards value/consideration, there is no merit in requiring such assessee to include even the TDS it paid in the value of services, as in the case on hand. There is an argument advanced for the Revenue that as per the terms of agreement, it is for the appellants to bear the TDS and thus it is to be treated as part of the consideration. We are unable to yield to the said contentions since in such agreements where one is a non-resident and such non-resident doesn't have any PE, then it becomes the responsibility of the other party who is an Indian resident, to meet with the TDS obligation arising on account of the agreement in question. Even if such clause is not there in the agreement, still the resident cannot escape the tax liability and hence it becomes incumbent upon it to deduct tax at appropriate rate, at source, before making the payment. We find that the decisions relied upon by the appellant support our a....