TaxTMI 
TaxTMI 
2024 (6) TMI 306
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....ount of service tax as confirmed above and order to pay the same under the provision of Section 75 of the Finance Act,1994 (iii) I impose a penalty of Rs. 10,000/- (Ten Thousand Only) under section 77(a) & (b) of Finance Act, 1994, ibid for their acts of omission and commission as mentioned in the preceding paras. (iv) I also impose a penalty of Rs. 7,64,09,507/-( Rupees Seven Crores Sixty four Lakhs nine thousand five hundred seven only ) under section 78 (1) of Finance Act, 1994 for their various acts of omission and commission as mentioned in the preceding paras. 2.1 Appellant is renowned Law Firm engaged in providing all kind of legal services in different fields of various laws such as compliance with relevant laws, assistance in filing various returns and forms under various laws etc. to its clients. 2.2 Prior to 01.09.2009, legal services were not subject to Service Tax under Finance Act, 1994. Therefore, the appellant was not registered with the Service Tax Department as its services were not exigible to Service Tax. However, w.e.f. 01.09.2009, a new category of service i.e. "Legal Consultancy Services" was introduced vide which legal services were bought under the am....
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....hey have never made payment of service tax during the period April' 2007 to August 2009. (c) Section 69 of Finance Act, 1994 read with Rule 4 of Service Tax Rules 1994 in as much as they failed to make application for registration during the period April'2007 to August'2009. (d) Section 70 of Finance Act, 1994 read with Rule 7 of Service Tax Rules, 1994 in as much as they have never filed ST-'3 returns to the department during the period April'2007 to August'2009 2.5 The nonpayment of service tax was unearthed by department by causing investigation against them, hence, the provisions of Section 73(1) of Finance Act,1994 for extended period of limitation was invokable and the service tax amount determined is recoverable from party interest at appropriate rate on the said amount of service tax and education cess under the provisions of section 75 of Finance Act, 1994 was also recoverable. 2.6 Appellant for the contraventions have rendered themselves to penal action under section 76 & 78 of Finance Act, 1994. 2.7 A Show Cause dated 19.10.2012 was issued to the appellant asking them to show cause as to why: (i) An amount of Total Rs. 7,64,09,507/- (....
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....s consultant in relation to management of any business or organization shall be covered under the ambit of this category. From the definition, it is evident that in order to qualify as a "Management or Business Consultant/ Management Consultant", a person must provide services which are in relation to management of any business or organization and it also includes any person who is rendering advice, consultancy or technical assistance in relation to:- Financial Management Human Resource Management Marketing Management Other Similar areas of Management without specifying and proving the provision of any service, impugned order confirmed the demand against the appellant on the Gross Value as per P & L A/c. The onus to prove the provision of service while proposing and confirming the demand lies on the Department which they have failed to do. Reliance is placed on the decision of Hon'ble Tribunal, Delhi in the case of M/s. Deltax Enterprises [2017 (12) TMI 966- CESTAT New Delhi]. even if it is considered that the services provided by the appellant are covered under the ambit of "Management Consultancy Services" (though strongly denied) then it shall be considered as ....
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....ivities undertaken by our clients. To examine the party's contention, with respect to the allegation made in notice to show cause, it is essential to consider the activities undertaken b them and to test these with respect to relevant statutory provisions. 24. To consider the activities undertaken by the party, it is essential to party's operational area, as detailed in their broacher (RUD-5A) includes, banking firms and finance, (including project finance, capital markets consider and mutual funds,) initial public offerings, insurance, commercial disputes property law and conveyancing , corporate and commercial law, energy (including coal, oil and gas ), mining , telecommunications, intellectual property partnership, testamentary , air law (including aircraft leasing), shipping taxation, direct and dispute resolution by litigation and arbitration before international and domestic tribunals. 25. Further the prospective activity under taking by them for 'Mergers and Acquisitions' it has been describe that they firm has cast iron experience in Merger & Acquisition "M&A" having worked for major Indian and multinational corporations and is rated as the best by vario....
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....ogy Transfer Agreements, Shareholders Agreement, Joint Venture Agreement etc. The firm also provides requisite legal support in negotiating and finalization of the document required to close the deals The firm has a team of experts who negotiate and provide requisite legal support in closure of the transactions, including reviewing and advising on closing documents (v) Permissions and Approvals - FML advise its clients on the requisite approvals and permissions under the prevailing corporate laws and assists the client in processing the same with the concerned bodies viz RBI,FIPB & seeking sector specific approvals (vi) Tax Issues - FML's core M&A team also includes tax experts to advise the clients on tax planning and other related issues (vii) Post Closing Compliance - We also provides advice with respect to post closing compliance including drafting & filing of the necessary documents before the concerned Registrar of Companies, the FIPB and in case of requirement sending intimations required under the various contracts. (viii) Management Issues - FML has varied experience in advising the clients on the method and extent of investment, methods of acquiring management....
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....y, in connection with the management of any organization or business in any manner and includes any person who renders any advice, consultancy or technical assistance, in relation 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" In terms of Section 65(105) (r), Taxable services means any service provided or to be provided to a client (to any person with effect from 16.052008), by a management or business consultant in connection with the management of any organization or business, in any manner. 29. As above the scope and coverage is very wide. I observe that definition is in two parts, first limb is specific while the second limb is inclusive. The general or first limb follow that no particular qualification is required for Management Consultant". As long as the in providing any service, either directly or indirectly, in connection with the management of any organization or business in any manner etc., they are covered under the said definition and service tax is payable. The service may be provided directly....
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....ening, identification and evaluation; (d) Financial analysis and valuation of target company or merging companies, (e) Carrying out financial and legal due diligence; (f) Detailed analysis of regulatory and tax implications and evaluation of alternative structures; (g) Deal structuring such as merger, friendly acquisition, hostile bid, asset buy-out, de- merger, slump sale etc; (h) Advising as to the means and source of financing transactions and arranging finance, if required; (i) Complying with regulatory requirements such as managing public offer under SEBI's Takeover Regulations; (j) Counseling on bidding strategy and tactics; (k) Establishing negotiating positions and assist in negotiating with the target company management; (l) Coordinating with legal counsel in finalizing the terms of the purchase/acquisition agreement; and (m) Assisting in post-acquisition integration Out of the above services, so far as (a) and (m) are concerned these services are mainly offered by strategy/general management consultants or other consultants specializing in Human resource management. In so far as (b) to (I), these services are offered, either jointly or severally,....
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....ty of agencies, known as investment banks/merchant banks, corporate finance/advisory services of commercial banks/financial institutions corporate finance/advisory services division of accounting/audit firms, specialized mergers and acquisition boutiques, strategy/general management consultants having differing organizational or ownership profile, such semantic differences in any way do not obliterate the basic nature of the services that clearly relate to management of an organisation. Accordingly the financial advisors for merger and acquisition would come under the category of 'management consultant for the reasons that the services provided by them are clearly in connection with the management of any organization 36. As above, taking into account all the above points, I am also is of a view that merger, acquisition and other form of restructuring of business organization have emerged as key element in the modern management and as the term 'management covers the various functions and the multifarious activities required for efficient and effective functioning of an organization, any advisory services rendered in merger and acquisition transaction are also includable un....
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....ey are also liable to pay, interest at appropriate rate, under the provisions of section 75 of Finance Act, 1994 39. In view of the facts narrated above, it appears that M/s FML had suppressed vital information from department during the relevant period and had not applied for registration and not filed service tax returns as required under the provisions of Finance Act, 1994. If the said inquiry had not been initiated by department, non payment of service tax by M/s FML would have gone unnoticed and a huge amount of service tax would have escaped the Govt. exchequer. Thus by omission and failure on the part of M/s FML, they are liable to imposition of penalty under section 78 of Finance Act, 1994. The penalty under section 76,ibid. is not invokable as they had held liable to penalty under section 78,ibid 40. further observe that despite being engaged in providing of taxable services, fail to pay service tax , fail to take registration in accordance with provision of section 69 ibid and Rules their under. Further they also failed to keep , maintain or retain books of account, failed to filed prescribed service tax return as provided under provision of Chapter V of Finance Act19....
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....of information technology resources or other similar areas of management;" 15.3.2 C.B.E.C. Circular F. No. 177/2/2001-CX.4 [Section 37B Order No. 1/1/2001-ST] dated 27.06.2001 has clarified the scope of management consultant service. The relevant portion of the above Circular read as under: - "7. In this regard, the Board had consulted the Indian Institute of Management, Ahmedabad for obtaining an expert opinion on the subject matter. They have opined that the term "Management" is generally understood to mean running the affair of an organisation in an organised and systematic manner. To be able to do this efficiently and effectively, management typically involves carrying out a host of activities, functions and tasks and at different levels. Thus management encompasses both strategic and operational level functioning and would include tasks such as planning, organising, staffing, directing, controlling and coordinating. Management also invariably involves designing 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 organisati....
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....t while no definition of the term "management" can be satisfactory, the best way to approach its construction would be negatively, i.e., by elimination. Section 65(65) too is worded widely enough to provide for this and covers financial management, human resources management, marketing management, management of information technology resources and, the crucial residuary limb "other similar areas of management." In our opinion, all the services under the agreement we have referred to above will fall under one or the other of these limbs. There is some congruence, for example between "financial management" in the statutory definition and the financial services being rendered by the foreign entity. Similarly, marketing management brings advertising within its scope. Other services such as insurance and legal services will fall within the residuary limb, especially because these are not purported to be provided directly or with any professional expertise. It is not as if the foreign enterprise is itself an insurer or a lawyer. It appears that it will only make those services available to the Appellant. 20. In view of our above discussions, we have to agree with the conclusions drawn ....
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....ces as per Section 65 (105)(zzzzm) of the Finance Act, 1994. "65(105) taxable service means any service provided or to be provided, - (zzzzm) (i) to any person, by a business entity, in relation to advice, consultancy or assistance in any branch of law, in any manner; (ii) to any business entity, by any person, in relation to representational services before any court, tribunal or authority; (iii) to any business entity, by an arbitral tribunal, in respect of arbitration. Explanation. - For the purposes of this item, the expressions arbitration and arbitral tribunal shall have the meanings respectively assigned to them in the Arbitration and Conciliation Act, 1996 (26 of 1996);" From perusal of the above definition it is quite evident that the services which are sought to be covered under the said category are essentially in nature services in relation to representation, before the legal authorities or court or the services of arbitral tribunal in respect of arbitration. The services in relation to advice, consultancy or assistance in any branch of law, in any manner, are also covered under this category. Clarifying the scope of the said service following was clarified b....
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....ions made and also no determination made by the adjudicating authority in this regards. For the redetermination of the amounts which should be subjected to tax under the category of Business and Management Consultants the issue needs to be reconsidered by the original authority for the entire period of demand. 4.8 Appellant have claimed the services provided by them would be considered as the Export of Service as in the most of the case their clients are located abroad and they are receiving the consideration in convertible Foreign Exchange. They have placed reliance on Rule 3 (2) of the Export of Services Rules to buttress their claim. Relevant rule is reproduced as under:- "Rule 3: Export of Service" (1).................. (2) The provision of any taxable service specified in Sub-rule (1) shall be treated as export of service when the following conditions are satisfied namely:- (a) such service is provided from India and used outside India, and (b) payment for such service is received by the service provider in convertible Foreign Exchange." We do not find any such claim being made before the original authority. In absence of any such claim being made before the origin....