Custom, Excise & Service Tax Tribunal
Mahindra & Mahindra Contech Ltd vs Mumbai I on 28 March, 2013
IN THE CUSTOMS, EXCISE AND SERVICE TAX APPELLATE TRIBUNAL
WEST ZONAL BENCH AT MUMBAI
APPEAL NO: ST/213/2005
[Arising out of Order-in-Appeal No: BR/65/M-IV/2005 dated 28/04/2005 passed by the Commissioner of Central Excise (Appeals), Mumbai IV.]
For approval and signature:
Honble Shri P.R. Chandrasekharan, Member (Technical)
Honble Shri Anil Choudhary, Member (Judicial)
1.
Whether Press Reporters may be allowed to see the Order for publication as per Rule 27 of the CESTAT (Procedure) Rules, 1982?
:
No
2.
Whether it should be released under Rule 27 of CESTAT (Procedure) Rules, 1982 for publication in any authoritative report or not?
:
Yes
3.
Whether Their Lordships wish to see the fair copy of the Order?
:
Seen
4.
Whether Order is to be circulated to the Departmental authorities?
:
Yes
Mahindra & Mahindra Contech Ltd.
Appellant
Vs
Commissioner of Service Tax
Mumbai I
Respondent
Appearance:
Shri D.B. Shroff, Advocate for the appellant Shri Rakesh Goyal, Addl. Commissioner (AR) for the respondent CORAM:
Honble Shri P.R. Chandrasekharan, Member (Technical) Honble Shri Anil Choudhary, Member (Judicial) Date of hearing: 28/03/2013 Date of decision: 28/03/2013 ORDER NO: ____________________________ Per: P.R. Chandrasekharan:
The appeal arises from Order-in-Appeal No: BR/65/M-IV/2005 dated 28/04/2005 passed by the Commissioner of Central Excise (Appeals), Mumbai IV.
2. The appellant, M/s. Mahindra & Mahindra Contech Ltd., Mumbai was registered with the department under the category of Management Consultancy Services. During the scrutiny of the ST-3 returns filed by the appellant for the 1998-99 to 2001-02 and comparing the same with the balance sheets for the same period, it was noticed that the appellant had collected fees payable for various executives who have been deputed to look after the various assignments given by them and these fees received were not declared in the ST-3 returns and informed to the department. Accordingly, a notice dated 02/06/2003 demanding service tax of ` 93,74,403/- along with interest thereon and also proposing penalties were issued by the department on the consideration received aggregating to ` 18,74,88,082/- during the period 16/10/1998 to 31/01/2002. The appellant submitted that the activity undertaken by them was of deputation of staff and not for rendering any Management Consultancy Service. The notice was adjudicated and the demand was confirmed along with interest thereon apart from imposing penalties. The appellant preferred an appeal before the lower appellate authority, who vide the impugned order dismissed the appeal.
3. The learned counsel for the appellant makes the following submissions:
3.1. The appellant had rendered Management Consultancy Service to their clients during the impugned period on which they had discharged service tax liability.
3.2. In addition to the above, they had also deputed personnel such as Executives, Secretaries, Receptionists, etc. to their group companies. These personnel deputed remained the employees of the appellant and wages/salaries of these personnel were recovered from the group companies. In addition, they also recovered 15% of the wages/salaries as service charges. For recovery of these amounts, they had issued debit notes to the group companies.
3.3. The said service of deputing staff to the group companies came under tax net only w.e.f. 16/06/2005 under the category of Manpower Supply Service and they have been discharging service tax on this activity with effect from the said date. For the period prior to 16/06/2005, the said service was not taxable and hence the question of payment of service tax does not arise.
3.4. He relies on the following decisions of this Tribunal in similar situations, in support of his arguments:
(i) Daurala Organics vs. Commissioner of Central Excise, Meerut, 2009 (14) STR 620;
(ii) Glaxo Smithkline Pharmaceuticals Ltd. vs. Commissioner of Central Excise, Mumbai IV 2005 (188) ELT 171;
(iii) Sterlite Optical Technologies Ltd. vs. Commissioner of Central Excise, Vapi 2009 (13) STR 582;
(iv) Carborandum Universal Ltd. vs. Commissioner of Central Excise, Chennai 2010 (18) STR 473.
4. The learned Additional Commissioner (AR) appearing for the Revenue, on the other hand, contends that the appellant had rendered Management Consultancy Services to their group companies and had also provided staff to undertake various functions of the group companies and, therefore, deputation of staff is related to the rendering of Management Consultancy Services and accordingly the said activity is liable to service tax under the category of Management Consultancy Services
5. We have carefully considered the rival submissions.
5.1. From the debit notes raised by the appellant to their group companies the debit is towards fees payable for various executives who have been deputed to look after various assignments given by you for the period ________. From the nature and description of the service rendered, it is obvious that the charges have been collected on account of deputation of staff. It is also clear that the staff so deputed has to look after various assignments given to them by the group companies and they are not doing any activity assigned by the appellant to them.
5.2. In the case of Glaxo Smithkline Pharmaceuticals Ltd., cited supra, this Tribunal held that the deputation of staff / sharing of staff for undertaking functions would come under the category of Executory services and will not come under the category of Management Consultancy Services or Business Auxiliary Services. In the case of Daurala Organics, an identical issue came up, wherein staff was deputed to group companies who were engaged in day-to-day activities. The appellant-company therein recovered the amounts representing salary and allowances from the group companies and demand was raised by the department proposing to levy service tax under the category of Management Consultant. This Tribunal, after considering the definition of Management Consultant held as follows:
6.2 From a careful reading of the above definition, it is seen that, the "management consultant" is "one who is engaged in providing service.........relating to conceptualizing, devising, development, modification, rectification or upgradation of any working system of any organization". In the present case, the appellants have made available officials and staff (some of them skilled) and they were, admittedly, engaged in conducting day-today activities in the group company to which they were deputed. Learned advocate also submitted that only from 16.06.2005 the services of man power supply was brought into Service Tax net. Their activities can be considered only as that of supplier of manpower which was taxable only from 16.06.2005 whereas, the demand in the present case relates to earlier period. 5.3. Similarly, in the case of Carborandum Universal Ltd., cited supra, an identical issue came up and this Tribunal held that the service of deputation of staff does not come under the category of Management Consultancy Service but falls under Manpower Recruitment or Supply Agency Service. In the Sterlite Optical Technologies Ltd. cited supra, also an identical view was taken.
6. In the light of these decisions we are of the view that the services rendered by the appellant in the case before us does not fall under the category of Management Consultancy Service but comes under the category of Manpower Supply Agency Service which came under tax net effective from 16/06/2005. Since the period involved in the present case is from October, 1998 to January, 2002, much prior to the introduction of levy on Manpower Supply or Recruitment Agency Service the demand raised in the impugned order does not sustain. Accordingly, we allow the appeal.
(Pronounced in Court) (Anil Choudhary) Member (Judicial) (P.R. Chandrasekharan) Member (Technical) */as 7