Custom, Excise & Service Tax Tribunal
Yes vs Represented By : Shri Harish ... on 13 November, 2014
CUSTOMS EXCISE & SERVICE TAX APPELLATE TRIBUNAL, West Zonal Bench, Ahmedabad COURT Appeal No. : ST/183/2007, ST/255/2009 Arising out of : 1. OIA No. 74/2007-STC-RAJU/Commr(A-IV)/Ahd Dated 30/8/2007 2. OIA-82/2009-STC-/LMR/COMMR-A-/AHD Dated 18/03/2009 Passed by : The Commissioner (A), C&ST Ahmedabad For approval and signature : Mr. M.V. Ravindran, Hon.'ble Member (Judicial) Mr. H.K. Thakur, Hon.ble Member (Technical) 1 Whether Press Reporter 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? No 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 Appellant (s) : M/s Deloitte Haskins & Sells Represented by : Shri Harish Bindhumadhavan (Adv.) Respondent (s) : The Commissioner, C&ST, Ahmedabad
Represented by : Shri Anil Gidwani CORAM :
Mr. M.V. Ravindran, Hon.'ble Member (Judicial) Mr. H.K. Thakur, Hon.ble Member (Technical) Date of Hearing : 29/09/2014 Date of Decision : 13/11/2014 ORDER No. A/11938-11939/2014 dtd 13/11/2014 Per : Mr. M.V. Ravindran;
These two appeals are directed against OIA No. 74/2007(STC) RAJU/Commr(A-IV)/Ahd dtd 7.4.2007.
2. The brief facts of the case is that the appellant were engaged in providing various taxable services like practicing chartered accountants Services, Management consultancy Services etc., as defined under Section 65(105) of the Finance Act, 1994. The appellant were holding service tax registration under the category of practicing Chartered Accountant as per provisions of Section 65(83) of Finance Act ,1994 and were paying Service Tax only for providing this service. On scrutiny of the balance sheet and details reflected in Profit and Loss accounts it was noticed that the appellant had collected fees from their clients for rendering the service of Management Consultants Service/Corporate Finance services/solution services under the main head Income for the period 2001-02 to 2003-05 for Rs 1,82,83,448/- which is taxable under the head of Management Consultants Service as per the provisions of Section 65(65) of the Act. The appellant had not obtained service tax registration under the said category and no discharged their service tax liability of Rs 13,30,250/- for providing such taxable service. By virtue of Noti. No 59/98-ST dt 16.10.98, the service provided by a practicing Chartered Consultant in connection with the management of any organisation in any manner shall be deemed to be the taxable service under the category of Management Consultant. As per Section 65(105)( r) of the Act, the taxable service means any service provided to a client, by a management consultancy in connection with the management of any organisation, in any manner. A statement of Shri Yogesh Ghanshyam Shah, Partner of M/s C C Chokshi & Co., Ahmedabad who is a partner of appellant was recorded on 17.10.05, 20.10.05 & 01.09.06 wherein he inter-alia admitted that his company has provided services like audit, tax audit, matter relating to direct & indirect taxes, management consultancy etc., that there was a contract service agreement between the appellant and M/s C C Chokshi & Co and accordingly the work was carried out by the appellant though M/s C C Chokshis staff; that the transactions showing the amount of various fees, reflected in the balance sheet are only after realisation of the same from the clients/customers, that they have not obtained service tax registration under the category of Management Consultancy Service upto 31.3.2005.
A dated 20.10.2006 was issued upon the appellant for contravention of various provisions of Finance Act, 1994. The said SCN was adjudicated by the Joint commissioner vide the impugned order wherein the demand for service tax of RS 13,30,250/- was confirmed u/s 73 and ordered recover of interest u/s 75 of the Act. Imposed penalty of Rs 13,30,250/- u/s 78; penalty of Rs 1,000/- u/s 77; penalty of Rs 100/- per day u/s 76 & penalty of Rs 500/- u/s 75A of the Finance At, 1994.
3. Being aggrieved by such an order passed by the Adjudicating Authority, appellant preferred an appeal before the First Appellate Authority, raising therein question of limitation applicability of Notification No 59/98 dtd 16.10.1998 as amended by Notification No 15/2002 dtd1.8.2002 and also on merits that the services rendered by them would not fall under the category of Management Consultancy Services. The first Appellate Authority after following the due process of law did not agree with the contentions raised by the appellant and rejected the appeal.
4. Ld Counsel appearing on behalf of the appellant after taking us through the entire records submits that the lower authorities have confirmed a demand to the extend of Rs 3,19,658/- which is also annexed as appeal alongwith this matters as in the impugned order, the First Appellate Authority had remanded the matter back to the Adjudicating Authority for quantification of the correct demand. It is his submission that in both the appeals the issue is inter-connected. He would submit that the demand is hit by limitation on the ground that the appellant in response to letter dtd June 30, 2005 from the audit party gave all the documents for conducting audit of records maintained by the appellant and the show cause notice was issued on 20th Oct. 2006, by the Jt. Commissioner after a period of 15 months from the date of submission off the required details to the authorities. It is his submission that when the audits have been conducted and the authorities are aware of the issues, there is no valid reason for authorities to issue show cause notice by invoking larger period. For this proposition he relies upon :
i) Agro Pack v CCE,Surat 2009(240)EL.135
ii) Shree Ram Multi Tech Ltd v. CCE Ahmedabad 2009(238)ELT.699
iii) Shree Uma Foundries Pvt Ltd v. CCE, Kolkatta - 2008(222)ELT.317, and
iv) Suvikram Plastics (P) Ltd v. Bangalore - 2008(225)ELT.282 4.1 It is his submission that the appellant is a practicing Chartered Accountant firm providing services out of India and receiving the payment in convertible foreign exchange which are not repatriated out of India. It is his submission that during the disputed period, i.e., April 2001-March 2005 the authorities have demanded service tax on certain transactions alleging that the consideration for the said transactions is not received in convertible foreign-exchange and hence not eligible for exemption from payment of service tax. He would then draw our attention to various notifications and circulars and submit that after Notification 6/1999/ST there is no notification in force for export of service and exemption payment of service tax but appellant had categorically taken a stand that the amounts were received for the transaction of export services and there was no need for the appellant to submit Foreign Inward Remittance Certificate to establish that consideration is received in convertible foreign exchange. Since the services were provided outside India, the transactions would be considered as export of service. It is his submission that despite this, appellants are enclosing payment debit advice of Netwest Bank, which indicates that the appellant had received the amounts in convertible foreign exchange. It is his submission that though the FIRC is indicating the amount credited to the appellants accounts in Indian Rupees the issuance of FIRC by the Bank itself goes to support the fact the bank has received foreign currency.
4.2 It is his submission that in respect of the demand of the service tax liability on the appellant under the category of management consultancy services, he would submit that the appellant was engaged in also providing various services in relation to the assignments of Information Memorandum Valuation, Valuation of Business, Review of Housing Loan, Partner Search Assignments and Syndication of Working Capital.
4.3 He would submit that these services would not fall under the category of Chartered Accountants services nor would they fall under the category of Management consultant as the definition of Management Consultancy include who helps in making standards operating procedures, advices, consultancy or technical assistance which changes the working system of the organization. Thus, advice, consultancy or technical assistance relating to changes in the standard operating procedure will only be covered under management consultancy services. It is his submission that the services provided by the appellant are of executory type of responsibilities of management got done to another agency and hence cannot be considered as services or improving management of business entity. He would rely upon the following :
a. B.S,R & Co v. CCE, Gurgaon - CST-2013(30)STR242 (Tri.del.) b. Ernst &Young Pvt Ltd v. CST 2012(27)STR.462 (Tri.Del) c. Basti Sugar Mills Co Ltd v. CCE (2007)10.STT.107 (New Delhi-CESTAT) 4.4 He would also rely upon the judgement of the Tribunal in the case of Sridhar & Santhanam v. CCE, Chennai 2009(14)STR.756 (Tri.Chennai), Glaxo Smithkline Pharmaceuticals Ltd v. CCE Mumbai 2006(3)STR.711 (Tri.Mumbai) and Jyoti Ltd v. CCE, Vadodara 2008(9)STR.373 (Tri.Ahmd.) for the proposition.
5. Ld DR strongly defended the impugned order. It is submission that the appellant has been providing the various services to the appellants client which would fall under the category of management consultancy services. It is his submission that the action taken by the appellants client based upon the advice given or the reports submitted would definitely fall under the category of management consultancy services. It is his submission that the show cause notice is not hit by limitations as the appellants accounts were audited and it was found that there is escapement of tax.
6. We have considered the submissions made at length by both sides and perused the records.
7. The issue to be decided in this case is whether the appellant is covered under the category of Management Consultancy Services for the services provided by him in relation to the following assignments:
a) Information Memorandum Valuation
b) Valuation of Business
c) Review of Housing Loan
d) Partner search assignment, and
e) Syndication of Working capital
8. Yet another issue which arises for our consideration is whether during the relevant period the amounts received by the appellant in consideration for export of services would be exempted from service tax liability as having received in convertible foreign exchange.
9. On perusal of the records and the written submissions made at the time of personal hearing, we find that the appellant has been taking a consistent plea before the lower authorities that the services rendered by them are in respect of the clients situated abroad are in the form of export of services. The said plea of the appellant was supported by documentary evidence of receipt of the amounts for consideration by the appellants bank in freely convertible foreign exchange and credited to the appellants account in Indian Rupees. One such example which we find is in respect of an amount received by Union Bank of India and credited to the appellants account, was as per the direction of Netwest Bank which indicated a credit of amount in Pounds and converted into Indian Rupee, is sent to account of appellant in Union Bank of India. The submissions of the Ld Counsel is not misplaced and needs to be accepted, as to that when foreign bank receives the amount and converts it into Indian Rupee and remits the same to the appellant such amounts are to be held as received in freely convertible foreign exchange. In our considered view it has to be held that the services were rendered by the appellant to a person or a client situated abroad, in itself qualifies as export of service and the export of services are not taxable. In our considered view, appellant has made out a strong case in his favour in respect of non payment of service tax on the services which are exported.
10. As regards the question of service tax liability on the Management Consultancy Services the issue can be grouped into two parts. The first part upto issuance of Notification No 15/2002-ST dated 1st Aug, 2002 and subsequent period.
10.1 The appellant is a practicing Chartered accountant and has been registered with the authorities as such. We find that during the period prior to 1.8.2002 , the Chartered Accountant services were liable to be taxed and Notification No. 59/98-ST dtd 16.8.1998 specifically exempted the taxable services provided by the practicing Chartered Accountant or a Company Secretary or a Cost Accountant; services which are rendered to a client other than taxable services which were enumerated in the said Notification. In our considered view, the interpretation put forth by the appellant of the said notification are acceptable, as the services which are in question in this case are not covered under the said Notification 59/98-ST till 1.8.2002. This view has been taken by the Co-ordinate Bench in the case of Sridhar & Santhanam (Supra) wherein Tribunal held as under:
I have considered the case records and the rival submissions. The dispute to be resolved in this case relates to the Notification No. 15/2002-Service Tax dated 1st August, 2002. The dispute is confined to the date of effect of the Explanation introduced by this notification. The notification does not contain anything to indicate that it operates from a past date. The language of the notification does not say that the notification is intended to remove doubts and clarifies a position valid since the issuance of the Notification No. 59/98-S.T. Considering the language of the notification, in the absence of a specific stipulation as regards its date of effect, the amendment has to be held to be effective only from the date of issue of this notification. The text of the Notification No. 59/98-S.T. does not support denying such exemption as availed by the appellant. Perhaps the legislature did not envisage such a benefit under the said notification and hence the disputed notification was issued. But a legislative intent which is not obvious cannot be read into a notification by the agency which implements the notification. There is a risk in allowing the enforcing agency to read the legislative intent in that the same can be differently interpreted by different persons. A benefit available on a plain reading of the notification cannot be denied retrospectively by issuing a notification. The Explanation introduced under Notification No. 15/2002-S.T., dated 1-8-2002, therefore, takes effect only from the date of its issue. Therefore liability to tax of the appellants as regards services of Management Consultant and Man-power Recruitment Agent it rendered during the period 16-10-98 to 31-7-2002 confirmed in the impugned order cannot be sustained. Demand is also barred by limitation in the absence of charge of suppression of facts. The returns for the material period had been filed in time as prescribed and the demand notice was issued beyond the normal period after filing the returns. In the result this appeal is allowed.
11. In view of the foregoing judicial pronouncement, we find that till 1.8.2002 any services provided by the appellant other than the services as mentioned in Notification No. 55/98-ST are not liable to be taxed.
12.1 Post 1.8.2002 it is the claim of the appellant that the services rendered by them were not of any advisory or making standard operating procedures; or advising for changing the entire work system of the organization. We find that the services which are in question are enumerated in paragraph No.8 hereinabove. No. 8. We find that the said services may not be covered under the Management Consultant Services as these services are not in nature of providing consultancy or advice for improving management of the business entity. We find that our above view is covered and fortified by the decision that the Tribunal in the case of BSR and Co (Supra) wherein it was held as under.
The Tribunal has been holding that only services in the nature of providing consultancy or advices for improving the Management of a business entity only will be covered by the definition and not executory type of responsibilities of management got done through another agency. For example collection of bad debts is a responsibility of a Management. If somebody is engaged for collecting bad debts the person engaged cannot be considered to be providing Management or Business Consultancy Services. Though the definition at Section 65(65) includes any service in connection with management of any organization, the scope of the definition gets restricted to services in relation to consultancy as is evident from the name given to the service and commercial understanding of the expression Management or Business Consultancy. 12.2 In yet another case i.e., Ernst &Young Pvt Ltd (supra)the Tribunal held a under:
14.?We have considered arguments on both the sides. We find that the decisions of the Tribunal in the case of Futura Polyesters Ltd. (supra) quoted above is clearly to the effect that most of the impugned activities could not fall under the definition of Management Consultancy Service. We are of the view that though compliance with laws is part of the responsibilities of management such responsibility per se cannot bring it into the ambit of the words in connection with the management of any organisation used in Section 65(105)(r) and Section 65(65) of Finance Act, 1994 to tax such services. In this matter we see merit in the clarification given by CBEC in para 9 of its circular dated 27-6-2001. The decision of the Apex Court in the case of Parle Exports (P) Ltd. (supra) gives the rule that a taxing entry should be understood in the same way in which these are understood in the ordinary parlance. According to CBEC the ordinary meaning of management will not cover Compliance Services. According to the adjudicating authority ordinary meaning of management covers Compliance Services. We concur with the view of CBEC and reject the view of the adjudicating authority, since in our view every responsibility of management cannot be considered as management function. For example the management may have a responsibility to set up a canteen in a factory employing large number of workers. A person who gives advice on initial setting up of that canteen cannot be considered to be giving Management Consultancy Service. Out of the various impugned services, the services in the matters before FIPB there could be a doubt as to whether the service was in connection with management function or in connection with compliance of regulations. Since there is no such examination in the impugned order and since we find the demand to be time barred we are not dealing with this issue in detail.
13. It can be seen from the reproduced judicial pronouncement of the Tribunal, that the issue involved in this case is covered in the favour of the appellant herein.
14. No contrary decision was brought to our notice by both sides. In our view, since the issue is covered in favour of the assessee by the various judicial pronouncements, we find that the impugned orders are unsustainable and liable to set aside and we do so. Impugned orders are set aside and appeals are allowed.
(Pronounced in the Court on 13/11/2014)
(H.K. Thakur) (M.V. Ravindran)
Member (Technical) Member (Judicial)
swami
??
??
??
??
2