Custom, Excise & Service Tax Tribunal
T C Ashok vs Hyderabad-Ii on 13 April, 2026
1 Appeal Nos. ST/26096 &
26097/2013
CUSTOMS, EXCISE AND SERVICE TAX APPELLATE TRIBUNAL
HYDERABAD
REGIONAL BENCH - COURT NO. - I
Service Tax Appeal No. 26096 of 2013
(Arising out of Order-in-Original No. 01/2013-ST-HYD-III-ADJN(TRF).COMMNR dated
03.01.2013 passed by Commissioner of Customs, Central Excise & Service Tax, Hyderabad)
Shri T. C. Ashok .. APPELLANT
Plot No.868,
Road No.45,
Jubilee Hills,
Hyderabad,
Telangana - 500 033.
VERSUS
Commissioner of Central Excise .. RESPONDENT
And Service Tax Hyderabad - II Kendriya Shulk Bhavan, L.B Stadium Road, Basheerbagh, Hyderabad, Telangana - 500 004.
AND Service Tax Appeal No. 26097 of 2013 (Arising out of Order-in-Original No. 02/2013-ST-HYD-III-ADJN(TRF).COMMNR dated 03.01.2013 passed by Commissioner of Customs, Central Excise & Service Tax, Hyderabad) Smt T. Nirmala Ashok .. APPELLANT Plot No.868, Road No.45, Jubilee Hills, Hyderabad, Telangana - 500 033.
VERSUS Commissioner of Central Excise .. RESPONDENT And Service Tax Hyderabad - II Kendriya Shulk Bhavan, L.B Stadium Road, Basheerbagh, Hyderabad, Telangana - 500 004.
APPEARANCE:
Shri Y. Sreenivasa Reddy, Advocate for the Appellant. Shri V.R. Pavan Kumar, Authorized Representative for the Respondent. CORAM: HON'BLE Mr. A.K. JYOTISHI, MEMBER (TECHNICAL) HON'BLE Mr. ANGAD PRASAD, MEMBER (JUDICIAL) FINAL ORDER No. A/30207-30208/2026 Date of Hearing: 19.01.2026 Date of Decision: 13.04.2026 [ORDER PER: ANGAD PRASAD] 2 Appeal Nos. ST/26096 & 26097/2013 These two appeals are filed by the appellants on identical grounds against the Order-in-Original dated 03.01.2013, whereby, the Adjudicating Authority demanded the service tax along with the applicable interest and also imposed penalty.
2. The brief, fact of the case is that the shareholding of two shareholders viz- the appellants were sold to a foreign based company and a payment was also made to the consultant for the services of sale of company by the two appellants/shareholders towards the service of sale of their shares in company and ultimate transfer from Indian company to fundamental company.
3. The Learned Advocate has mainly contested that demand of tax on the service of Merger & Acquisition under the category of Management or Business Consultancy service is wrong as the said activity would clearly fall under another taxable service of Banking and Financial Services. Further, he also contested that demand of Service Tax on the shareholders of a company on the service received by a company on the ground that they together hold 100% is also against settled law as company is a different juristic person as different from the shareholder. Further, even assuming that these two individual shareholders received services, the service provided to individuals are outside the scope of Section 66A and rules made thereunder, since, sale of their shares is not for the purpose of use in any business. Moreover, since, those two individuals are resident outside India (being agreement citizens) and received service by foreign entity, it cannot be treated as import of service also and hence payment cannot be sustained. However, the allegation of suppression of facts with an intent to evade duty can also not be sustained.
In support that the said activity relating to Merger & Acquisition would not fall 3 Appeal Nos. ST/26096 & 26097/2013 under Business or Management Consultancy Service, but would fall under Business and Financial Service under Section 65(12) of the Finance Act, and said service which has been made a taxable service with effect from 16.07.2011 only. He has relied on various judgments:
(a) CCE, Mumbai Vs Kotak Mahindra Capital Company Ltd., [2017 (7) G.S.T.L. 401 (BOM)]
(b) DSP Merill Lynch Ltd., Vs CST, Mumbai [2016 (44) STR 436 (Tri-Mum)]
(c) Triumph International Finance Ltd., Vs CST, Mumbai [2014 (35) STR 338 (Tri-Mumbai)]
(d) HML Agencies Pvt Ltd., Vs CCE, Mangalore [2018 (12) G.S.T.L. 46 (Tri-Bang)
4. He has also contested that the confirmation of demand based on CBEC Order dated 27.06.2001 is also wrong as the Hon'ble High Court discussed this order, but held that the service of Merger & Acquisition does not fall under management of organisation and taxable and instead is covered under Banking and other Financial Services with effect from 16.07.2001. In spite of that there is no provision to collect Service Tax from a company from its Director in the Finance Act, 1994 he has relied on the following judgments:
(a) L.D. Industries Vs Commissioner of Central Excise, Pune, [2003 (157) ELT 459 (Tri-Delhi)]
(b) Ved Kapoor Vs Union of India, [2014 (299) ELT 385 (Del)]
5. He has also relied on the following judgments in support that the service falls outside the scope of taxable service:
(a) KR Alloys Ltd., Vs CCE, Calicut [2009 (13) STR 584 (Tri-Bang)]
(b) Punjab Venture Capital Ltd., Vs CCE, Chandigarh [2011 (24) STR 410 (Tri-Del)]
(c) Pardip Phosphates Ltd., Vs CCE, Bhubaneswar 4 Appeal Nos. ST/26096 & 26097/2013 [2022 (66) G.S.T.L. 486 (Tri-Kolkata)]
(d) CLSA India Ltd., Vs CST, Mumbai [2014 (34) S.T.R. 407 (Tri-Mumbai)]
6. Further, in support of his argument that extended period cannot be invoked, he has relied on the following judgments:
(a) Uniworth Textile Ltd., Vs Commissioner of Central Excise, Raipur [2013 (288) E.L.T. 161 (S.C.)]
(b) CCE, Bangalore Vs Northern Operating Systems Pvt Ltd., [2022 (61) G.S.T.L. 129 (S.C.)]
(c) Monsanto Manufactures Pvt Ltd., Vs CCE&ST, Ghaziabad reported in [2013 (32) S.T.R. 364 (Tri-Del)] and upheld in CCE&ST Vs Monsanto Manufacturers Pvt Ltd., [2014 (35) S.T.R. 177 (All.)]
7. The Learned AR, on the other hand has basically contested that the Management Consultancy Service is quite wide and therefore even to services provided by the consultant in this case, would get covered within ambit of Management Consultancy Service. He is relying on the judgment of the Co-
ordinate Bench in the case of HSBC Securities and Capital Markets (I) Pvt Ltd., Vs Commissioner of Service Tax, Mumbai [2014 (33) STR 530 (Tri- Mum)], wherein, it was, inter alia, held that the said activity of acquisition and merger would be covered under the category of Management Consultancy Service before 16.07.2011 and thereafter under Business and Other Financial Services.
8. He has also relied on the judgment of Co-ordinate Bench in the case of Vimal Stocks Pvt Ltd., Vs CST, Ahmedabad [2024 (16) Centax 61 (Tri- Ahmd)], wherein, the Tribunal examined whether the service of providing market related advice based on technical analysis of stocks could be covered under Business and Financial Services, it was, inter alia, held that in order to fall under the category of Business and Financial Services, the company who 5 Appeal Nos. ST/26096 & 26097/2013 is providing the service has to be Business and Financial Institutions. He has also relied on the judgment of the CESTAT - Allahabad in the case of M/s Fox Mandal & Co Vs CC, CE & ST, Noida [2024 (6) TMI 306 - CESTAT-ALL], wherein, inter alia, it has been held that services provide in relation to Merger & Acquisition would be covered under the category of Business and Management Consultancy Service.
9. We have carefully considered the rival submissions, perused the records of the case and the judicial precedents relied upon by both the sides.
10. The primary issue for determination is whether the services received by the appellants in relation to merger and acquisition are liable to service tax under the category of "Management or Business Consultancy Service" under Reverse Charge Mechanism, or whether such services fall under another taxable category and further whether the demand can be sustained on individual shareholders.
11. It is observed from the records that the services in question pertains to advisory/consultancy in relation to merger and acquisition of shareholding, culminating in transaction of ownership of an Indian company to a foreign entity.
12. The contention of the Department is that such services fall within the wide ambit of "Management or Business Consultancy Service". However, we find that nature of service rendered in specifically connected with corporate restructuring, acquisition and funding advisory and not under management consultancy service.
13. In this regard, reliance placed by the appellant on decisions such as CCE, Mumbai Vs Kotak Mahindra Capital Company Ltd., DSP Merill Lynch Ltd., 6 Appeal Nos. ST/26096 & 26097/2013 Vs CST, Mumbai, Triumph International Finance Ltd., Vs CST, Mumbai and CLSA India Ltd., Vs CST, Mumbai, supra, is relevant, wherein, it has been held that the merger and acquisition advisory services are classifiable under Banking and Financial Services.
14. Further, it is an admitted position that such services were specifically brought out under the taxable category of Business and other Financial Services only with effect from 16.07.2001 and therefore classification under Management Consultancy service for the relevant period is not sustainable.
15. The demand has been raised under Section 66A of the Finance Act 1994 treating the services as imported of service. However, from the facts on record, it is evident that the services were rendered in relation to sales of shares held by individual shareholders. Said transaction is in the nature of transfer of capital asset and not in the course of business of the individuals. The recipient i.e. the shareholders were not engaged in any business activity in respect of such transaction. It is settled principle that Section 66A applies only when services are received for using business or commerce. In the present case, the service relates to personal investment/shareholding decisions and therefore fall outside the ambit of taxable import of services. It is also an undisputed legal position that a company is a separate judicial entity distinct from its shareholders.
16. Therefore, demand raised on individual shareholders for services allegedly received by the company is fundamentally flawed, even if both the shareholders collectively hold 100% shares as it does not negate the separate legal entity of the company.
17. We also find merit in the contention that services relating to merger and acquisition, being a specialised funding advisory services, cannot be artificially 7 Appeal Nos. ST/26096 & 26097/2013 brought under management consultancy service, merely due to its wide wording.
18. The Tribunal in the case of HSBC Securities and Capital Market (I) Pvt Ltd., supra, has held that such services may fall under Management Consultancy Service prior to a certain period and thereafter under Business and Financial Services; however, such classification depends on the exact nature and scope of service provider. In the present case, there is no evidence to show that the foreign consultants were providing management consultancy service in relation to rendering management of business, rather the services were confined to transactional advisory for acquisition/sale of shares of individual shareholders, which resulted in acquisition of said company by buyers.
19. In view of the above discussions, we hold that the services in question do not fall under "Management Consultancy Service" for the relevant period and therefore the services are not liable to tax under Section 66A in the hands of individual shareholders. Since the appeals are liable to be allowed on merits, therefore, we have not discussed other grounds including limitation.
20. Appeals allowed.
(Pronounced in open court on 13.04.2026 ) (A.K. JYOTISHI) MEMBER (TECHNICAL) (ANGAD PRASAD) MEMBER (JUDICIAL) Jaya