Custom, Excise & Service Tax Tribunal
Embassy Property Developments Ltd ... vs Commissioner Of Central Tax, Bangalore ... on 19 January, 2024
Service Tax Appeal No. 917 of 2011
CUSTOMS, EXCISE & SERVICE TAX APPELLATE
TRIBUNAL
BANGALORE
REGIONAL BENCH - COURT NO. 1
Service Tax Appeal No. 917 of 2011
(Arising out of Order-in-Original No.98/2010 dated
23.12.2010 passed by the Commissioner of Service Tax,
Bangalore.)
M/s. Embassy Property Developments Limited
(Formerly M/s. Dynasty Developer(s) Ltd.)
Embassy Point, No.150, Infantry Road,
Bangalore - 560 001. ...............Appellant(s)
Versus
The Commissioner of Service Tax
Service Tax Commissionerate
No.16/1, S.P. Complex,
Lalbagh Road,
Bangalore - 560 001. .......... .........Respondent(s)
Appearance:
Shri K. S. Ravi Shankar, Sr. Advocate Shri K. S. Naveen Kumar, Advocate Shri Mohd. Rahim, Advocate for the Appellant Shri Dyamappa Airani, AR for the Respondent CORAM:
Hon'ble Dr. D.M. Misra, Member (Judicial) Hon'ble Mr. Pullela Nageswara Rao, Member (Technical) Final Order No. 20052 /2024 Date of Hearing: 25.07.2023 Date of Decision: 19.01.2024 Per : Dr. D.M. Misra This appeal is filed challenging the Order of the Commissioner of Service Tax, Bangalore. In the impugned order, the Commissioner held as follows:Page 1 of 32
Service Tax Appeal No. 917 of 2011 i. I confirm the demand under proviso to section 73(1) of the Finance Act, 1994 of Rs.8,15,12,315/- (Rupees Eight Crores fifteen lakhs twelve thousand three hundred and fifteen only) being the service tax (inclusive of education cess) payable under the category 'Management Consultancy Service' for the period from 2004-05 upto 05/2007.
ii. I appropriate the amount of Rs.5,39,67,516/- (Rupees Five crores thirty nine lakhs sixtyseven thousand five hundred and sixteen only paid by M/s DDPL vide challans dt.18/02/2010 & 20/04/2010 towards the demand confirmed as at (i) above.
iii. I order payment of appropriate amount of interest on the service tax above under section 75 of the Finance Act, 1994.
iv. I appropriate the amount of Rs.52,88,640/- (Rupees Fifty two lakhs eighty eight thousand six hundred and fourty only) paid by M/s. DDPL vide challan dt.18/03/2010 towards the demand of interest confirmed as at 'iii' above. v. In respect of the demand confirmed at (i), I impose penalty of Rs. 100/- per day upto 17.04.06 and with effect from 18.04.06, Rs.200/- per day or @2% the service tax, per month, whichever is higher, till the date of actual payment of the outstanding amount of service tax, which shall not exceed the total service tax liability confirmed as above, under section 76 of the Finance Act, 1994, vi. I impose penalty of Rs. 1000/- (Rupees One thousand only) under section 77 of the Finance Act, 1994. vii. I impose penalty amounting to Rs. 8,15,12,315/- (Rupees Eight crores fifteen lakhs twelve thousand three hundred and fifteen only) under section 78 of the Finance Act, 1994, which shall be reduced to 25% of the service tax confirmed at sl. No. i above, provided, the entire amount of service tax along with interest and reduced penalty are paid within THIRTY days of the receipt of this order.
2. Briefly stated facts of the case are that the Appellant during the period 2004-05 to 2007-08, provided certain services to M/s. Golf Links Software Park Pvt. Ltd. and M/s. Manyata Promoters Pvt. Ltd. On the basis of intelligence, investigation has been initiated against the appellant by recording statements, Page 2 of 32 Service Tax Appeal No. 917 of 2011 scrutinizing documents, etc., which revealed that during the aforesaid period, the appellant though rendered taxable service under the category of 'Management Consultancy Service' (MCS) but failed to discharge Service Tax on the same. On conclusion of investigation, show-cause notice was issued to the appellant on 22.4.2010 for recovery of Service Tax amount of Rs.8,15,12,315/- with interest and penalty; proposal to appropriate service tax of Rs.5,39,67,516/- and interest of Rs.52,88,640/- paid by them. On adjudication, the demand was confirmed with interest and penalty mentioned as above. Hence, the present appeal.
3.1 The learned Sr. Advocate for the appellant submits that the appellant is a real estate development company possessing necessary expertise and skills to undertake project management work such as promotion and development of real estate projects viz., Development of STPs, commercial development, hardware tech park and entertainment centre. The appellant was registered with Service Tax department under the category of 'Construction Services' with effect from 24.03.2005. They have entered into two agreements dated 31.03.2005 (for project management) and 01.4.2005 (for business consultancy) with Manyata Promoters Pvt. Ltd. They had also earlier entered into an agreement with M/s. Golf Links Software Park Pvt. Ltd. for business consultancy on 06.4.2003. During the course of investigation, it was submitted to the department that the activities/services rendered by them are in the nature of Page 3 of 32 Service Tax Appeal No. 917 of 2011 Business Consultancy service, which became taxable only with effect from 01.6.2007. Hence, they were not required to discharge Service Tax for the service rendered during the said period. Further, it is argued that the services provided against the agreement dated 31.3.2005 being executory in nature and not management consultancy, therefore, no service tax is payable by them. Referring to the agreement dated 31.03.2005, the learned Sr. Advocate submitted that the services are not in the nature of advice, consultancy or technical assistance alone. The responsibility, role and function of the appellant in its entirety as per Clause 8 of the said agreement reveal a major role and responsibility of the appellant in execution of the project. It is submitted that the adjudicating authority had ignored the said submission of the appellant. In support, the learned Sr. Advocate referred to the following decisions:
a. Basti Sugar Mills Co. Ltd Vs CCE, 2007 (7) STR 431 (T). Maintained by the SC in 2012 (25) STR J.154 (SC).
b. Rolls Royce Indus Power (1) Ltd Vs CCE, 2006 (3) STR 292 (T) c. Nirulas Corner House Pvt. Ltd Vs CST, 2009 (14) STR 131 (T) d. Suzlon Windfarm Services Ltd Vs CCE, 2014 (33) STR 65 (T) e. CMS (1) Operations & Maintenance Co.P.Ltd Vs CCE, 2007 (7) STR 369 (T) f. CCE Vs Sahney Kirkwood Pvt. Ltd, 2014 (35) STR 609 (T) Maintained by the SC in Commr. Vs CMS (1) Operations and Maintenance Co. P. Ltd, 2017 //94) GSTL J.75 (SC) g. Vedanta Ltd Vs CCE, 2019 (28) GSTL 258 (T) 3.2 Further, referring to Board's Circular No.115/9/2009-ST dated 31.7.2009, he has submitted that in the said Circular, it is clarified that only advisory services are covered under the Page 4 of 32 Service Tax Appeal No. 917 of 2011 management consultancy and not the executory services.
Further, he has submitted that Business Consultancy Service was made taxable only with effect from 01.6.2007 and since, the Commissioner chose to ignore the agreement dated 31.3.2005, the stipulations in those agreements could be materially relevant to decide the nature of services and classification. He has emphasised that the agreement dated 31.03.2005 clearly establish that the nature of service provided are executory functions and not advisory services, therefore, management consultancy service is not attracted in the facts of the present case. Further, he has submitted that since the Commissioner has laid much emphasis on the agreement dated 31.03.2005, hence he should not have given credence to the oral testimony of the person, whose statements are recorded. Further, it is submitted that nomenclature of transactions not relevant to determine the tax liability and it is the substance of the transaction that is relevant. In support, he referred to the judgment in the case of Delhi Stock Exchange Association vs. CIT: 1961 (41) ITR 495 (SC) and Sutlej Cotton Mills vs. CIT: 1979 (116) ITR 1 (SC). Further, referring to Section 65A of the Finance Act, 1994, he has submitted that in deciding classification of a service, a specific service would prevail over the general service and the essential character of the transaction has to be considered. In support, he has referred to the CBEC Circular No.334/4/2006- TRU dated 28.2.2006.
Page 5 of 32
Service Tax Appeal No. 917 of 2011 3.3 Further, he has submitted that since the department had doubted the veracity of the agreement dated 06.4.2003 and 01.4.2005, the burden of proof still continues to be vested with the Revenue to establish taxability and classification of the service rendered by the appellant. The acceptance of agreement dated 31.03.2005 by the Commissioner proves the case of the appellant that the services rendered are executory and not advisory in nature.
3.4 Further, he submits that since the Commissioner has placed reliance only on the agreement dated 31.03.2005, hence the statements based on other two agreements are of no consequence to determine the taxability and classification of service or imposition of penalty. Further, he has submitted that the allegation of fabrication of documents are not relevant to determine the tax liability of services under Management Consultancy Service as the Commissioner chose to ignore other two agreements and simply proceeded with the agreement dated 31.03.2005. Further, the learned advocate submitted that the amount paid during the course of investigation with the department should not be treated as admission of liability or guilt. Further, they have submitted that collection of taxes from M/s. Manyata Promotors Pvt Ltd. for certain period cannot lead to the inference that services rendered by the appellant are taxable. It is his contention that there is no estoppel in law and in support he referred to the judgment of the Hon'ble Supreme Court in the case of Kalidas Dhanjibhai vs. State of Bombay: AIR Page 6 of 32 Service Tax Appeal No. 917 of 2011 1995 SC 62 and Sports Club of Gujarat Ltd. vs. UOI: 2010 (20) STR 17 (Guj.).
3.5 Further, he has submitted that extended period of limitation cannot be invoked in the present case. Also, since the tax liability itself does not arise because of the specific recitals in the agreement dated 31.03.2005, interest and penalty would not arise. Further, it is submitted that for non-following of the procedures, benefit of CENVAT credit cannot be denied. In support, they have referred to the decision in the case of Formica India Division vs. CCE: 1995 (77) ELT 511 (SC), mPortal India Wireless Solutions Pvt. Ltd. vs. CST: 2012 (27) ELT 134 (Kar.) and Icon Industries vs. CCE: 2018 (363) ELT 114 (Del.). Further, he has submitted that imposition of penalty under Section 76 and Section 78 of the Finance Act, 1994 simultaneously is contrary to the decision of the Hon'ble High Court in the case of CST vs. Motor World: 2012 (27) STR 225 (Kar.).
4. Per contra, the learned Authorised Representative for the Revenue referring to various statements recorded during the course of investigation, submitted that the nature of services rendered as disclosed in the statements, reveal that through agreement dated 31.03.2005, the appellant has been appointed as a 'project development manager' and particularly, the clause 5.2.1, Clause 8, Clause 12, Clause 14 Clause 15, Clause 16, and Clause 18, reveal that the appellant has been carrying out the activities of recommending, coordinating and supervision of the Page 7 of 32 Service Tax Appeal No. 917 of 2011 development of the project and not executing the project itself. Hence, the claim of the appellant that they were actually executing the project is incorrect and unsustainable. He has further submitted that, in fact, the consideration paid to the appellant was only 5% of the total construction cost actually paid by M/s. Manyata to building contractors, hence the claim of the appellant that they have executed the project is unacceptable. 4.1 Further, referring to the definition of 'Management Consultant' prior to 01.05.2006 and thereafter, the amendment brought into with effect from 01.06.2007, the learned Authorised Representative for the Revenue has submitted that the appellant was providing services in relation to the management of the organisation i.e., M/s. Manyata with respect to different areas of management. Though, there is a significant difference in the wordings of the definition of 'Management Consultancy Service' post 01.5.2006, the essence remains the same. Explaining it further, he has submitted that before 01.5.2006, it included consultancy, advice or assistance which consisted of conceptual designing, etc., of any working system of any organisation. This definition focused on what the service provider was actually doing (conceptualising, designing, development, modification, rectification) in relation to any working system. After 01.5.2006, various working systems of an organisation are spelt out viz., financial, logistics, human resources, marketing, procurement, etc.. Any technical advice or consultancy in these fields or in other similar area of management was treated as Management Consultancy Service. The claim of the appellant that their Page 8 of 32 Service Tax Appeal No. 917 of 2011 company is for development of real estate projects and hence, it cannot be inferred that they were providing Management Consultancy Service, is not acceptable. It is the service provided by the appellant which is relevant and not the activity of the appellant in general, which has been specifically discussed by the learned Commissioner in para 14 of the order.
4.2 Referring to Clause 7, 8 and 8.8 of the agreement dated 31.03.2005, the learned Authorised Representative has submitted that this service indicate advice and assistance rendered by the appellant, hence the services rendered by the appellant beyond the advisory role and purpose of other services like liasoning, coordination, obtaining approvals from authorities, etc., not covered under Management Consultancy Service is unacceptable. Therefore, their services are not executory in nature and their claim that the activity involved development of software park is also not correct since they have not contributed in terms of planning, designing, architecture or construction of the project. The closet they came to execute the project in recommending the "personnel of professional team" to be appointed by M/s. Manyata Promotors Pvt. Ltd. In support of his contention that the services rendered by the appellant are not executory in nature but management consultancy service, he referred to the following judgments of the Tribunal in the cases of:
(i) Jubliant Enpro vs. Commissioner of Central Excise, Noida:
2015 (38) STR 625 (Tri.-Del.);
(ii) Anglo American Services (India) Pvt. Ltd. Vs. Commissioner of Service Tax, Delhi: 2019 (22) GSTL 415 (Tri.-Del.) Page 9 of 32 Service Tax Appeal No. 917 of 2011
(iii) Commissioner of Central Excise and Service Tax, LTU, Mumbai vs. Reliance Industries Ltd: 2016 (45) STR 341 (Tri.-Mum.) 4.3. On the issue of applicability of extended period, the learned Authorised Representative has submitted that provision of such services rendered by the appellant to M/s. Manyata Promotors Pvt Ltd. and M/s. Golf Links Software Park Pvt. Ltd.
were not disclosed to the department nor they have obtained any service tax registration. They have not filed statutory Returns for the period 2004-05, 2005-06 and 2006-07. Further, during the course of investigation and from the statements recorded, it revealed that multiple agreements were entered and some of them were not brought to the notice of the top executives also. One of the agreements dated 06.4.2003 was not genuine and this has been confirmed by the letter issued by Sub Registrar, Kengeri. The appellant has also collected Service Tax from the service receiver by issuing debit notes in the year 2006 and not deposited with the Government. All the above facts make it clear that the appellants have suppressed the facts and wilfully misstated with an intention to evade payment of service Tax. Accordingly, the Commissioner has rightly invoked the extended period of limitation and confirmation of duty demand along with interest and imposition of penalties. Further, he has also submitted that the Commissioner was right in not extending the benefit of CENVAT credit in the impugned order in absence of documents/evidences submitted by the appellant.
5. Heard both sides and perused the records.
Page 10 of 32
Service Tax Appeal No. 917 of 2011
6. The issues involved in the present appeal for determination are whether: (i) The service rendered by the appellant during the period 2004-05 to May 2007 to M/s. Manyata Promoters Pvt. Ltd. & M/s. Golf Link Software Park Pvt. Ltd. be classified under taxable category of 'Management Consultancy Service' and Service Tax is payable invoking extended period of limitation; and (ii) CENVAT credit be admissible for the said period in rendering the service, if held to be taxable.
7. The appellant during the relevant period rendered services to M/s. Manyata Promoters Pvt Ltd and M/s. Golf Link Software Park Pvt. Ltd. and received consideration for providing such services. Three agreements claimed to have been entered into between the appellant and the said service receivers dated 06.04.2003, 31.03.2005 and 01.04.2005. In the impugned order the learned Commissioner rejecting the credibility of agreements dated 06.04.2003 and 01.04.2005, laid emphasis on the stipulations under agreement dated 31.03.2005. The appellant in their arguments did not object to the said course of action by the adjudicating authority, however, from the very beginning their contention has been that the services rendered by them do not fall under the category of 'Management Consultancy Service' but the services are executory in nature; also it is their contention referring to the agreement dated 06.04.2003 and 01.04.2005 that they have provided 'Business Consultancy Services' and since the said business consultancy service is taxable with effect Page 11 of 32 Service Tax Appeal No. 917 of 2011 from 01.06.2007, hence, for the period prior to the said date, no liability can be fastened on them for rendering the said service.
8. The definition of 'Management Consultant Service' as was in force before and after the relevant period reads as follows:
Prior to 01.6.2007 Section 65(105) "Management Consultant" means any person who is engaged in providing any service, either directly or indirectly, in connection with the management of any organisation in any manner and includes any person who renders any advice, consultancy or technical assistance relating to conceptualising, devising, development, modification, rectification or upgradation of any working system of any organisation.
After 01.6.2007
Section 65(105) "Management or Business
Consultant" means any person who is engaged in
providing any service, either directly or indirectly, in connection with the management of any organisation 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;
9. The Agreement dated 31.05.2005 which is the bone of contention, between the parties and the Ld. Commissioner extensively referred the same in the impugned Order needs to be stated. The conditions relevant for the present purpose are reproduced as below:
PROJECT MANAGEMENT AGREEMENT EXECUTED THIS DAY OF 31" DAY OF MARCH 2005 Page 12 of 32 Service Tax Appeal No. 917 of 2011 BETWEEN M/S.MANYATA PROMOTERS PRIVATE LIMITED, a Company incorporated under the Companies Act, 1956, having its registered office at Second Floor, Classic Courts, Richmond Road, Bangalore - 560 001, represented by its Chairman and Managing Director Mr. Reddy Veeranna for the FIRST PART (hereinafter referred to as the "MANYATA" which expression shall, the context means and requires shall include its successors-in-title and assigns).
AND M/S.DYNASTY DEVELOPERS PRIVATE LIMITED, a Company incorporated under the CompaniesAct,1956,having its Office at Embassy Point, No.150, Infantry Road, Bangalore - 560 001,represented by its Director Mr. Jitendra Virwani (hereinafter referred to as the "PROJECT DEVELOPMENT MANAGER", which expression shall, wherever the context means and requires shall include its successors-in-title and assigns).
NOW THIS AGREEMENT WITNESSETH AS UNDER:
1) REPRESENTATIONS AND ASSURANCES I.WHEREAS MANYATA are the allottees under Lease Cum Sale agreements all executed by Karnataka Industrial Area Development Board (KIADB) and MANYATA and the KIADB have also vide separate possession letters handed over possession of the property allotted on the Lease cum sale basis of all that piece and parcel of industrial lands in situated in various survey Numbers all situated at Nagawara Village, Bangalore North Taluk, more fully set out and described in the First Schedule hereto and hereinafter referred to as the "PROPERTY" and the details of the Lease Cum Sale agreement and the Possession Certificate are also set out in the Schedule hereto against the lands defined therein;
II. WHEREAS MANYATA being desirous of commercially exploiting the Property by putting up commercial development / software technology park (the project hereafter),with several other amenities and facilities to be provided in the said development;
III. MANYATA has represented that the Property is free from any kind of encumbrances, contracts, litigations, claims, liens Page 13 of 32 Service Tax Appeal No. 917 of 2011 expressed or implied, easement rights in favour of any third party, acquisition or requisition proceedings, attachments, before or after judgement, or against any statutory dues and MANYATA are not prohibited under any law developing Property; IV. WHEREAS the Project Development Managers have the necessary expertise, infrastructure to take up the work of the project management and have accordingly contracted with MANYATA who after negotiations are desirous of appointing Project Development Managers with the exclusive rights to look after the promotion and development of the Entire Project envisaged on the Property in terms hereof as detailed in this agreement;
V. Project Development Managers based on the representation and assurance as aforesaid and on the specific understanding that the appointment made hereunder is exclusive to Project Development Managers and the appointment will not be revoked save and except as expressly stipulated herein the Project Development Managers have agreed to act as the project managers undertaking the obligation as set out herein:
2) DEFINITIONS AND INTERPRETATION:
In this Agreement unless otherwise specifically expressed otherwise, the Parties hereto agree that the following terms shall be defined and understood between them as under:
2.1) "the Site" means the land allotted to MANYATA by KIADB under the lease cum sale agreement which is more particularly described in the Schedule upon which it is proposed to carry out the Development; except the land under development under an exclusive arrangement with MFar Holdings private limited 2.2)"the Local Planning Authority" means the concerned authority for securing several permission for the Development.
2.3) "Planning Application" means the application for sanction and permission to carry out the Development made to the Local Planning Authority or to be made by the Project Development Managers at the expense MANYATA or any alternative application or variation or amendment to an application made which may subsequently be required to make;
2.4) "the Building Contractor" means a Contractor of suitable experience with adequate financial resources and good reputation to be appointed under the Building Contract by Page 14 of 32 Service Tax Appeal No. 917 of 2011 MANYATA to carry out the construction activities and the related Development;
2.5) "the Building Contract" means a contract to carry out the Development to be made between (1) MANYATA and (2) the Building Contractor:
2.6) "Development" means the carrying out of the works necessary to secure the erection and completion on the Site of the Project consisting of buildings, all the Individual Units and their infrastructure with the planning permission obtained in response to the planning Application and the Plans and where the context so admits and requires the completed Individual Units and their infrastructure and a brief description of the Development 2.7) "the Professional Team" means:
2.7.1) Architect/s who have to be appointed for the Development by MANYATA 2.7.2) Quantity Surveyors who are to be appointed for the Development by MANYATA 2.7.3) Structural Engineers who arc to be appointed for the Development by MANYATA 2.7.4) Building Services or Mechanical and Electrical Contractors or land scape contractors who are to be appointed for the Development by MANYATA 2.8)"the Plans" means the plans, sections and elevations referred to in the Planning Application and the other plans sections and elevations in respect of the buildings Individual Units and their infrastructure prepared by the Professional Team with such amendments as may from time to time in the proper opinion of the members or appropriate member of the Professional Team deem it reasonably necessary order to secure the proper and expeditious completion of the Development; 2.8) "the Permits" means the planning permissions (other than any planning permission granted in response to the Planning Application and building regulation approvals granted from time to time in respect of the Development and all other consent and approvals whether statutory or otherwise which may be necessary for the carrying out of the Development;Page 15 of 32
Service Tax Appeal No. 917 of 2011 2.9) "the project"mean the development of the Schedule Property by putting up commercial development , software tech park , hardware tech park , entertainment centre etc. 2.10) "the Specifications" means the specifications to be prepared by the Professional Team upon the instructions of the Project Development Managers and approved by MANYATA 2.10) "the Project Development Manager's Fee" means the amounts to be received by the Project Development Managers in terms of clause 5.2.1 below;
2.11) words importing one gender shall be construed as importing any other gender;
2.12) words importing the singular include the plural and vice versa;
2.13) references to persons include bodies corporate and vice versa;
2.14) the Clause Headings are only for easy reference, and convenience and shall not be taken into account in construction or interpretation of that Clause;
3) THE PLANNING APPLICATION Project Development Managers shall make available to MANYATA who shall within 06 weeks from the handing over the plan, submit to the Planning Authority for approval and MANYATA shall then use all reasonable endeavours to obtain the sanction for the plan submitted for the Development asper the Application, subject to the conditions which are levied. The Project Development Managers will provide the copy of all the relevant plans as per the schedule of development and also render the necessary assistance in the process of plan approval.
4) SITE OFFICE:
MANYATA will permit Project Development Managers to establish a Site Office on the Schedule Property. The expenses of running and maintenance of this site office will be the responsibility of PDM.
5) CONSIDERATION FOR THE PERFORMANCE OF THE MANAGER'S Page 16 of 32 Service Tax Appeal No. 917 of 2011 FUNCTIONS AND OBLIGATIONS:
5.1 Project Development Managers shall perform the functions and obligations on his part specified in this Agreement in consideration of the payment of:
5.2) Project Development Managers' Fee being computed as under:
5.2.1 The MANYATA shall pay the Project Development Manager 5% (Five per cent) of the expenditure incurred on the construction and development of the PROJECT plus the service tax at the rate or rates in force from time to time as consideration for rendering all the services specified in this Agreement 5.2.2 Such consideration shall be decided annually on 31" March of a financial year on the basis of the audited accounts of the MANYATA. The amount of consideration shall become payable forthwith after it is determined subject to adjustments, if any, on account of advance withdrawals made by the Project Development Manager as stated hereafter.
5.2.3 The amount of consideration shall be certified by the auditors of the MANYATA.
For the purpose of this clause, the "Expenditure on Construction and development of the Site" shall mean:
(i)The direct expenditure like materials and labour and payments to contractors for the work as having been carried out certified by an engineer/architect/project management consultant.
(ii)All payments made to the professional team.
(iii) The reasonable depreciation on assets used in construction.
In case of dispute about the working of the Expenditure on Construction, the figure may be worked out with the help of the auditors of the MANYATA, and on the certification of the figure by the auditors, it shall not be called into question. Until the final receivable in respect of the consideration is decided at the end of a financial year, the Project Development Manager shall be entitled to draw money from MANYATA against the progress of work of construction of the PROJECT from time Page 17 of 32 Service Tax Appeal No. 917 of 2011 to time. The moneys so drawn by the Project Development Manager shall be adjusted against the amount of consideration determined receivable by it from MANYATA at the end of a financial year as stated hereinabove.
5.2.3. The Project Development Manager shall not be entitled to reimbursement of any other expenditure which may have been incurred in connection with the provision of services under this Agreement (except those which are preapproved by Manyata) 5.3) In the event of MANYATA, abandoning the project, the Project Development Managers shall be titled to their fee up to the stage of completion.
6)PROJECT DEVELOPMENT MANAGERS TO FURNISH REPORTS ON PROGRESS OFDEVELOPMENT:
Project Development Managers shall:
6.1) within 04 weeks after obtaining Plan Sanction prepare and deliver to MANYATA progress charts and cash flow projections for all items of expenditure to be incurred by MANYATA in connection with the Development;
6.2 Report of all other arrangements connected with the carrying out of the Development, from time to time;
6.3 Ensure that at all times during the Development adequate, competent and suitably qualified and experienced staff of Project Development Managers are employed properly to perform the functions and obligations of Project Development Managers under this Agreement;
6.4) Fix Meeting wherein Project Development Managers shall provide all the necessary information with regard to the progress of the development which shall be recorded and signed by Project Development Managers and MANYATA or their respective representatives;
7) MANYATA TO ENTER INTO THE BUILDING CONTRACT:
If necessary, MANYATA shall enter into a Building Contract recommended by the Project Development Manager with a Building Contractor for the Development of the PROJECT Page 18 of 32 Service Tax Appeal No. 917 of 2011
8) SUMMARY OF THE PROJECT DEVELOPMENT MANAGER'S GENERAL FUNCTIONS ANDOBLIGATIONS:
The Project Development Managers shall in addition to the Project Development Managers specific functions and obligations under any other Clause:
8.1) supervise and co-ordinate all aspects of the Development and without prejudice to and in addition to the generality supervise and co-ordinate the activities of the Professional Team in respect of the Development;
8.2) use all reasonable endeavours to see that the Development is practically completed in accordance with the Plans and the Specifications (with such alterations as may be necessary and approved by MANYATA) and within the timeframe agreed upon 8.3) Project Development Managers shall provide from time to time cash flowcharts and estimate charts to MANYATA and such cash flow charts and estimate charts to be prepared and furnished every six months;
8.4) Liaisoning with statutory/municipal or any other appropriate authorities for obtaining approval, intermediate approvals and final completion certificate/documents including but not restricted to commencement certificate(s) and occupancy certificate(s) 8.5)Liaisoning with the Contractors for the smooth implementation of the project.
8.6) Make available to MANYATA 8.6.1) As built layout and building drawings.
8.6.2) As built electrical drawings.
8.6.3) As built sanitary and water supply drawings.
8.6.4) As built drawings for all other systems , 8.6.5) Completion certificates from Statutory Bodies.(On completion, all these drawings will be become exclusive property of Manyata) Page 19 of 32 Service Tax Appeal No. 917 of 2011 8.7) The Project Development Managers shall be responsible for certification at every stage of works commencing from all the drawings, from the foundation to the completion and all stages applicable thereto and as set out in this Agreement; (such certification to cover the recommendation to release payments) 8.8) The Project Development Manager shall wherever applicable support such Certification with the report of specialist whose services the Project Development Managers may have taken or have to take for such certification;
8.9) The Project Development Managers shall carry out the services with due diligence and efficiency and shall exercise such skill and care in the performance of the services as is consistent with recognized professional standards, 8.10) The Project Development Managers shall act at all times so as to protect the legitimate interests of MANYATA and will take all reasonable steps and exercise reasonable care and caution to keep all expenses to a minimum, consistent with sound contractual and engineering Practices.
8.11) Project Development Managers subject to the contract shall have complete control of the personnel performing the Services
9) LICENCE TO THE MANAGER:
During the period of development, as long as there is no breach of the terms of the agreement, the Project Development Managers shall have irrevocable licence and authority to enter upon the site for the purpose of carrying out its functions and obligations under this Agreement without reference to MANYATA;
10) DEVELOPMENT PLANNING.
Project Development Managers shall during the development be entitled to take decisions on planning the implementation of the contract, execution of the work, the priority of works to be done changes to be made in any works items and the day to day management of the development of the project which in the opinion of the PDM is reasonably necessary for the purpose of progress of the Development Page 20 of 32 Service Tax Appeal No. 917 of 2011
11) ALTERATIONS RECOMMENCED BY THE PROFESSIONAL TEAM:
In the event of the Professional Team recommending any alteration to the Plans or the Specifications, the Project Development Managers shall in consultation with the professional team approve such alterations ;(provided such alterations are not in conflict with the overall development plan)
12) TERMS OF EMPLOYMENT OF NECESSARY PERSONS:
12.1) MANYATA shall appoint as recommended by the Project Development Managers, the Building Contractor, all nominated Sub-contractors and/or specialist Sub-Traders the members of the Professional Team and all other third parties required to be appointed to carry out functions in connection with the Development all of whom are in Clause 12.2 called 'Necessary Persons'; But none of these personnel shall be deemed to be in the employment of Manyata, unless specifically stated.
12.2) The Project Development Managers shall use all reasonable endeavours to ensure that all Necessary Persons are engaged for the Development and successful completion thereof;
13) COPIES OF CONTRACTS/SITE MEETING REPORTS:
Copies of all contracts relating to the Development and/or each Approved Letting and/or any Approved be supplied to MANYATA by Project Development Managers and vice versa as soon as possible after their being entered into. Project Development Managers shall ensure that copies of all Architects Certificates, variations and orders are sent to MANY ATA on its issuance. Report of the site meetings shall be made available MANYATA;
14) MANYATA TO PROVIDE FOR FINANCE AS REQUESTED:
It shall be the responsibility of MANYATA to make payments and arrange for funds as per the cashflow charts or when required for the Development and payments under several accounts as agreed from time to time and recorded in the Minutes of the Meeting held between Project Development Managers and MANYATA without prejudice to the other obligation of MANYATA to pay under any other clause of this Agreement;Page 21 of 32
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15) PAYMENTS BY MANYATA 15.1) MANYATA shall endeavour, within 14 days of the issue of a Project Development Managers of the full net amount shown on such Certificates, make payments to the person entitled;
However, delay in making the payments is likely to cause delay in the completion of the project.
15.2) MANYATA shall endeavour to pay all proper fees of the Professional receipt by MANYATA of a written demand by Project Development Managers;
15.3) MANYATA shall pay for all the expenses of the Development including the following but not limited to the same:
a) Travel expenses for Development; (to the concerned personnel)
b) All expenses for coordination with several agencies involved in the Development;
5.4) COMPUTATION OF ACCOUNTS:
On the completion of every Building Managers shall prepare and finalise accounts for the said Building and on such finalisation of accounts for the said Building and on such finalization of accounts, pay to Project Development Managers the balance amounts of the Management Fee after making adjustments for the advances, if any, received by the Project Development Manager:
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18) MANYATA TO PAY FEES ETC:
MANYATA shall pay all fees, charges, fines, penalties and other payments which during the progress of the Development may properly be payable to any Authority, Statutory Body or any competent person in respect of the Development;
xxxxxxxxxxxxxx 29.3) WHOLE AGREEMENT Page 22 of 32 Service Tax Appeal No. 917 of 2011 The Parties acknowledge that this Agreement and these conditions contain the whole Agreement between the parties and it has not relied upon any oral or written representations made;
29.4) SUPERSEDES PRIOR AGREEMENTS This Agreement supersedes any prior agreement between the parties whether written or oral and such prior agreements are cancelled as at the Commencement Date but without prejudice to any rights which have already accrued to either of the parties.
10. A plain reading of the agreement particularly Clauses 5, 6, 7 and 8 of the Agreement dated 31.3.2005 which deal with the functions and obligations of the project manager in carrying out and implementing the agreement entered with M/s. Manyata Promoters Pvt. Ltd. reveals that the appellants are required to manage overall implementation of the project viz., the Software Technology Park for which the agreement had been entered between the appellant and M/s. Manyata Promoters Pvt. Ltd.. It states and reveals their obligation and function is implementation of the project and not execution of the project.
On a close reading of few stipulations/clauses of the Agreement, in the said context of the recitals, we find that the Appellants are required to supervise and coordinate all aspects of the development, use of reasonable means to see that the development is completed in accordance with plans and specifications, cash management of the project by providing cash flow charts and estimate charts to M/s. Manyata Promoters Pvt. Ltd., approach Municipality and any other authorities in obtaining approvals; and also they are responsible for certification at every stage of work commencing from the Page 23 of 32 Service Tax Appeal No. 917 of 2011 drawings, foundation, etc.. It is clear that the actual project is executed by appointment of suitable contractors having adequate financial resources and good reputation; subcontractors, team of professionals consisting of architects, quantity surveyors, structural engineers, building services or mechanical and electrical contractors who would be appointed by M/s. Manyata Promoters Pvt. Ltd. on the basis of recommendation by the appellant for completion of the project. The term 'project' is also defined under the said Agreement at Clause 2.9 which means the development of the scheduled property by putting up commercial development, software tech park, hardware tech park, entertainment centre, etc.. The fees for rendering the service prescribed under Clause 5.2.1 to be paid to the appellant is 5% of the expenditure incurred on the construction and development of the project; also the computation of the construction and development expenses are prescribed at Clause 5.2.3. of the agreement. Analysing the stipulations of the said Agreement dated 31.3.2005, it cannot be said that the arrangement between the appellant and M/s. Manyata Promoters Pvt. Ltd. for execution of the project as a whole; on the contrary, it reveals that appellant has been engaged to advise/assist M/s. Manyata Promoters Pvt. Ltd. in implementation and completion of the project. Therefore, the claim of the appellant that they have been appointed to execute the project has been rightly rejected by the learned Commissioner as the activities/performance stipulated under the Agreement clearly discloses that the services rendered in the Page 24 of 32 Service Tax Appeal No. 917 of 2011 management of the project for its completion by engaging suitable contractors, subcontractors, team of professional, obtaining approvals etc.; thus, in the nature of advice, consultancy or technical assistance. No contrary evidence has been placed by the Appellant to rebut the said finding of the Commissioner.
11. The judgment cited by the learned advocate for the appellant particularly Basti Sugar Mills Limited (supra), is not applicable to the facts and circumstance of the present case being on a different set of facts. In the said case by an agreement with Indo Gulf Industries Ltd., who took over the management of running of a sugar mill was alleged to be a Management Consultancy Agreement service and Service Tax was accordingly demanded from the assessee. Analyzing the various clauses of the Agreement between the appellant with Indo Gulf Industries, the Hon'ble Supreme Court concluded that the appellant was entrusted the operation of the factory and various Clauses of the Agreement were to enable the appellant to perform the operation of the factory, smoothly. The Agreement is not for advice or consultancy. Contrary to the said facts, in the present case, the recitals in the Agreements acknowledges the expertise of the appellant in infrastructure area to undertake the work of Project Management and the other Clauses of the Agreement which are in consonance with the object to manage the project for its smooth completion. Page 25 of 32
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14. Similarly, the judgment in the case of CMS (I) Operations & Maintenance Co. P. Ltd. vs. CCE: 2007 (7) STR 369 (Tri.), the issue before the Tribunal was that the appellant and M/s. ST-CMS Electric Company Pvt. Ltd., which had been formed to finance, construct, own and operate 200 MW lignite fired power plant entered into a contract called "Operation and Maintenance Agreement" with obligation to maintain the facility, generate electricity and supply the same to Tamil Nadu Electricity Board as per the Power Project Agreement between the owner and Tamil Nadu Electricity Board on a continuous basis. They received a lumpsum amount every month from the owner as a consideration for operating the plant as per contract. In the said case, the entire operation of the plant was entrusted to M/s. CMC (I) Operations and Maintenance Co. Pvt. Ltd., which is not so in the present case, therefore, the said judgment is also not applicable to the facts of the present case.
15. On the other hand, we find that the judgment referred by the learned Authorised Representative for the Revenue in the case of Jubilant Enpro (supra), the interpretation referred to the definition of 'Management Consultancy Service' can safely be adopted to the present case. In paragraph 6 of the judgment, it was observed as follows:
"6. We have considered the submissions made by both sides. A careful perusal of the appellants services to M/s. Transocean and M/s. Tide Water detailed in para 2 above makes it clear that the appellants were advising the clients about various aspects relating to Management. The services are not executionery in nature and are clearly advisory in nature. The Page 26 of 32 Service Tax Appeal No. 917 of 2011 definition of "Management Consultant" is so worded that the services performed by the appellants clearly fall within its scope and for that one only has to read the definition of "Management Consultant" quoted earlier vis-à-vis the description of impugned services (detailed in para 2) to come to such finding. The expressions like "any service", "either directly or indirectly", "in connection with the management", "in any manner" appearing in the definition of 'Management Consultancy Service' are expressions which are expansionary rather than restrictive. Thus, this definition is wide enough to include advisory services rendered in connection with the management of an organisation. The services rendered to M/s. Transocean and M/s. Tide Water as enumerated earlier clearly show that predominantly predominant parts of the said services were advisory (not executionary) and the 'advices' (services) were directly connected with the management of the companies the services were rendered to. The said 'advices' (services) rendered related to conceptualizing, devising, development, modification, rectification or upgradation of the working system of the said companies. Advices on commercial aspects, current developments, import and export policy of India, potential problems and solutions, marketing strategies, alerting them about potential misuse of their IPRs, economic & political scenarios etc. were clearly applicable to and useful for the working systems of these companies (M/s. Tide Water & M/s. Transocean) and thus clearly fell within the ambit of role of 'management consultant' as defined earlier. Thus the impugned service clearly qualifies for the status of Management Consultancy Services; some of its minor fringes being subsumed thereunder by virtue of Section 65A(2)(5) of Finance Act, 1994. The appellants' attempt to elucidate the meaning of Management Consultancy by reference to Page 27 of 32 Service Tax Appeal No. 917 of 2011 meaning of the word 'Management' is not really germane because the expression "Management Consultant" and "Management Consultancy Service"
are clearly defined in the Finance Act, 1994 itself and therefore one doesn't have to, indeed one cannot, look beyond the statutory definition for the purpose of classification in this case. It is well settled that for the interpretation of statutes one has to go by the definition of a 'term' contained in the statute regardless of its dictionary or other meanings or its definitions in other statutes. The service which was the subject matter of M/s. Glaxo Smithkline Consumer Healthcare v. CC, Mumbai-II (supra) was essentially in regard to market development, marketing and sales and hence was not similar to the impugned service. The service involved in the case of Bharti Televentures (supra) was essentially liaisoning. Indeed, none of the other case laws cited by the appellants for pressing that the impugned service is not Managements Consultancy Service dealt with service of the nature described in para 2 above."
In the aforesaid judgment, the Tribunal has observed that the definition of 'Management Consultancy Service' as provided under Section 65A of Finance Act,1994 is very clear as the term contained in the statute indicates that services rendered relating to conceptualising, devising, development, etc., of the working system of the said companies; advising on commercial aspects would come under the scope of 'Management Consultancy Services'.
16. In the present case, commencing from identification of the contractors, sub-contractors, professional team, day-to-day management of cash flow, completion of the project in Page 28 of 32 Service Tax Appeal No. 917 of 2011 accordance with plan, etc., with active participation and advice of the appellant from time-to-time rendered to M/s. Manyata Promoters Pvt. Ltd., fall within the scope of advice, consultancy or technical assistance. Besides the statements of various persons recorded from time-to-time, reveal that the activities by the appellant acknowledge to be in the nature of managerial service rendered to M/s. Manyata Promoters Pvt. Ltd. Besides, we find that the appellant had collected Service Tax as per Clause 5.2.1 of the Agreement in few instances from M/s. Manyata Promoters Pvt. Ltd. but not paid the same to the department. Thus, the Project Development Management Fee collected by the Appellant squarely fall under the category of 'Management Consultancy Service' and taxable service during the period under dispute. The claim of the Appellant that it becomes taxable only with effect from 01.06.2007 under the 'Management or Business Consultancy Service', in our view is not sustainable in view of the facts and circumstances of the case discussed as above.
17. The next issue to be addressed is whether extended period of limitation could be invoked against the appellant for recovery of duty. The learned Commissioner in the impugned order while confirming the demand for extended period held that the appellant has not taken registration even though they have provided taxable service and also collected service tax by issuing debit notes to the service receivers; also during the financial year 2005-06 and 2006-07, income on account of Page 29 of 32 Service Tax Appeal No. 917 of 2011 services rendered reflected in their balance sheet under the head Project Management fees, thus they were aware of the applicability of service tax under the category of Management Consultancy service. Also, the learned Commissioner recorded that the agreement dated 06.4.2003 found to be not genuine being reported by the Registering Authority. All these factors were cumulatively considered by the adjudicating authority and it is concluded that the Appellant has suppressed the fact of rendering taxable service during the said period and proviso to Section 73(1) of the Finance Act,1994 is attracted. We do not find any discrepancy in the said conclusion of the Ld. Commissioner. The said finding have not been rebutted through material particulars before this Tribunal. Contesting the said findings, it is submitted by the learned advocate on behalf of the appellant that merely collecting service tax on few occasions and not depositing it with the department would not lead to any conclusion that the appellant had suppressed or mis-declared facts to evade payment of service tax. The explanation furnished by the appellant to justify non-payment of service tax is not convincing and hence not acceptable. On the contrary, analysing the statements the learned Commissioner at para 44-45 of the impugned order held that there is mis-declaration and suppression of facts. In these circumstances, invocation of extended period of limitation is sustainable. Consequently, the penalty imposed on the appellant under Section 77 and 78 of the Finance Act, 1994 are also justified. However, penalty imposed under Section 76 along with Section 78 cannot be sustained. Page 30 of 32
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18. On the issue of admissibility of CENVAT credit of the service tax paid on various input services while rendering the taxable service, the learned Commissioner in the impugned order has held that the appellant has not produced any documentary evidence in support of their claim. In other words, the learned Commissioner has not disputed admissibility of CENVAT credit, if any,cggug of the service tax paid on input services used in providing the taxable services, but not allowed the same due to lack of evidence. We are of the view that the appellants are eligible to avail CENVAT Credit of service tax paid on input services subject to production of necessary documents which would be scrutinised and CENVAT credit, if any, admissible be allowed. Similarly, the learned Commissioner also though accepted in principle that benefit of cum-tax value can be extended to the Appellant but did not consider the same, as necessary evidence has not been placed indicating the value charged has been inclusive of tax.
19. In the result, the impugned order is modified and the issue of classification of service under Management Consultancy service and confirmation of the demand of service tax with interest for the period in question and penalty under Section 77 and 78 of the Finance Act, 1994 is upheld; penalty imposed under Section 76 is set aside; cum-tax value and CENVAT credit be allowed subject to scrutiny of the documents. The matter is reamended accordingly to recompute the liability in accordance Page 31 of 32 Service Tax Appeal No. 917 of 2011 with the observations made as above. Appeal is disposed of accordingly.
(Order pronounced in Open Court on 19 .01.2024) (D.M. Misra) Member (Judicial) (Pullela Nageswara Rao) Member (Technical) rv Page 32 of 32