Indian Kanoon - Search engine for Indian Law

(2) Liability to pay service tax on miscellaneous expenses incurred on items other than traveling, lodging, boarding and described as infrastructural and establishment expenses.

(3) Liability to service tax in respect of payments received in foreign exchange.

(4) Liability to service tax on expenses incurred in procuring core document and borrowing other services from Head Office and other Mckinsey entities for which no recovery was made from client and service tax has been charged as agent of the principal.

(4) Liability to service tax of expenses incurred in procuring core document and borrowing other services from Head Office and other Mckinsey entities for which no recovery was made from client and service tax has been charged as agent of the principal.

During the course of rendering management consultancy services, the appellants procured core documents from its Head Office for which charges amounting to Rs. 42,65,57,062/- were paid to the Head Office and not recovered. Similarly the appellants borrowed some services from M/s Mckinsey entities as well as its Head Office for which Rs. 45,52,73,707/- were paid to Head Office and other Mckinsey entities and the same were also not recovered from the client as there was a limit in the contract that OPE recoverable from the client will not exceed 15% of the total consultancy charges. The revenue has considered that these services were critical to the job and vital and pivotal to carry out the assignment and therefore the core document charges, borrowed service charges and market research charges incurred by the appellants were liable to service tax. The adjudicating authority further held that since these services were provided by the principal/branches/subsidiary to the noticees and as the noticee was the subsidiary of the principal it had acted as an agent in providing these services and it is imperative that the noticee pays appropriate amount of service tax on the same. The total amount to paid came to Rs. 89,27,55,541/- which was held liable to service tax amounting to Rs. 4,46,37,777/- alongwith interest. It was submitted that the appellants have not been reimbursed by the client in respect of the services borrowed by them and since they were in the nature of information and data available with the agency from which it has been borrowed without any analysis and providing consultancy, they cannot be considered as a management consultancy services at all. Once the adjudicating authority consider them as an agent, an agent cannot be charged service tax for the services received by him. They also cannot be charged as a recipient of the services, if it is considered that the services were provided by Mckinsey, U.S.A. and its entities to them in India as the provision for charging service tax from the recipient came only w.e.f. June 16, 2005 and even in that case show cause notice has not invoked those provisions.