ST - Very nomenclature of service 'management consultancy' indicates that it has nothing to do with provisions of facilities, expenditure of which is reimbursed - appellant is not rendering any advice - Demand set aside: CESTAT
By TIOL News Service
MUMBAI, JAN 08, 2015: M/S Century Enka Ltd. entered into an Agreement with M/s. Centak Chemicals Ltd. for the period April 1999 to March 2004 for providing General support services, Operational services, Personnel services and Secretarial services to the latter. From 1 st April, 2004, on the expiry of the first agreement, they entered into two separate agreements for operational facilities and personnel facilities to be provided to M/s. Centak Chemical Ltd.
The clauses read as below-
General Support Services:
1. The use of infrastructural and /or utility facilities.
2. Use of staff engaged in industrial relations, personnel department, etc.
3. Use of fire fighting equipment/facilities.
Direct Operational Services:
1. Provide assistance for waste disposal and use of sewerage system.
Principle of operation
Chapter V - Secretarial Services
CEL shall make available and render and CENTAK shall use as required, Secretarial & Registered office services at Mumbai & Calcutta.
Chapter VII - Reimbursement of Cost
For the Operational, Personnel support and Secretarial services CENTAK will reimburse the proportionate cost to CEL, as agreed and mentioned herein below:
|
Nature of Services
|
Amount of reimbursement per month for Financial year 1999-2000
|
|
Operational Services
|
Rs.1,92,000/-
|
|
Personnel Services
|
Rs.8,000/-
|
|
Secretarial Services
|
Rs.18,000/-
|
|
Total
|
Rs. 2,18,000/-
|
The case of Revenue is that all these services fall within the scope of Management Consultancy service and, therefore, the appellant is liable to pay service tax on the amounts received from M/s. Centak Chemicals Ltd.
As per Section 65(65), Management 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".
A Service Tax demand of Rs.9,15,892/- along with interest and penalties was confirmed by the lower authorities and against this order the appellant is before the CESTAT.
The appellant submitted that the provision of facilities is nowhere covered by the term ‘Management Consultancy' and there is no client to principal relationship between the two entities.
The AR emphasised that any service provided directly or indirectly, in connection with the management of any organization is wide enough to include the activities of the appellant under the definition.
The Bench referred to the clauses of the agreements, the definition of Management Consultant and observed -
++ We find from the clauses of the Agreement that reimbursement is being made by M/s. Centak Chemicals for use of the facilities provided by the appellant. The income received from M/s. Centak Chemicals is reflected in the balance sheet of Century Enka.
++ We find that no services are provided by the appellant in connection with the management of M/s. Centak Chemicals Ltd. They are not rendering any advice or consultancy to M/s. Centak Chemicals Ltd. The very nomenclature of the service "management consultancy" indicates that it has nothing to do with provisions of facilities such as water, effluent treatment, etc. the expenditure of which is all reimbursed to the appellant.
The order confirming the ST demand was set aside and the appeal was allowed.
(See 2015-TIOL-63-CESTAT-MUM)
