By TIOL News Service

MUMBAI, OCT 07, 2016: THE appellant is registered under the category of 'Credit Rating Agency' since 1998.

Apart from credit rating activity, the appellant also undertakes certain financial advisory services in respect of energy, banking, development, finance, transport and urban infrastructure, disinvestment and risk management. The appellant started paying Service Tax on the aforesaid services under the head of "Banking and Other Financial Services" w.e.f. 16.08.2002 [and accepted by the department] when the term 'body corporate' was included in addition to banking and non-banking financial companies as the provider of such services.

ASCN dated 20.02.2003 was issued demanding Service Tax of Rs.1,50,42,302/- for the period 1999-2000 to 2001-02 by proposing to classify the financial advisory services rendered by the appellant under the category of 'Management Consultancy Service'.

As the demand was confirmed with interest and penalties, the appellant is before the CESTAT.

The appellant submitted that in Board Circular No. B-11/3/98-TRU dated 07.10.1998 it was clarified that information and advisory services, if any, rendered by credit rating agency would not attract Service Tax for the reason that said services do not fall under the definition of 'Credit Rating Agency' services. Therefore, the appellants were bona fide belief that they were not required to pay any Service Tax on the information/advisory services rendered by them. That 'Management Consultancy Service' does not include the financial advisory services; appellant has not rendered any advice in respect to management of any organization.It is also mentioned that there are various correspondences with the DG Service Tax on the issue of taxability of the services in question being an audit objection; appellant have been filing the ST-3 returns regularly; there being no suppression of fact on the part of the appellant, therefore, the extended period of demand could not have been invoked.

The AR justified the order of the original authority.

The Bench observed –

++ On the services in question, the appellant has been paying Service Tax under the head of "Banking and Other Financial Services" w.e.f. 16.08.2002 and the Department had accepted the same. That being so, we do not understand how for the previous period the Department can demand Service Tax on the very same activity under the category of 'Management Consultancy Service'.

++ Advisory service of the appellant is clearly covered under clause (f) of the definition [of "Banking and Other Financial Services" which reads - Advisory and other auxiliary financial services including investment and portfolio research and advice, advice on mergers and acquisitions and advice on corporate restricting and strategy ]. (HSBC Securities & Capital Markets (I) Pvt. Ltd - 2008-TIOL-1241-CESTAT-MUM & Punjab Venture Capital Ltd. - 2008-TIOL-754-CESTAT-DEL relied upon)

++ Onplain reading of definition of 'Management Consultancy Service' it is seen that in the inclusion clause, services of any advice consultancy or technical assistance relating to conceptualising devising, development, modification, rectification or up-gradation of any working system of any organisation falls under the definition of 'Management Consultancy Service'. From the facts of the present case,these services were not provided by the appellant for any organisation.

++ The department has not raised any objection in classifying the advisory services under "Banking and Other Financial Services" by the appellant. Therefore, department cannot take stand that the same service prior to 16.08.2002 was falling under 'Management Consultancy Service' and after 16.08.2002 it is classifiable under "Banking and Other Financial Services".

++ Advisory service provided by the appellant does not fall under the category of 'Management Consultancy Service', however, it is correctly classifiable under "Banking and Other Financial Services". Therefore, the same was not taxable prior to 16.08.2002.

The impugned order was set aside and the appeal was allowed.

In passing: Also see - 2013-TIOL-1869-CESTAT-MUM.

(See 2016-TIOL-2643-CESTAT-MUM)