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April 2012

(2012) STR J 157 & 158 — Basti Sugar Mills

By Puloma Dalal, Jayesh Gogri
Chartered Accountants
Reading Time 1 mins
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Manufacturer of sugar — Took over management of the sugar mill of another entity for a consideration — Levy of tax as management consultancy agreement — Held, it was management function and hence not liable for tax.

Facts:
The appellant was engaged in the manufacture of sugar in its sugar mill and under an agreement with Indo Gulf Industries Limited, it took over the management of Indo Gulf Industries Limited sugar mill in consideration for certain payment. The Service Tax Department treated the above agreement as a Management Consultancy agreement and demanded service tax on this payment.

Held:
The appellant was in-charge of the operation of the factory and thus was performing the management function. The Tribunal held that no service tax would be applicable for rendering these management functions.

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