Though compliance services were part of management responsibility, such services per se were not covered under the expression “in connection with management of any organisation” of management consultancy services.
Since the appellants relied on CBEC Circular, there was no suppression of facts and extended period of limitation could not be invoked.
Facts:
The appellants were engaged in providing services such as management consultancy, manpower recruitment, consulting engineer services etc. During the period from 2001-2002 to 2004-2005, the appellants also provided compliance services i.e. assistance in relation to complying with the regulation of RBI, Foreign Investment Promotion Board etc., filing application for import export code, returns under Income Tax Act, returns with the office of Registrar of Companies, sales tax returns etc. The Revenue contended that such compliance services were covered under the management consultancy services and hence the appellant had short paid the service tax for the above mentioned period. The appellants put forth the following arguments:
Management covers both strategic and operational level functioning and would include tasks such as planning, organising, staffing, directing, controlling and co-ordinating. He argues that the primary purpose of complying with rules and regulations of the country is only a responsibility of Managers and does not fall within the functions which are considered to be the core of management functions. They placed reliance on the letter no. V/DGST/21-26MC/9/99 dated 28th January, 1999 which clarified that activities in relation to complying with rules and regulations would not be covered under the ambit of management consultancy services and also on TRU letter F. no. 341/21/99-TRU dated 28th January, 1999 clarifying that practitioners providing assistance in relation to ESI and PF regulations, would not be covered under the expression “management consultant”. They also relied on CBEC circular no. 1/1/2001-ST dated 27th June, 2001, wherein it was clarified that if the agency’s role is limited to the compliance of such act or regulations and not governed by any contractual relationship with the advisee company, then such services will not be covered under the scope of ‘management consultant’.” They further placed reliance on the Hon’ble Tribunal’s decision in case of CCE, Chennai vs. Futura Polyesters Ltd. 2011 (24) STR 751 (Tri.-Chennai) ruling that such services (compliance services) shall not be taxable u/s. 65(105)(zr). The appellants in response to the revenue’s argument of meaning of management services relied on the Supreme Court’s decision in case of CCE vs. Parle Exports (P) Ltd. 1988 (38) ELT 741 (SC), that it is laid down by the Hon’ble Supreme Court that a taxing entry should be understood in the same way in which these are understood in the ordinary parlance.
The revenue on the other hand contended that without the compliance services, the receiver of service could not have carried out its managerial function and contended that the definition of “management consultancy services” was extremely broad to cover any service directly or indirectly provided in connection with the management of any organisation in any manner and the ‘inclusive’ part of the definition though was specific, did not restrict the scope of the ‘means’ part of the definition. Further, since the appellants had not included the said details in the service tax returns, a suppression was alleged and therefore justified invoking of extended period of limitation.
Held:
Though compliance with laws was part of the responsibilities of management, such responsibility per se would not bring any activity within the phrase “in connection with the management of any organisation” as already decided in and Futura Polyesters (supra) was being followed. The decision of Parle Exports (supra) as relied upon by respondents, specified that a taxing entry should be understood in its common parlance. CBEC circular should not have been ignored by the adjudicating authority, which stated that compliance services were not management consultancy services.
Since the appellants had relied on the CBEC circular during the relevant period, the demand was held as barred by limitation also. If the public acted relying on such circulars and still the charge of suppression is slapped on them, it can be the worst travesty of justice. So, there was no case for invoking suppression.
