Management Consultancy Service is Self Service, not Business Support or Auxiliary Service: CESTAT Rules No Tax Applicable [Read Order]

The Customs, Excise and Service Tax AppellateTribunal (CESTAT), Hyderabad Bench, reiterated that management consultancyservice is not covered within the category of Business Support Service or Business Auxiliary Service, it will not be eligible for service tax as it is self service.

The facts are that the appellant Bharathi Cement Corporation Pvt Ltd, discharges applicable Service Tax under Reverse Charge Mechanism (RCM) under the category of ‘Management Consultancy Service’ and avails Cenvat Credit for it.

The appellant was subjected to Excise Audit during which an allegation was raised regarding the non-payment of Service Tax on salary re-imbursements made in respect of expatriate employees to M/s VICAT S.A.

The counsel for the appellant submitted that the appellant pays a part of salary directly to the expats in India. Further, the appellant files Indian Income Tax Returns for the expatriates on their global salary. It has also been submitted that the control, supervision and responsibilities lie entirely with the appellant in the respect of employees.

The counsel denies suppression of facts as alleged in the show cause notice and submitted detailed replies explaining the nature of agreements entered into with the expats.

The opposing counsel relied on Bangalore (Adjudication) ETC v. M/s Northern Operating System Pvt Ltd and submitted that the amounts on which Service Tax was demanded were exclusive of salary paid by the appellant to the expatriate employees.

The tribunal observed that the appellant has paid the demanded amount to the tune of INR 18,57,880/-. It was also noted that some of the employment agreements were entered well before the management consultancy agreement.

Finally, it was found the relationship is that of employer employee and no service tax is leviable post 01.07.2012. However, prior to 01.07.2012, these activities would be in the realm of self service and could not be covered within the category of Business Support Service or Business Auxiliary Service hence not leviable to service tax.

Accordingly, the two member bench of A.K. Jyotishi (Technical Member) and Angad Prasad (Judicial Member), allowed the appeal.

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