Service provided w.r.t. fulfilling Statutory Requirements - whether Management Consultancy Service

PJ/Case Laws/2011-12/1468

Case: Commissioner of Central Excise, Chennai V/s Futura Polyesters Ltd.

Citation: 2011(24) S.T.R. 751 (Tri.- Chennai)

Issue: - Whether service rendered in respect of ESI, PF and the other industrial law is covered under Management Consultancy, if service is not involving any change/improvement in existing system of management organization?

Brief Facts: - Respondent-assessee entered into an agreement with M/s. Futura Polymers Ltd. for rendering –

A. Advise, assistance in an undertake compliance with the following:-

(a) Various taxation matters

(b) Various Local Laws

(c) Export-Import Policy and other laws e.g. Labour Laws.

(d) Labour Laws like EPF, ESIS, Minimum Wages Act and various other Industrial laws related to labour.

B. Training of employees of FPL in Various areas

C. Extent of EPL Research and Development facilities available with IOCL as it works both at Manali, Chennai and Khopoli, Maharashtra especially in chemical and polyester technology.

D. Render assistance and liaison with Government Department at New Delhi and Chennai on matters relating to fiscal policies, imports, exports, fulfillment of export obligations, execution of legal undertakings with the Government, prepare alternative plant including conversion of EPCG routers as and when required by FPL.

E. Overseeing the compliance requirement in regard to Companies Act, including matters related to Board of Directors and Shareholders contractual matters advice and assistance in maintenance of statutory records, filing of required returns and forms etc.

According to department, the amount received for the above should be treated as service rendered by a Management Consultant attracting service tax. Demand was raised in the show cause notice on the ground that the assessee were rendering Management Consultancy service. Demand was confirmed by the Adjudicating Authority and interest was also demanded for the period from 16.10.1998 to 31.03.2000. Penalty under Section 78 as well as penalty under Section 78 were also imposed. The demand was set aside by the Commissioner (Appeals). Hence, Revenue is in appeal before the Tribunal.

Appellant’s Contention: - According to department, the amount received for the above should be treated as service rendered by a Management Consultant attracting service tax.

Reasoning of Judgment: - The Tribunal held that services rendered cannot be treated as Management Consultancy Service in the light of agreement entered by them with Futura Polymers Ltd and Circular dated 20.08.1999 because services rendered by ESI, PF and the other industrial law practitioners are in the nature of providing secretarial assistance in filling up of various returns and forms, maintenance of records, which do not involve any change or improvement in the existing system of management organisation and do not get covered by scope of term ‘Management Consulting’.

It was held that no advice was given by the respondent but what is done is for applying for and obtaining documents, approvals from Government bodies i.e. carrying out activities for fulfilling statutory requirements. These services do not involve any change or improvement in the management of an organization and does not require any specialized knowledge of a Management Consultant but these services are only in the nature of compliance with the statutory requirements. No interference required with impugned order.

Decision: - Appeal dismissed.

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PJ/Case Laws/2011-12/1468

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