CESTAT, NEW DELHI BENCH: LIAISON WORK IS NOT MANAGEMENT CONSULTANCY SERVICE (In favour of assessee)

In its judgment dated 29^th August, 2012, CESTAT, NEW DELHI BENCH in the case of Bharti Televentures Ltd. vs. Commissioner of Central Excise held that liaison work cannot be considered as “Management or Business Consultancy” and cannot be taxed under of Finance Act 1994.

Issues for Consideration

The issue arises here for consideration is whether the liaison works undertaken by appellant fall under Management Consultancy Service and liable to service tax or not.

Facts of the Case

• The appellant was registered with service tax authorities under “Management Consultancy Service” in respect of Telecommunication services.

• During the course of audit of their records for the years 2000-01, 2002-03, it was observed that the appellant did not pay service tax on “liaison charges” received by them from their clients.

• Revenue was of the view that the liaison work done by the appellant was service within the meaning of “Management Consultancy Service” and liable to service tax.

• “Management Consultancy Service” as per sec 65(65) means any person who is engaged in providing any service either directly or indirectly in connection with the management of any organization in any manner and includes any person who renders any advice, consultancy or technical assistance relating to conceptualizing, devising, development, rectification or upgradation of any working system of any organization.”

• From the Books of Account of the appellant , it was seen that one of their clients namely M/s Bharti Telesonic Ltd (“BTL” for short) was in the process of negotiating with different telecom operators for entering into interconnect agreements.

• And BTL requested vide letter dated 15.4.2002, to liaison with the telecom operators to identify suitable partners and take steps for concluding agreements.

• The appellant vide their letter dated 01.06.2002 informed BTL that their discussion with Hutchison Essar South Limited concluded and had advised BTL to sign the agreement.

• Revenue was of the view, that the above activity done by the appellant was taxable under “Management Consultancy Services”.

• The appellant submits “liaison work” is in the nature of a job to be executed by the management and this work is not in the nature of any advice or consultancy for improving the management of the organization. 

• His argument is that only if an agency is hired for improving the management functions and only if the activity is in the nature of advice or consultancy, the activity can be classified under the taxable entry for “Management Consultancy”.

• Opposing appellant the ld. A.R for revenue submits that the definition section at 65(65) is broad enough to cover any services either directly or indirectly connected with the management of an organization. Laison work is connected with the management of the organization and hence covered by definition at section 65 (65).

• Based on such reasoning a show cause notice, dated 13.07.2005, was issued to the appellant.

• On adjudication the demand was confirmed along with interest and penalty.

• Aggrieved by the order of the Commissioner the appellant has filed this appeal.

Observation of Tribunal

• In the present case Tribunal are of the view that liaison work is not in the nature of any consultancy or advice.

• It is one of the temporary functions that were required for the functioning of the company.

• If a person does the activity of collecting of debts of a company, that person cannot be considered to be doing management consultancy service, though debt collection is a responsibility of the management.

Based on such reasoning and in view of the decisions relied upon by the counsel for the appellant, Tribunal are of the view that liaison work cannot be considered as “Management or Business Consultancy” and cannot be chargeable to service tax.

Regards

CA. Mona Singhal

Partner

Arpit Gupta & Associates

Chartered Accountants

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