Full Judgment
(3) Train the Head office marketing staff for coordinating with the branch office and agents. BCC will also conduct special sales promotion programs in new areas/territories.
(5) Educate/train the staff of MMM/agents/branch offices for sale/service of the STILL/DEXION products all over India.
(7) Coordinate with STILL, Singapore/DEXION, UK for negotiations/finalization of orders against last projects/contracts.
(8) Conduct road shows and exhibitions on behalf of STILL, Singapore/MMM.In addition to the above, the MOU also required M/s BCC to offer services of their "expert executives" for canvassing export orders for the products of M/s MMM in Europe and far eastern Countries as also for working out a system for handling small export orders received by M/s MMM directly. M/s BCC received a sum of Rs 96.97 lakhs from M/s MMM as "assignment fee" for the period 1997 to 2002 in respect of the aforesaid services. According to the MOU, this assignment fee consisted of the following components (a). A sales Commission worked out at the rate of 2% of the Ex-works sales price for all sales made in the domestic and export market.
This would cover the products manufactured by MMM. (b) 1% on the sales price of the agency products namely STILL/DEXION at present and the other line that may be added during the year.
2. The department, in a show cause notice dated 24.1.03, demanded Service lax on the aforesaid amount from M/s BCC alleging that the aforesaid services assigned to them by the MOU constituted three taxable services viz. Management Consultancy, Manpower Recruitment agency service and Market research agency Service. The show-cause notice has invoked the longer period of limitation in terms of Section 73(a) of the Finance Act, 1994. Demand of Service tax was contested by the party both on merits and on limitation. The original authority confirmed the demand of Service tax of Rs 4,83,350/- against M/s BCC under Section 73(2) of the Act and imposed on them penalties under Sections 75A, 76 and 77 of the Act. The first appellate authority upheld the decision of the lower authority in so far as Manpower Recruitment Agency and Market Research Agency were concerned. As regards Management Consultancy, the appellate authority found that the MOU did not indicate that M/s BCC rendered any such service to M/s MMM.The lower appellate authority remanded the case to the original authority for re-quantification of the demand of tax, after setting aside the penalties. The party is still aggrieved by the order of the lower appellate authority. It is submitted by the learned Counsel for the appellants that all the services covered the MOU are "business auxiliary services" as defined under The Finance Act, 1994 as amended by the Finance Act, 2003.
3. I have examined the records and heard both sides. It is submitted by the learned Counsel for the appellants that all the services covered by the MOU are business auxiliary services as defined under Finance Act, 1994 as amended by Finance Act, 2003. He has furnished the definition of "business auxiliary service" which reads as under : (19) "business auxiliary service" means any service in relation to, - (i) promotion or marketing or sale of goods produced or provided by or belonging to the client; or (iv) any incidental or auxiliary support service such as billing, collection or recovery of cheques, accounts and remittance, evaluation of prospective customer and public relation services, and includes services as a commission agent, but does not include any information technology service.
Relying on Clause (iv) of the above definition, learned Counsel has argued that all the services listed out in the MOU are covered by the definition of "business auxiliary service". It is pointed out that the expression "evaluation of prospective customer" denotes market research which is clearly covered by the fourth service mentioned in the list of services in the MOU, which the learned Commissioner (Appeals) treated as market research agency service. According to learned Counsel, the service of conducting market surveys in India for the products of M/s MMM was nothing other than "evaluation of prospective customer", one of the services envisaged under "business auxiliary service". Leaned Counsel has made an endeavour to show that the service of "assisting in appointing/training marketing/service staff" vide the second service in the list of services is not manpower recruitment agency service. It is pointed out that the structure of assignment fee given in the MOU has nothing to do with manpower recruitment agency service. Thus, it is the learned Counsel's argument that there is no valid reason for treating any of the services listed in the MOU as manpower recruitment agency service or market research agency service. Apart from this, learned Counsel has also argued that, there being no computation provision enabling the taxing authority to determine the value of individual services comprised in the total sum of Rs 96.67 lakhs, this case cannot be considered to be falling within the purview of the charging Section (Section 65 of the Finance Act, 1994). This legal plea is based on the Hon'ble Supreme Court's judgment in CIT Bangalore v. BC Srinivasa Setty wherein it had been held thus : The charging Section and the computation provisions together constitute an integrated code. When there is a case to which the computation provisions cannot apply at all, it is evident that such a case was not intended to fall within the charging section The learned Counsel also submits that none of the lower authorities examined the plea of limitation raised by M/s BCC against the demand of Service tax. According to learned Counsel, facts necessary for invoking longer period of limitation under Section 73(a) of the Act were not alleged in the show cause notice.
5. After careful consideration of the submissions, I find that the question to be settled at the outset is whether any of the services listed out by the MOU and assigned to M/s BCC against payment of assignment fee could be held to constitute "manpower recruitment agency service" and "market research agency service". Manpower recruitment agency service means "any commercial concern engaged in providing any service directly or indirectly in any manner for recruitment or manpower to a client". As rightly found by the Commissioner (Appeals), one of the services rendered by M/s BCC to MMM was assistance in appointing/training marketing/service staff. This service was clearly in the nature of service of "directly or indirectly providing in any manner for recruitment or manpower for the client". As regards market research agency, again, this expression as defined under the Finance Act 1994, means "any commercial concern engaged in conduction of market research in any manner in relation to any product, service or utility including all types of customized and syndicated search services". The lower appellate authority has included the service of "conducting all India surveys for STILL & DEXION products" rendered by M/s BCC to M/s MMM in the category of market research services. Learned Counsel has made an attempt to include this service within the ambit of the expression "evaluation of prospective customer:" occurring in the definition of "business auxiliary service". This argument is rather not appealing inasmuch as the expression "evaluation of prospective customer" should be read and understood in its context. This expression exists in the company of "billing", "collection or recovery of cheques" "accounts and remittance" all of which are capable of being evaluated in monetary terms. Hence the expression "evaluation of prospective customer" is not akin to "market research" which is essentially a qualitative process rather than quantitative. In the present case, one of the services listed out by the MOU, is "conducting all India surveys for MMM products", which is nothing but market research for the client.
Thus, I am of the considered opinion that the learned Commissioner (Appeals) has rightly decided the taxability of the fourth service listed out by the MOU. The impugned order requires to be upheld on merits.
6. Learned Counsel has raised an interesting legal plea. It is pointed out that the lower appellate authority has remanded the case to the original authority for re-quantification of Service tax. According to learned Counsel, this re-quantification is impossible inasmuch as the computation provision (Section 67 of the Finance Act, 1994) does not provide the means for this quantification. Relying on the Apex Court's ruling, learned Counsel has contended that in view of this impossibility, it has to be held that the aforesaid services were not intended to be taxable by the Statute. The Hon'ble Apex Court's ruling is that the charging Section and the computation provision together constitute an integrated code. Even according to the Counsel for the appellants, there is a computation provision (Section 67 ibid). In the instant case, the appellants have no case that Section 76 is not applicable to their case. Hence, the Hon'ble Apex Court's ruling is not relevant to them inasmuch as what was ruled by their Lordships was that, when there was a case to which computation provisions could not apply at all, it was evident that such case was not intended to fall within the charging section. Coming to grips with practical terms, the learned Counsel has pointed out that the amount of 96.67 lakhs collected by them from M/s MMM is not capable of being split up and therefore, it is impossible to evaluate the two services under consideration. I find that the agreement between the appellants and their client spelt out services to be rendered by the former to the latter against monetary consideration (assignment fee) to be paid by the client. Hence it must be possible for the parties to the agreement to provide breakup of the assignment fee. The appellants, one of the parties to the MOU, should be able to apportion the assignment fee into components relatable to various services assigned to them under the agreement. For this purpose, the original authority should address them.
7. The learned Counsel, however, is right when he says that none of the authorities has addressed the limitation issue. Admittedly, the demand of Service tax is beyond the normal period of limitation and the show cause has invoked the longer period of limitation in terms of Section 73(a). It is the contention of the appellants that any ground necessary for invoking the longer of limitation was not specifically alleged in the show-cause notice. Apparently, this contention though raised before both the authorities, was not heeded by any of them. The original authority should seriously consider the question as to whether the demand of tax is time-barred or not. Hence the scope of remand ordered by the lower appellate authority will stand widened for enabling the original authority to pass a speaking order on the limitation issue also. It is ordered accordingly. It is made clear that a reasonable opportunity of being heard should be given to the party. In the result, the impugned order stands modified to the extent that the original authority is directed to examine the limitation issue also and pass a speaking order thereon in accordance with law and the principles of natural justice. The appeal is disposed of in these terms.