The Commissioner Of Service Tax-1 vs M/S. Dsp Merill Lynch Ltd
2017 Latest Caselaw 6857 Bom

                                          903-39-CEXA-3-27-2017.DOC




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       IN THE HIGH COURT OF JUDICATURE AT BOMBAY
            ORDINARY ORIGINAL CIVIL JURISDICTION


             CENTRAL EXCISE APPEAL NO. 3 OF 2017



 The Commissioner of Central Excise,
 Customs & Service Tax,
 14th Floor, Air India Building,
 Nariman Point, Mumbai - 400 021.                     ...Appellant

         Versus

 M/s. Kotak Mahindra Capital Co. Ltd.
 229, 3rd Floor, Bhaktawar,
 Nariman Point, Mumbai - 400 021.                ...Respondent


                               WITH
            CENTRAL EXCISE APPEAL NO. 27 OF 2017


 The Commissioner of Central Excise,
 Customs & Service Tax,
 14th Floor, Air India Building,
 Nariman Point, Mumbai - 400 021.                     ...Appellant

         Versus

 M/s. DSP Merill Lynch Ltd.
 Mafatlal Centre, 10th Floor,
 Nariman Point, Mumbai - 400 021.                ...Respondent




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                                                  903-39-CEXA-3-27-2017.DOC




 Mr. Pradeep S. Jetly, with Mr. Sham Walve, for Appellant in
      the both matters.
 Mr. Rohan Shah, with Mr. Harsh Shah & Mr. Anay Banhatti,
      Ms. Sunchita Rungfa, i/b Economic Law Practice for
      Respondents in both matters.


                               CORAM:   A.S. OKA AND
                                        RIYAZ I. CHAGLA, JJ.

DATED: 6th September 2017

O R A L J U D G M E N T :- (Per Riyaz I. Chagla J.)

1. We are disposing of the above Appeals preferred by the

Revenue by this common order and judgment. The above

Appeals have challenged the impugned orders passed by the

Customs, Excise and Service Tax Appellate Tribunal, Mumbai

(for short "Appellate Tribunal") dated 3rd February 2016 in

Central Excise Appeal No. 3 of 2017 and 11st January 2016

in Central Excise Appeal No. 27 of 2017 respectively. Both of

the impugned orders have answered the issue as to service

tax being payable on "Merger and Acquisition Services" prior

to 16th July 2001 under the category of "Management

Consultancy Services" in the negative. For the sake of

903-39-CEXA-3-27-2017.DOC

convenience we are referring to the facts in Central Excise

Appeal No. 3 of 2017.

2. The Respondent / Assessee is engaged in professional

advisory / consultancy services, corporate advisory services,

financial advisory services and consulting services in relation

to "Merger and Acquisitions" to various customers / clients.

The Respondent had provided these services without

obtaining service tax registration and had not paid service tax

on the amounts received by them from their customers /

clients for the said services. The Appellant classified the said

services as taxable services under Management Consultancy

Services and issued show cause notice dated 10th April 2006

to the Assessee to show cause why service tax amounting to

Rs.37,69,113/- for the period October 2000 to November

2001 under the provisions of Section 73(1) of Finance Act,

1944 is not payable by the Assessee. The Adjudicating

Authority vide order dated 29th July 2008 held the services

provided by the Assessee to be taxable under Management

Consultancy Services and demanded service tax of

Rs.37,69,113/- along with interest and penalty under the

903-39-CEXA-3-27-2017.DOC

provisions of the said Act. The Assessee preferred an Appeal

before the Commissioner (Appeals). By order dated 31st

January 2011, the Commissioner (Appeals) upheld the order

of the Adjudicating Authority but waived the penalties

imposed under the provisions of the said Act in view of

Section 80 of the Finance Act, 1944. The Assessee preferred

an Appeal before the Appellate Tribunal By the impugned

order dated 3rd February 2016, the Appellate Tribunal

allowed the Appeal of the Assessee. The Appellant has

challenged this impugned order.

3. Mr. Jetly, learned counsel appearing for the Appellant in

both the Appeals has contended that service tax is payable

on Merger and Acquisition Services prior to 16th July 2001

under the category of "Management Consultancy Services".

Mr. Jetly relied upon a board circular No. 1/1/2001-ST

(Section - 37-B) dated 27th June 2001, which was issued for

taxable services and point No.10 of which reads thus:-

"10. Now, therefore, in exercise of the powers conferred under Section 37B of the Central Excise Act, 1944, (as made applicable to service tax by Section 83 of the Finance Act,

903-39-CEXA-3-27-2017.DOC

1994) the Board hereby clarifies that any services rendered in relation to Merger and Acquisition will be covered under the scope of taxable services provided by "management consultant" and these services will be liable to service tax accordingly."

4. Mr. Jetly has drawn our attention to the definition of

management Consultant which has been reproduced in the

impugned order at paragraph 7, which reads thus:-

"Management Consultant means any person who is engaged in the providing any service, either directly or indirectly, in connection with the management of any organisation in any manner and includes any person who renders any advice, consultancy or technical assistance, relating to conceptualising, devising, development, modification, rectification or upgradation of any working system of any organisation."

5. Mr. Jetly has contended that Merger and Acquisition

Services come within the definition of Management

Consultancy and would be included under Management

Consultancy Services prior to 16th July 2001 and hence

would be taxable. Mr. Jetly has contended that the

introduction of Merger and Acquisition Services under the

Banking and Financial Services with effect from 16th July

903-39-CEXA-3-27-2017.DOC

2001 makes no difference as Merger and Acquisition

Services have been at all times a taxable service. Mr. Jetly

has relied upon an order of the Appellate Tribunal in HSBC

Securities & Capital Markets (I) P. Ltd. V. Commr. Of S.T.

Mumbai1 , paragraph 4 of which reads thus:-

"We have given careful thought to the various submissions made by both the sides. The various transactions which are covered by the said demand notice are listed in para-1 above. We have also gone through various agreements between the appellants and the various clients. (As detailed in para-1). On going through these agreements. It is found that the nature of service is purely advisory in nature. All the advices are relating to the financial restructuring relating to business of various clients. It is true that in few cases in addition to advices, certain executory functions have also been carried out.

However, on going through such agreements, we find that these executory functions are consequent to the advice and also again followed up with further advice. It is because of the particular nature of the work/industry that such executory functions have been carried out. We are therefore of the considered view that main function has been advisory in nature and not execution, execution seems to be incidental to the advisory functions. In view of this position, we reject the appellant's contention that their activities are executory in nature and not advisory. In view of this conclusion, we find 1 2014 (33) S.T.R. 530 (Tri. - Mumbai).

903-39-CEXA-3-27-2017.DOC

that first nine case laws mentioned in Para 2 supports the case of Revenue rather than appellant."

6. Mr. Jetly has submitted that the above decision has

held in paragraph No.5 that advisory services in the field of

finance is advisory in nature and would fall under the

definition of Management Consultancy Services which is a

wide definition and not restricted to any particular field of

management. According to him, this decision would apply to

the present case and that "Merger and Acquisition Services"

falls under that "Management Consultancy Services" and

hence is liable to service tax.

7. Mr. Rohan Shah learned counsel appearing for the

Respondent has supported the impugned orders. He has

submitted that a plain reading of the definition of

"Management Consultant" it is clear that Management

Consultant is to be read in connection with management of

an organisation. He has contended that the mere introduction

of "Merger and Acquisition Services" as a separate category

under the "Banking and Financial Services" with effect from

16th July 2001 would show that "Merger and Acquisition

903-39-CEXA-3-27-2017.DOC

Services" were not included in the definition of "Management

Consultant". This service has been brought as a separate

category for the first time and hence would be taxable under

the Banking and Financial Services from 16th July 2001. Mr.

Shah has also relied upon the decision of the Division Bench

of this Court in Indian National Shipowners' Association V.

Union of India2, where entry of (zzzzj) was brought in for the

first time in Section 65 (105) of Finance Act, 1994 and

paragraph 37 of the judgment reads thus:-

"Entry (zzzzj) is entirely a new entry. Whereas entry (zzzy) covers services provided to any person in relation to mining of mineral, oil or gas, services covered by entry (zzzz) can be identified by the presence of two characteristics namely (a) supply of tangible goods including machinery, equipment and appliances for use, (b) there is no transfer of right of possession and effective control of such machinery, equipment and appliances.

According to the members of the 1st petitioner, they supply offshore support vessels to carry out jobs like anchor handling towing of vessels, supply to rig or platform, diving support, fire fighting etc. Their marine construction barges support offshore construction, provide accommodation, crane support and stoppage area on main deck or equipment. Their harbour tugs are deployed for piloting big vessels in and out of the 2 2009 (14) S.T.R. 289 (Bom.)

903-39-CEXA-3-27-2017.DOC

harbour and for husbanding main fleet. They give vessels on time charter basis to oil and gas producers to carry out offshore exploration and production activities. The right of possession in and effective control of such machinery, equipment and appliances is not parted with. Therefore, those activities clearly fall in entry (zzzzj) and the services rendered by the members of the 1st petitioner have been specifically brought to the levy of Service Tax only upon the insertion of this new entry."

8. Mr. Shah has further contended that the services which

were considered in that decision viz. mining services were

held to be not taxable prior to the insertion of entry (zzzzj) in

Section 65 (105) of the Act and drawing an analogy from this

decision, Mr. Shah has submitted that the introduction of

Merger and Acquisition Services with effect from 16th July

2001 as a separate category under the Banking and Financial

Services would also be taxable only from the insertion of the

new entry. The above decision of the Division Bench of this

Court in Indian National Shipowners Association (Supra)

has been affirmed by the Supreme Court in Union of India

Vs. Indian National Shipowners Association 3.

3 2011 (21) S.T.R. 3 (SC)

903-39-CEXA-3-27-2017.DOC

9. Having considered the arguments, we find merit in the

submission of the learned counsel for the Assessee that

"Merger and Acquisition Services" having been introduced for

the first time as a separate category under Banking and other

Financial Services with effect from 16th July 2001 would

show that the said service was never a part of Management

Consultancy Services which has been in existence at all

times. We are of the view that "Merger and Acquisition" is

highly technical and a restrictive term and cannot be related

to the managing of the affairs of the organisation which would

come within the definition of "Management Consultant". We

are also of the view that the decision of Division Bench of this

Court in Indian National Shipowners Association (Supra)

would apply in the present case partially since that case has

considered the issue of introduction of a new entry viz. mining

service in the Finance Act and held that the levy of service

tax on this service would be after the insertion of the new

entry. We accordingly hold that service tax is payable on

Merger and Acquisition Services only upon its insertion in the

Banking and Financial Services with effect from 16th July

2001 and was not leviable prior thereto.

903-39-CEXA-3-27-2017.DOC

10. We accordingly dismiss the Appeals. There shall be no

order as to costs.

       ( RIYAZ I. CHAGLA J. )             ( A.S. OKA, J. )