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2017 (12) TMI 1653 - HC - Service TaxBranch of Foreign Company - Management consultancy services - charges recovered in respect of the borrowed services from other Mckinsey entities - According to the case of the revenue, the appellant could not provide satisfactory explanation and supportive documents for OPE of an amount of ₹ 35,68,38,421/out of total sum of ₹ 40,82,55,661/for the period between October 1998 to March 2003 - inclusion of core documents charges, borrowed service charges as well as market research charges in assessable value - disallowance of abatement of traveling, lodging and boarding expenses - tax on miscellaneous expenses incurred on items other than traveling, lodging, boarding and described an infrastructural and establishment expenses - tax for payments received in foreign exchange - service tax on expenses incurred in procuring core document and borrowing other services from Head Office and other McKinsey entities for which no recovery was made from clients - expenses incurred on core documents and borrowed service charges of which recovery was made from the client - section 66 of the Finance Act,1994 - time limitation. Held that:- As per subsection 4 of section 66, service tax can be levied at the rate of 5% of the value of the taxable services. Sub clause (r) of clause 48 of section 65 provides that the taxable service means any service provided to a client by management consultant in connection with the management of any organization in any manner. Section 67 deals with the valuation of taxable service for charging service taxes. Clause (q) of section 67 provides that in relation to service provided by management consultant to a client, the valuation of taxable service shall be on the basis of the gross amount charged by the such consultant from the client for services rendered in connection with the management of any organization in any manner. Thus, the service tax is required to be charged on the gross amount charged by the management consultant to his client. The case of the appellant is that to enable the appellant to render service to its client, it was necessary for the client to submit necessary data. As the client did not provide the data, the appellant was required to borrow the said data from other Mckinsey entities and other entities. As a matter of fact, the Appellate Tribunal found that no material has been placed on record to show that the data which is procured from other Mckinsey entities was required to be supplied by the client and that due to inability of the client to supply the said data, the appellant obtained it acting as an agent of the client. As per clause (q) of section 67 of the Finance Act,1994, service tax is payable on gross amount charged by the consultant. Thus, a finding of fact recorded is that the appellant procured data which its clients were not under an obligation to provide. The said data was acquired by the appellant for the purpose of rendering management consultancy services in India. It was used in India for rendering taxable service. Therefore, the amount charged to the client for core documents and other borrowed services is in fact on account of services rendered by the appellant in India. The said amount cannot be said to be payable on account of services rendered abroad. Therefore, we are unable to accept the submission that the taxable event did not occur in India and that the act of denying abatement amounts to invoking extraordinary territorial jurisdiction which is not in existence. The other contention which was canvassed was that the appellant has merely arranged services of their foreign entities for and on behalf of their clients and the consideration for making such arrangement is already included in the consultancy fees. This contention based on factual assertions has not been canvassed before the Appellate Tribunal - The contention sought to be raised is that the amount recovered from the customers is in the nature of reimbursement of expenditure and not for providing of service. This factual contention is not agitated before the Tribunal as there is no reference to the such contention raised in the impugned Judgment. Therefore, the same cannot be raised in this appeal. Appeal is dismissed as no substantial question of law is involved.
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