TMI Blog2011 (5) TMI 611X X X X Extracts X X X X X X X X Extracts X X X X ..... nducted for the parent company and indicated in the balance sheet as income are repatriated in form of dividend - Decided in favor of the assessee - ST/524/2006-CU(DB) - ST/237/2011 - Dated:- 18-5-2011 - M V Ravindran, M Veeraiyan, JJ. For Appellants : Mr C Hari Shankar, Adv. Mr S Sunil, Adv. For Respondent : Mr Amrish Jain, SDR Per: M Ravindran: This appeal is directed against Order-in-Appeal No.60(GRM)/ST/JPR-I/06, dt. 22/8/2006. 2. The relevant facts that arise for consideration are that the appellant herein is subsidiary of M/s. Gillette USA. The appellant had, on instruction of their parent company, conducted a study viz. "South Asian Market Research" and charged fees from their parent company in the year 2000-01. The Revenue authorities on scrutiny of the balance sheet noticed that the said amounts have been shown as income arriving from 'Management Fees(Consulting fees)'. After calling for explanation from the appellant, a show-cause notice was issued directing them to show-cause as to why service tax amount be not demanded from them along with interest and why consequent penalties and interest be not demanded. The appellants contested the show-cause ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s substituted which would include the activity of the appellant. It is his submission that the definition was substituted by the Finance Act, 2007 and it can be made applicable only prospectively as the said definition was not included as retrospective effect. It is his next submission that the appellant would be eligible and entitled to the benefit of Notification No.6/99-ST dt. 09/04/1999. He would take us through the said notification and submit that the notification squarely covers the assessee's case. It is his submission -that both the lower authorities have relied upon the proviso to the notification which would not be applicable in this case. It is his submission that Notification No.6/99 was rescinded in 2003 and the activities of the appellant were prior to 2003, hence the notification would apply in full force. It is his submission that Circular No.56/5/2003-ST dt. 25/4/2003 would also cover the issue in the appellant's case, as the amounts which were accounted by the appellant as income were received in foreign exchange. It is the alternate submission that the services provided by the appellants were exported and no service tax can be levied. He would submit that the de ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lant is liable to discharge the service tax and consequent interests and penalties. 5. We have considered the submissions made at length by both sides and perused the records. 5.1. The undisputed facts are that the appellant, during the period 2000 and 2001, had shown receipt" of an amount of Rs.4,32,00,000/- and Rs.2,33,11,000/- respectively during the relevant year as income for providing services to their parent company M/s. Gillette USA. It is also undisputed that the amounts received by the appellant were for the market research conducted by the appellant for their parent company. We find that both the lower authorities have not disputed of this fact that the appellant had conducted market research for the suitability of the parent company's products in South Asian market. 5.2. The entire findings of the lower authorities in this case for taxing the amount received under the 'Management Consultancy Service' revolve around the definition of 'Management Consultancy Service'. The said definition during the relevant period reads as under:- "Any person who is engaged in providing any service, either directly or indirectly in connection with the management of any organiz ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ition. Both sides could not produce anything to indicate that this definition was with retrospective effect. In the absence of any evidence, we are of the view that the substituted definition could be only perspective. 5.4. In view of the foregoing, we find that the appellant's services rendered to the parent company could not fall under 'Management or Business Consultant'. 5.5. We also find that during the relevant period, there was a separate category service which included the marketing research activities under Section 65(69) of the Finance Act, 1994. We find that the appellant was not issued any show-cause notice nor demands were raised for including the services rendered by them under Section 65(69) of the Finance Act, 1994. 5.6. As regards the submissions of the appellant that they are not liable to pay any service tax by virtue of Notification No.6/99-ST, we find that it is undisputed that the amounts which were indicated in the balance sheet as income from the consulting fees for market research conducted by the appellant, was received in convertible foreign exchange. It is also undisputed that the said amount has been recorded in the accounts and reflected in the ba ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... authorities needs to be deprecated for more than one reason. The amounts which have been given by the appellant for parent company is in form of dividend, which is for the shares held by the parent company in the appellant's company. It is a common knowledge that dividend is paid to the shareholders only if there is disposable profit. It is common knowledge that profit of the company is arrived only after the entire income and expenditure is accounted for and when there is income over the expenditure. It cannot be, by any stretch of imagination, held that the amounts which have been received by the appellant in convertible foreign exchange for the market research conducted for the parent company and indicated in the balance sheet as income are repatriated in form of dividend. In our view, both the lower authorities have erred in coming to such conclusion and such conclusion is nothing short of words in the notification, which has been always held as impermissible by the various judicial pronouncements. 6. In view of the foregoing reasons, we are of the considered view that the impugned order is incorrect and liable to be set aside and we do so. The impugned is set aside and the ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
