Activity Of Mediator Cannot Fall Under Business Consultant Services, No Service Tax Under RCM Applicable: CESTAT

The Kolkata Bench of the Customs, Excise and Service Tax Appellate Tribunal (CESTAT) has held that the activity of a mediator cannot fall under business consultant services.The two-member bench of P. K. Choudhary (Judicial Member) and P. Anjani Kumar (Technical Member) has observed that the appellants/assessee are not liable to pay any service tax on the reverse mechanism on the services rendered by the mediator. The appellant/assese were admitted to the Board for Industrial and Financial Reconstruction (BIFR) and a Scheme for Financial Reconstruction was sanctioned. In terms of the Scheme, dues of current unsecured creditors, including OCP-MP Morocco, to the extent of 11% of the overdues were proposed to be waived off. A waiver of 70% was granted in respect of non-current unsecured creditors, including M/s Group Chimique Tunisien (GCT). An appeal was filed before the Appellate Authority for industrial and financial reconstruction, which remanded the matter back to BIFR with a direction to the Bank to grant a similar dispensation to M/s Group Chimique Tunisien (GCT). The order was challenged by the appellant company before the High Court and the Supreme Court. In subsequent proceedings, the BIFR directed the appellants to resolve the settlement of outstanding dues with GCT and submit a completion report to the Board and MA (SBI). The appellants entered into an agreement and appointed M/s Cotunace to mediate and get the matter settled with GCT for a mediation fee of USD 10,00,000.00, which was paid by the appellants to M/s Cotunace. The appellants deposited the service tax under the head "Management Consultant's Service" on a reverse charge basis under protest. The appellant felt that the fees paid to M/s Cotunace did not qualify under any category of taxable service and, therefore, filed a refund. The Department issued a show-cause notice proposing to reject the refund claim and the claim was rejected by the Order-in-Original and the rejection was upheld. The appellants submitted that the sine qua non for taxability of a service provided by a management or business consultant is that it should be in connection with the management of any organization. The appellant submitted that in the absence of any form of advice or assistance with respect to the management of the finances of the appellant, the activity by the Mediator, which is executory in nature, cannot fall under the category of a management or business consultant service. The Appellant further submitted that while undertaking the mediation activity, the mediator is expected to possess the skills of negotiation and communication to resolve the disputes relating to outstanding dues between the parties and not in any area of management of the Appellant Company. In the absence of any expertise or performance of an activity relating to expertise provided by the Mediator, the activity can by no stretch be taxed. The CESTAT held that the services rendered by M/s Cotunace do not fall under the management consultancy service in terms of Section 65 (65) of the Finance Act, 1994. The appellants are not liable to pay any service tax on the reverse mechanism on the services rendered by M/s Contunace to the appellants. Any tax paid is liable to be refunded. Case Title: M/s Paradeep Phosphates Ltd. Versus Commissioner of Central Excise, Customs & Service Tax, Bhubaneswar Citation: Service Tax Appeal No.232 of 2012 Dated: 11.08.2022 Counsel For Appellant: CAs Ajay Sanwaria, Shreya Mundhra Counsel For Respondent: Authorized Representative K. Chowdhury Click Here To Read/Download Order

Activity Of Mediator Cannot Fall Under Business Consultant Services, No Service Tax Under RCM Applicable: CESTAT

Mariya Paliwala

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Activity Of Mediator Cannot Fall Under Business Consultant Services, No Service Tax Under RCM Applicable: CESTAT

Mariya Paliwala

This is a premium content Available exclusively to Our subscribers

INR 1099+GST

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This is a premium content
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