Reply Pondicherry

The Assistant Commissioner of Central Excise, No.14, Municipal Street, Azeez Nagar, Reddiarpalayam, Pondicherry-10.

Dated 22nd May 06

Dear Sir, Sub: ST- Non-Payment of Service Tax on “Management Consultancy Service”- Issue of notice- reg. Ref: Letter C.No:V/30/24/2005- S.Tax dated 12.12.2005. Please refer to your above letter wherein you have demanded Service tax of Rs2,20,000/on the taxable value of Rs.44,00,000/- received by us during the financial year 2001-02 and in 2002-03 in respect of “Management Consultant Service” and further sought to recover interest and penalty under various provisions of the Finance Act, 1994. In this regard we would like to bring to your kind attention the following facts;1)

M/s Creative Polypack Ltd. is a company under the same management with Common Directors and owned by Substantially same shareholders.

2) That even though the amount shown as received from M/s Creative Polypack Ltd. was mentioned in the Accounting Head as “Management Fees”. 3) Both the companies are under the common management and ownership, hence several facilities are provided by M/s Aparana Paper Processing Industry (P) Ltd, Pondicherry to M/s Creative Polypack Ltd, Calcutta and the charges are levied upon M/s Creative Polypack Ltd.at the year end to ensure equitable distribution of profit amongst the group companies. The charges shown in to the profit and loss account as received and the charges are not recovered as consideration for providing any consultancy. In our case since Board of directors for both M/s Aparana Paper Processing Industry (P) Ltd, Pondicherry and M/s Creative Polypack Ltd, Calcutta is the same, so it is not possible for M/s Aparana Paper Processing Industry (P) Ltd, Pondicherry to provide any management consultancy to M/s Creative Polypack Ltd independent of their Board of Directors. Both the companies are managed by same set of people who guides the management of the company. It would be absurd to come to a conclusion whereby M/s Aparana Paper Processing Industry (P) Ltd, Pondicherry can provide consultancy on any subject which is independent of the thought process of its Board of directors since it is artificial natural person and cannot have a thinking of its own. Since in our case both the companies are acting under the direction of same management, hence a situation cannot be conceived whereby one company will make the payment to other company for management consultancy, as we have not rendered any service at all to our own concern as well as to any other concern.

We submit that we are central excise registered manufacturer and our books of accounts are open to all the agencies concerned. There is no suppression of fact with intention to avoid any tax. As there was no clear cut clarifications and communications received in our end and that we have not been well versed in service tax matters since we are not in the venture of providing management consultancy service as profession , the liability under service tax statutues couldnot be followed. Records on receipt of the show cause notice from the dept we obliged with the due respect we paid the service tax Rs. 2,20,000 with interest Rs. 1,58,153 up to 09/5/06 and the necessary challan copy enclosed herewith. We humbly put forth that due to lack of knowledge on service tax matters only we could not comply with the service tax provisions In the above circumstances we pray not to impose any penalty and drop any further proceedings please.we may be heard in person. Thanking you

Yours faithfully, For Aparana Paper Processing Industry (P) Ltd Authorised signatory