Where the assessee company executed a works contract of design, development, commissioning etc., of an oil free compressor system for its client during the period 1997–2001 it was held that the assessee is not liable under ‘consulting engineering services’ –
(i) since services rendered by ‘companies’ were not liable prior to 1.5.2006 under this category;
(ii) since the assessee company’s service fall under works contract services which was brought into the ambit of service tax only w.e.f. 1.6.2007.
CASE LAWS DETAILS :- CST Vs Turbo tech Precision Engineering Pvt. Ltd. (2010) 18 STR.545 (Kar)
The revenue has come up in this appeal being aggrieved by the order of the CESTAT in Order-in-Appeal No. 59/2004-ST in Final Order No. 1068/06 date 15.06.2006 raising the following substantial questions of law:
a) Whether, the CESTAT was legal and correct in setting aside the impugned OLA No. 59/2004 date 14.06.2004 with consequential relief, when the activities undertaken by the respondent came squarely within the ambit of “Consulting Engineer” service, and service tax was levied on design development only.
b) Whether, the CESTAT was legal and correct in holding that the contracts entered into by the respondents were “works Contracts”, and hence not leviable to service *&x.
e) Whether, ratio of decisions relied on by CESTAT applies to the facts of the present case.
2. The facts leading to this case are as here under: The respondent- assessee is registered under the provisions of Finance Act 1994. The Department holding that the respondent- assessee is rendering services like, design development, design review, installation and commissioning and technology transfer for study and design of oil free compressor systems, brought the respondent – Company within the scope of “Consulting Engineer” service as per section 65(13) of the Finance Act Accordingly, a show cause notice was issued on 10.10.2002 calling upon the respondent- assessee why a service tax of Rs. 23,58,008/- shall not be demanded from it apart from levying interest and penalty under different provisions of the Act The respondent contended that they ore not liable to pay the service tax as Section 65(13) of the Act is not applicable to the respondent- assessee. However, the contention of the assessee was rejected by the Deputy Commissioner of Central Excise (Service Tax Division), Bangalore. Being aggrieved by the same, the assessee filed an appeal before the Commissioner of Central Excise (Appeals), Bangalore, which appeal also came to be rejected. Aggrieved by the concurrent findings, a second appeal was preferred before the CESTAT. CESTAT considering the different provisions of law of the Finance Act, came to be conclusion that the assessee is not liable to pay either service tax or the interest or the penalty levied by the revenue. Accordingly, the appeal of the assessee came to be allowed by the Tribunal
3. Being aggrieved by the same, the present appeal is filed raising the aforesaid substantial questions of law.
4. We have heard the learned counsel for the parties.
5. The main crux of the matter in this case is whether on the date of relevant assessment period the service rendered by the assessee has to be classified under the definition section 65(13), as ‘Consulting Engineer’ and whether the assessee can be brought into tax considering the work executed by the assessee as a Works Contract’.
6. If these two questions are answered in favour of the revenue and against the assessee, the substantial questions of law framed in this appeal are to be answered in favour of the revenue and against the assessee. If the case of the assessee does not fall under section 65(13) of the Act and if the Works contract executed by the assessee during relevant assessment period, cannot be taxed under the Finance Act, then the substantial questions of law framed are to be answered against the revenue and in favour of the assessee.
7. During relevant period, the definition of Consulting Engineer defined under section 65(13) reads as here under.
“consulting engineer” means any professionally qualified engineer or an engineering firm who, either directly or indirectly, renders any advice, consultancy or technical assistance in any manner to a client in one or more disciplines of engineering. Subsequently the definition of Consulting Engineer has been amended under the Finance Act 2006 which has come into effect from 1st May 2006, the definition of viikh reads as here under 65(31) “consulting engineer” means any professionally qualified engineer of any body corporate or any other firm who, either directly or indirectly, renders any advice, consultancy or technical assistance in any manner to any person in one or more disciplines of engineering.
8. Prom the combined reading of the definition of Consulting engineer prior to 2006 and after 2006, it is clear to the Court that the service rendered by the Company had not been included under the definition of consulting engineer prior to 2006 as its is stood under section 65(13). As a matter of fact, this Court has decided the said point in CEA 12/2007 on 1″ April 2010 stating that prior to the Amendment Act 2006, the Companies were not included under the definition of consulting engineer. When we have taken such a view, considering the relevant assessment year in the present case we have to hold that the [service rendered by, the assesses. Company during relevant period cannot be brought under the category of consulting engineer. Ulf the service rendered by the assessee cannot be considered as a consulting engineer, the question of calling upon the assessee to pay the service tax under the Finance Act, does not arise at all. Therefore, the said point has to be answered against the revenue and in favour of the assessee.
9. So far as the execution of the works contract is concerned, the works contract is defined under section 65(105)(zzzza) which reads as under:
(zzzza) to any person, by any other person in relation to the execution of a works contract, excluding works contract in respect cf roads, airports, railways, transport terminals, bridges, tunnels and dams. Explanation..- For the purposes of this sub-clause, works contract’ means a contract wherein,
-(i) transfer of property in goods involved in the execution of such contract is leviable to tax as sale of goods, and
(ii) such contract is for the purposes of carrying out,-
(a) erection, commissioning or installation of plant, machinery, equipment or structures, w nether pre- fabricated or otherwise, installation of elecuical and electronic devices, plumbing, drain laying or other installations for u-ansport of fluids, heating, ventilation or air-conditioning including related pipe work, duct work and sheet metal work, thermal insulation, sound insulation, fire proofing or water proofing, lift and escalator, fire escape staircases or elevators; or
(b) construction of a new building or a civil structure or a part thereof, or of a pipline or conduit, primarily for the purposes of commerce or industry; or
(c) construction of a new residential complex or a part thereof; or
(d) completion and finishing services, repair, alteration, renovation or restoration of, or similar services, in relation to (b) and (c); or
(e) turnkey projects including engineering, procurement and construction or commissioning (EPC) projects.
10. This section has come into force with effect from 1.6.2007. After considering the contract entered into between the assessee and its employer, the case of the assesses falls under section 65(105)(zzzza) Explanation (a) and (e) Even though the assessee’s case falls under the definition of Works contract, but the revenue has no power to call upon the assessee to pay service tax, interest and penalty therein, since the provisions of law has come into force with effect from 01.06.2007.
11. In the present case, contract is for the period between 1997 to 2001. Therefore, the said question is also required to be answered in favor of the assessee mid against the revenue.
12. In view of our findings on these points, we have to answer the substantial questions of law framed against the revenue and in favor of the assessee.
13. Accordingly, the appeal is dismissed.