2004 (7) TMI 664 - HC - Service Tax

Summary

Issues Involved:
1. Liability of a company to pay service tax as a "Consulting Engineer" under Section 65 of the Finance Act.
2. Interpretation of the term "Consulting Engineer" and whether it includes companies.
3. Applicability of exemption notification dated 28-2-1999 retrospectively.
4. Imposition of penalties on the appellant company.

Detailed Analysis:

1. Liability of a company to pay service tax as a "Consulting Engineer" under Section 65 of the Finance Act:
The appellant company, Tata Consultancy Services, challenged the order demanding service tax and penalties, arguing that it is not a "Consulting Engineer" as defined under Section 65(18) of the Finance Act. The court examined whether the definition of "Consulting Engineer" includes companies. The appellant contended that the definition applies only to professionally qualified engineers or engineering firms, not companies. However, the court noted that the appellant had registered under Section 69 of the Act, indicating its liability to pay service tax. The court concluded that the intention of the legislature was to bring consulting engineers, whether individuals, firms, or companies, within the service tax net.

2. Interpretation of the term "Consulting Engineer" and whether it includes companies:
The appellant argued that the term "Consulting Engineer" should not include companies. The court disagreed, stating that the definition clause must be read in the context of the entire statute, including Sections 66(3), 65(72)(g), and 65(18). The court emphasized that the term "firm" in the definition clause should be interpreted to include companies, as excluding them would lead to an absurd result and defeat the legislative intent. The court cited various judgments to support the principle that definitions must be interpreted in context and should not lead to unjust or absurd outcomes.

3. Applicability of exemption notification dated 28-2-1999 retrospectively:
The appellant sought retrospective application of the exemption notification dated 28-2-1999, which exempted services related to computer software from service tax. The court held that the notification did not admit of retrospective exemption and could not be made retrospective by judicial interpretation. The exemption was effective only from the date of the notification, and the appellant was liable for service tax for the period before the notification.

4. Imposition of penalties on the appellant company:
The appellant contended that the penalty was imposed automatically without considering the facts. The court found that the Additional Commissioner had imposed the penalty after observing that the appellant had deliberately flouted the law. The court noted that the appellant had charged service tax to clients but did not remit it to the government and had delayed registration. The court upheld the penalty, stating that it was imposed judicially and there was no scope for interference. The court also noted that the appellant had not raised the issue of penalty before the Single Judge or in the appeal, and it could not be raised for the first time during arguments.

Conclusion:
The court dismissed the appeal, upholding the Single Judge's decision that the appellant company was liable to pay service tax as a "Consulting Engineer" and that the exemption notification did not apply retrospectively. The court also upheld the imposition of penalties, finding no merit in the appellant's contentions.