2016 (11) TMI 1447 - AT - Service Tax

Consulting engineer s services - appellant provided technical assistance for preparation of detailed project reports for water shed development and received payments against such services provided by it - Held that - Professionally qualified engineer or any other firm, who renders any advice, consultancy or technical assistance in one or more disciplines of engineering, falls under the purview of the definition of consulting engineer , contained in Section 65(31) ibid - Since the word or is finding place in the definition between professionally qualified engineer and engineering firm and the appellant being an engineering firm, is falling under the purview of the said taxable service for the purpose of payment of service tax - demand upheld. Penalty - Held that - appellant was under the bona fide belief that only services provided by a professionally qualified engineer should attract payment of service tax - penalties set aside by invoking section 80. Appeal allowed - decided partly in favor of appellant.

Summary

Issues:
1. Whether the appellant is liable to pay service tax under the category of consulting engineer service.
2. Whether the penalties imposed under Sections 76, 77, and 78 of the Finance Act should be upheld.

Analysis:
Issue 1: The main issue in this case was whether the appellant, an engineering firm providing consulting engineer's services, is liable to pay service tax under the taxable category of consulting engineer service. The appellant argued that it is not a professionally qualified engineer and, therefore, the services provided do not fall under the definition of Consulting Engineer's Service as per Section 65(31) of the Finance Act. However, the Tribunal found that the appellant, being an engineering firm, falls under the purview of the said taxable service for the purpose of payment of service tax. The Tribunal noted that the definition includes both a professionally qualified engineer and an engineering firm, and since the appellant is an engineering firm providing taxable services, it is liable to pay service tax under the consulting engineer service category.

Issue 2: The second issue revolved around the penalties imposed under Sections 76, 77, and 78 of the Finance Act. The appellant contended that it did not discharge the service tax liability under a bona fide belief that only services provided by a professionally qualified engineer should attract payment of service tax. Considering this, the Tribunal extended the benefit of Section 80 in this case and set aside the penalties imposed by the authorities below. The Tribunal held that due to the appellant's genuine belief, penalties under Sections 76, 77, and 78 should not be imposed. Therefore, the appeal was partly allowed to the extent of setting aside the penalties imposed under these sections of the Finance Act.

In conclusion, the Tribunal ruled that the appellant is liable to pay service tax under the consulting engineer service category as an engineering firm. However, the penalties under Sections 76, 77, and 78 were set aside due to the appellant's genuine belief regarding the applicability of service tax only to services provided by professionally qualified engineers.