2013 (1) TMI 322 - HC - Service Tax

Consulting Engineering Services v/s Scientific and Technical Consultancy Service - assessee contested that services shown as research projects did not fall under the above category prior to 16.7.2001 and for the period prior to 16.7.2001 the scientific and technical consultancy services i.e research projects are not liable to levy of Service tax - Held that - Admittedly, levy of Service Tax on Consulting Engineering Services was introduced with effect from 7.7.1997 by notification No.23/97 dated 2.7.1997 under the Finance Act, 1994 through the Finance Act, 1997. It is also not disputed that Scientific or Technical Consultancy was brought under Service Tax net with effect from 16.7.2001 only. The assessee was not only providing Consulting Engineering Services but also Scientific or Technical Consultancy i.e. Scientific Research. The activities of Scientific Research and Consulting Engineering Services are different. The assessee in their letter dated 25.9.2002 had given a calculation indicating that only Rs. 15,58,750/- is payable towards service tax liability on Consulting Engineering Services (other than for research) for the period 1997-98 to 2001-02. They had included service tax liability on Scientific and Technical Consultancy Services i.e. research also for the period subsequent to 16.7.2001. They have also paid the said amount by TR-6 challans dated 21.1.2002 and 3.6.2002 as noted in para 7 of the order of the Commissioner of Central Excise and Customs (Appeals). Thus the Commissioner of Central Excise and Customs (Appeals), rightly allowed the appeal of assessee and rightly confirmed by Tribunal as the nature of activities undertaken by the respondent was not challenged before it - no substantial question of law arising in this appeal,l hence dismissed.

Summary

Issues:
1. Classification of services provided by the respondent under "Consulting Engineering Services" or "Scientific and Technical Consultancy Service."
2. Liability of the respondent to pay Service Tax from a specific date.
3. Interpretation of the nature of activities undertaken by the respondent.

Analysis:
1. The appeal was filed by the Revenue challenging the order of the Customs, Excise and Service Tax Appellate Tribunal regarding the classification of services provided by the respondent. The respondent, an autonomous body engaged in ship design and research services, contended that its research activities were not liable for Service Tax before a specific date. The Commissioner of Central Excise issued a show cause notice demanding Service Tax, which was contested by the respondent. The Additional Commissioner held that all services rendered by the respondent attract Service Tax, leading to an appeal by the respondent.

2. The Commissioner (Appeals) recognized the distinction between "Consulting Engineering Services" and "Scientific and Technical Consultancy Services." He held that research-related services became taxable only from a certain date and restricted the demand for Service Tax accordingly. The penalties imposed on the respondent were set aside due to the disputed tax liability. The Revenue challenged this decision before the CESTAT, which rejected the appeal, affirming the activities undertaken by the respondent were not under challenge.

3. The Revenue further appealed to the High Court contending that the respondent's services fell under the categories of "Consulting Engineering Services" or "Scientific and Technical Consultancy Service," making them liable for Service Tax from an earlier date. However, the High Court dismissed the appeal, upholding the decisions of the lower authorities. The Court emphasized that the nature of activities undertaken by the respondent determines the tax liability, which was correctly decided by the Commissioner and confirmed by the Tribunal. The Court found no substantial question of law, leading to the dismissal of the appeal at the admission stage without costs.