2015 (10) TMI 980 - AT - Service Tax

Consulting engineer services - classification - appellant contends that NEERI being a registered society is not within the ambit of taxable service which is restricted to service rendered by engineering firms. - revenue contended that they have rendered service in the category of scientific or technical consultancy - revenue has almost entirely relied upon the entry in Wikipedia on the subject of environmental engineer Held That - it is amply evident that the disputed projects do not involve engineering. Levying of tax on the consideration received for the disputed projects on the ground that these arise from rendering consulting engineer service is therefore not sustainable. The appellant has admitted these to be scientific and technical studies. We find that the appellant has registered itself as scientific and technical consultants with effect from 4 th January 2002 shortly after this service was made taxable and has discharged tax liability on the projects admitted as engineering consulting . As the disputed projects are not engineering they were not taxable during the relevant period. Decided in favour of the Appellant.

Summary

Issues:
1. Liability of service tax on projects undertaken by M/s National Environmental Engineering Research Institute (NEERI).
2. Classification of services provided by NEERI as "consulting engineer" or "scientific or technical consultancy."
3. Reliance on Wikipedia for tax determination.
4. Interpretation of engineering disciplines and scientific activities in the context of tax liability.
5. Applicability of tax laws to projects undertaken by NEERI.

Analysis:
1. The judgment revolves around the liability of service tax on projects undertaken by NEERI. The case involves a dispute regarding the service tax liability of NEERI for projects executed between July 1997 and March 2001. The Commissioner of Customs, Central Excise & Service Tax modified the tax liability to &8377; 1,86,17,905, with penalties imposed under sections 76 and 77 of the Finance Act, 1994. NEERI contested the demand, claiming certain projects were not taxable services.

2. The core issue in the judgment is the classification of services provided by NEERI as either "consulting engineer" or "scientific or technical consultancy." The Revenue alleged that NEERI rendered "consulting engineer" services without proper registration, leading to a tax liability of &8377; 2,33,92,441. NEERI contested this classification, arguing that certain projects fell under "scientific or technical consultancy" services, which were taxable only from July 2001. The judgment scrutinizes various projects undertaken by NEERI to determine the correct classification.

3. The judgment highlights the caution against relying solely on Wikipedia for tax determination. It emphasizes that while Wikipedia is a valuable source for general knowledge, it lacks the necessary credibility for making critical tax-related decisions. The judgment underscores the importance of robust and reliable sources in legal proceedings to ensure credibility and accuracy in decision-making.

4. The interpretation of engineering disciplines and scientific activities plays a crucial role in determining tax liability. The judgment delves into the definitions of engineering and science, emphasizing the distinction between the two. It clarifies that "consulting engineer" services pertain to specific engineering disciplines, while scientific activities involve observing phenomena, enhancing knowledge, and contributing to data. This distinction is pivotal in resolving the dispute regarding the classification of NEERI's services.

5. The applicability of tax laws to projects undertaken by NEERI is a significant aspect of the judgment. The appellate authority analyzed various projects categorized under environmental biotechnology, impact assessment, monitoring, policy analysis, and waste management to ascertain their engineering or scientific nature. Ultimately, the judgment concludes that the disputed projects undertaken by NEERI were scientific and technical studies, not engineering activities, thereby setting aside the tax demand of &8377; 1,86,17,905 imposed by the Revenue.

By meticulously examining the issues of tax liability, service classification, reliance on sources, interpretation of disciplines, and applicability of tax laws, the judgment provides a comprehensive analysis of the legal complexities surrounding NEERI's case.