2015 (12) TMI 86 - AT - Service Tax

Demand of service tax - consulting engineer service - reimbursement of the expenses - Held that - Karnataka High Court and the Delhi High Court in C.S.T., Bangalore vs. Turbotech Precision Engineering Pvt. Ltd. - 2010 (4) TMI 344 - KARNATAKA HIGH COURT and C.C.E.& Service Tax vs. Simplex Infrastructure & Foundry Works - 2013 (5) TMI 336 - DELHI HIGH COURT clearly ruled that prior to 1.5.2006, a company registered under the Companies Act, 1956 was not included within the definition of consulting engineer defined in Section 65(31) of the Finance Act, 1994. - respondent/assessee is not liable to remit service tax for providing consulting engineer service during 2001 to March, 2005, prior to 1.5.2006. - Decided against Revenue.

Summary

Issues: Appeal against order allowing relief to assessee on service tax demand for consulting engineer services and inclusion of reimbursed expenses in gross consideration.

Analysis:

1. Service Tax Demand and Under-reporting of Gross Consideration: The case involved an appeal by the Revenue against an order passed by the Commissioner (Appeals) in favor of the respondent/assessee. The appeal was related to the service tax demand of &8377;14,60,386/-, along with interest and penalties, for allegedly under-reporting the gross consideration charged for providing consulting engineer services from 2001 to March 2005. The dispute centered around the inclusion of expenses reimbursed by the assessee in the gross consideration received for the taxable service.

2. Decision of the Appellate Authority: The primary Authority had concluded that expenses incurred by the assessee, such as those on fixed assets, office equipment, travel, tenders, reports, legal fees, etc., should be included in the gross consideration for the service provided. However, the Appellate Authority granted relief to the assessee by excluding these reimbursed expenses from the calculation. As a result, the appeal of the assessee was allowed, leading to the dispute reaching the Appellate Tribunal.

3. Precedents and Legal Interpretation: The Tribunal referred to judgments by the Karnataka High Court and the Delhi High Court in cases like C.S.T., Bangalore vs. Turbotech Precision Engineering Pvt. Ltd. and C.C.E. & Service Tax vs. Simplex Infrastructure & Foundry Works. These judgments clarified that, before 1.5.2006, a company registered under the Companies Act, 1956 was not considered a 'consulting engineer' as defined in Section 65(31) of the Finance Act, 1994. Therefore, based on these binding precedents, the Tribunal concluded that the respondent/assessee was not liable to remit service tax for providing 'consulting engineer' services during the period in question, i.e., 2001 to March 2005.

4. Dismissal of Revenue's Appeal: Considering the legal interpretation and precedents, the Tribunal found no merit in the appeal by the Revenue. Consequently, the appeal was dismissed, and no costs were awarded in this matter. The decision highlighted the importance of legal definitions and precedents in determining tax liabilities and resolving disputes related to the interpretation of tax laws.

This detailed analysis of the judgment provides insights into the issues, legal interpretations, precedents, and the final decision reached by the Appellate Tribunal in this tax dispute case involving service tax demand and the inclusion of reimbursed expenses in the gross consideration for consulting engineer services.