2015 (12) TMI 1058 - AT - Service Tax

Demand of service tax - Consulting engineer service - Held that - Appellant was given the work which included design, engineering, procurement, manufacture, supply, civil works, erection, testing commissioning, reliability run, demonstration of performance guarantees as well as total project management in an integrated manner and on turnkey basis, and any other works reasonably required for the completion of the Facility and/or for safe, trouble free, normal operation of the facility. Therefore, there is force in the appellant s contention that merely because it had entered into four contracts for completing the scope of work would not take away from the fact that it was an operation of erection and commissioning on a turnkey basis and therefore the service rendered was works contract service which was not liable to service tax prior to 1.6.2007 in the light of the judgement of Supreme Court in the case of Larsen & Toubro (2015 (8) TMI 749 - SUPREME COURT). - period of dispute in this case is August 2003 to November 2005. Thus during the relevant period, the appellant being a body corporate was not covered under the definition of consulting engineer as per the above quoted judgement of Delhi High Court and consequently, the service rendered by the appellant could not be classified under Consulting Engineer Service under which the impugned demand is confirmed. - impugned demand is not sustainable. - Decided in favour of assessee.

Issues:
1. Whether the service provided by the appellant constitutes works contract service.
2. Whether the service provided falls under Consulting Engineer Service.
3. Applicability of the judgments cited by the appellant.
4. Interpretation of the definition of consulting engineer during the relevant period.

Analysis:

Issue 1:
The appellant argued that the service provided was a works contract service due to the comprehensive nature of the work undertaken, including design, engineering, procurement, erection, testing, commissioning, and project management on a turnkey basis. The appellant cited the Supreme Court judgment in the case of BSES Ltd. Vs. Fenner India Ltd. to support their contention that the multiple contracts entered into were for operational convenience and did not change the nature of the service provided. The Tribunal agreed with the appellant's argument that the service rendered was works contract service, not liable to service tax before 1.6.2007.

Issue 2:
The Department contended that the service provided by the appellant was Consulting Engineer Service, as each of the four contracts entered into had its own terms and conditions, scope of work, and obligations. However, the Tribunal found that the service provided by the appellant encompassed activities beyond mere consultancy and technical assistance, including the execution of works on a turnkey basis, which aligned more with works contract service rather than Consulting Engineer Service.

Issue 3:
The appellant relied on various judgments, including the Supreme Court judgment in the case of CCE Vs. M/s Larsen & Toubro Ltd., to support their argument that the service provided was not taxable as works contract service before 1.6.2007. The Tribunal found merit in the appellant's reliance on legal precedents, emphasizing the nature of the service provided and the applicability of relevant judgments to the present case.

Issue 4:
The Tribunal analyzed the definition of consulting engineer during the relevant period and noted that the definition was amended with effect from 1.5.2006 to include any body corporate. However, during the period in question (August 2003 to November 2005), the appellant, being a body corporate, was not covered under the definition of consulting engineer. Therefore, the service provided could not be classified under Consulting Engineer Service, as confirmed by the impugned demand.

In conclusion, the Tribunal allowed the appeal, stating that the impugned demand was not sustainable due to the nature of the service provided by the appellant falling under works contract service rather than Consulting Engineer Service. The Tribunal's decision was based on a comprehensive analysis of the contractual arrangements, legal precedents, and the definition of consulting engineer during the relevant period.

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