2001 (4) TMI 2 - HC - Service Tax

Service Tax Consulting Engineers (1) Valuers of plant and machinery (2) Valuers of immovable property (2) Legislative competence (3) Constitution validity.

Summary

Issues Involved:
1. Applicability of service tax provisions under the Finance Act, 1997 to registered valuers.
2. Definition and scope of "consulting engineer" under the Finance Act, 1994.
3. Legislative competence of Parliament to impose service tax on consulting engineers.
4. Alleged discrimination under Article 14 of the Constitution of India.

Detailed Analysis:

1. Applicability of Service Tax Provisions:
The petitioner, an institution of valuers, sought a Writ of Prohibition against the respondent from invoking Section 88, Chapter VI of the Finance Act, 1997 to levy and collect service tax from its members, who are registered valuers under Section 34AB of the Wealth Tax Act, 1957. The respondent argued that services rendered by these valuers fall under the definition of "taxable service" provided by a "consulting engineer" as per Section 65 of the Finance Act, 1994, amended by the Finance Act, 1997. The court examined the definitions and concluded that registered valuers of plant and machinery, who are required to have engineering qualifications, fall within the scope of "consulting engineers" and their services are taxable.

2. Definition and Scope of "Consulting Engineer":
The court analyzed the definition of "consulting engineer" under Section 65(13) of the Finance Act, which includes any professionally qualified engineer rendering advice, consultancy, or technical assistance in engineering disciplines. The court noted that registered valuers of immovable property and plant and machinery must possess engineering qualifications and experience, thus their services involve engineering knowledge and advice. The court rejected the petitioner's argument that valuation services do not constitute engineering advice, emphasizing that the engineering expertise required for valuation integrates it within the "engineering discipline."

3. Legislative Competence:
The petitioner also challenged the legislative competence of Parliament to impose service tax on consulting engineers, arguing it amounts to a tax on profession, which falls under state jurisdiction as per Entry 60 of List II of the Seventh Schedule of the Constitution. The court dismissed this argument, clarifying that service tax on consulting engineers is not a tax on profession but on the services provided, which falls under the legislative competence of Parliament.

4. Alleged Discrimination under Article 14:
The petitioner contended that taxing consulting engineers while exempting other professionals like architects and contractors is discriminatory and violates Article 14 of the Constitution. The court rejected this argument, stating that consulting engineers form a distinct class and the legislative decision to tax them falls within the domain of legislative wisdom, which is not subject to judicial review.

Conclusion:
The court dismissed both writ petitions, holding that registered valuers of plant and machinery and immovable property, who possess engineering qualifications, fall under the definition of "consulting engineers" and their services are taxable under the Finance Act. The court upheld the legislative competence of Parliament to impose service tax on consulting engineers and rejected claims of discrimination under Article 14. The connected miscellaneous petitions were also closed.