2008 (10) TMI 69 - AT - Service Tax

Appellant, manufacturer, provided technical consultancy to some of their clients - Revenue treating them as consulting engineers seeks recovery of service tax - period in dispute from 30/06/01 to 16/08/03 held that prior to amendment of section 65 in 2006, a manufacturing company merely employing engineers could not be treated as engineering firm therefore, appellant were not covered by the definition of consulting engineer during the period of dispute

Summary

Issues:
Interpretation of the definition of "consulting engineers" under Section 65(31) of the Finance Act, 1994 for the period from 30/06/2001 to 16/08/2003.

Analysis:
The appellant, a manufacturer of holograms, provided technical consultancy services during the disputed period. The Revenue sought recovery of service tax, interest, and penalties, treating them as "consulting engineers." The appellant argued that they were not covered by the definition of "consulting engineers" during that period as they were a manufacturing company, not an engineering firm. They relied on previous Tribunal decisions and contended that amendments to the definition post-dispute did not apply retroactively. The Revenue, however, cited a High Court judgment to support their position.

The Tribunal considered whether the appellant, engaged in manufacturing with occasional consultancy, fell under the definition of "consulting engineers." Relying on its previous decisions, the Tribunal emphasized that merely providing technical consultancy does not transform a manufacturing company into an engineering firm. The Tribunal distinguished between general industrial organizations and engineering firms, noting that specialized engineering knowledge is central to the latter's identity. The Tribunal found that the Revenue's reliance on the High Court judgment was misplaced as it dealt with a different issue regarding the term "engineering firm" in the definition.

Ultimately, the Tribunal held that the appellant was not covered by the definition of "consulting engineers" during the disputed period. Consequently, the service tax demand, interest, and penalties were deemed unsustainable, and the impugned order was set aside in favor of the appellant. The appeal was allowed, and the decision was pronounced in open court on 23/10/2008.