2006 (2) TMI 12 - AT - Service Tax

Service Tax Consulting Engineers service (1) Work contract (2) Appellant having comprehensive contract for design and various engineering activities (3) Service tax not imposable

Summary

Issues:
Appeal against service tax demand set aside by Commissioner (Appeals).

Analysis:
The judgment pertains to an appeal by the department against the Order-in-Appeal dated 25-2-2005, where the Commissioner (Appeals) had set aside the Order-in-Original confirming the demand of service tax on the respondent. The respondent, an engineering firm engaged in manufacturing engineering goods and executing contracts for various engineering works, was issued a show cause notice for service tax demand based on bills raised from 7-7-1997 to 31-3-2000. The adjudicating authority confirmed the demand, but the Commissioner (Appeals) concluded that the appellants were not liable to pay service tax. The Commissioner provided a detailed finding stating that the work contracts undertaken by the appellants were comprehensive in nature, covering various activities such as design, manufacture, supply, erection, and more. Citing precedents, the Commissioner held that service tax cannot be charged for design and engineering activities within the contract.

The issue in this case was found to be squarely covered by a previous Tribunal decision in the case of Daelim Industrial Co. Ltd. v. CCE, Vadodara, upheld by the Hon'ble Supreme Court. It was noted that the contract entered into by the respondent was comprehensive, and the separate billing for design, engineering, erection, and labor charges was merely for convenience. Consequently, the Tribunal found no merit in the department's appeal and dismissed it, upholding the Order-in-Appeal that set aside the service tax demand on the respondent. The judgment was dictated and pronounced in the Open Court.