2022 (7) TMI 524 - SC - Service Tax

Non-payment of Service Tax - Consulting Engineer Service - neither the respondent was registered under the Service Tax Act nor it paid the service tax on receipt of payments for such services - scope of definition of consulting engineer under Section 65(31) of the Finance Act 1994 specifically as to whether a body corporate is covered within its sweep prior to the amendment in 2005 - Demand of tax interest and penalty - HELD THAT - Under the Finance Act 1994 the definition of consulting engineer in Section 65(31) covers services provided to a client by a professionally qualified engineer or an engineering firm consisting of professionally qualified engineers. The taxable attribute is that the services must be rendered in a professional capacity - From the relevant provisions under the Finance Act 1994 referred to hereinabove taxable service means any service provided or to be provided. Under the relevant provisions of Finance Act 1994 at many places the word used is person . For example as per Section 68 every person providing taxable service to any person shall pay service tax. Section 69 provides that every person liable to pay the service tax may make an application for registration. In Section 70 also the words used are every person liable to pay the service tax. In many places under the Finance Act 1994 the Parliament/Legislature has used the word person (Sections 68 69 and 70). At this stage Section 3(42) of the General Clauses Act 1897 is also required to be referred to considered and applied. The word person includes any company or association or body of individuals whether incorporated or not. Therefore there is no logic and/or reason to exclude a body corporate from the definition of consulting engineer and to exclude the services of a consulting engineer rendered by a body corporate to exclude and/or exempt from the service tax net. Such an interpretation would lead to anomaly and absurdity. As observed hereinabove it will create two different classes providing the same services which could not be the intention of the Parliament/Legislature. The view taken by the High Court of Karnataka in the case of TCS 2004 (7) TMI 664 - KARNATAKA HIGH COURT and the Calcutta High Court in the case of M.N. Dastur 2005 (2) TMI 11 - HIGH COURT (CALCUTTA) taking the view that a firm and a company can be said to be a consulting engineer as defined under the Finance Act 1994 and liable to pay the service tax as a service provider is agreed upon - thus under the Finance Act 1994 in the definition of consulting engineer a body corporate is included and/or to be read into so as to bring a body corporate being a service provider providing the consultancy engineering services within the service tax net as such it is not necessary to consider whether the subsequent amendment amending the definition of consulting engineer by way of 2005 amendment adding a body corporate within the definition of consulting engineer would be retrospective and/or whether it can be said to be a clarificatory in nature or not and the said issue would become academic now. It is held that the respondent being a service provider providing consultancy engineering services was/is liable to pay the service tax for such services being consulting engineer within the definition of Section 65(31) of the Finance Act 1994 and therefore and thereby liable to pay the service tax under Section 66 r/w Section 68 of the Finance Act 1994 - the matter is remanded to the CESTAT to examine and decide the appeal on other grounds if any raised in the Appeal Memo before it afresh in accordance with law and on its own merits and in light of the observations made hereinabove and the law laid down by this Court in the present judgment and order. Appeal disposed off.

Issues Involved:
1. Definition and scope of "Consulting Engineer" under Section 65(31) of the Finance Act, 1994.
2. Liability of a "body corporate" to pay service tax for services rendered as "Consulting Engineer" prior to the 2005 amendment.
3. Interpretation of taxation statutes and legislative intent.
4. Applicability of judicial precedents and circulars in defining "Consulting Engineer."

Detailed Analysis:

1. Definition and Scope of "Consulting Engineer":
The primary issue revolves around whether a "body corporate" falls under the definition of "Consulting Engineer" as per Section 65(31) of the Finance Act, 1994, prior to its amendment in 2005. The definition initially included "any professionally qualified engineer or an engineering firm" providing consultancy services. The amendment in 2005 explicitly included "any body corporate or any other firm."

2. Liability of a "Body Corporate" to Pay Service Tax:
The respondent, a Chinese government company, entered into a contract with BALCO to provide "Design Engineering Services" and "Project Management & Technical Services." The Revenue argued that the respondent was liable to pay service tax on these services but had failed to do so. The CESTAT had set aside the demand, holding that a "body corporate" was not covered under the definition of "Consulting Engineer" during the relevant period.

3. Interpretation of Taxation Statutes and Legislative Intent:
The court emphasized the importance of interpreting taxation statutes strictly but not literally to the point of absurdity. The legislative intent must be considered to avoid manifest anomalies or contradictions. The court referred to several precedents, including the Karnataka High Court's decision in Tata Consultancy Services v. Union of India and the Calcutta High Court's decision in M.N. Dastur Limited v. Union of India, which supported the inclusion of companies within the definition of "Consulting Engineer."

4. Applicability of Judicial Precedents and Circulars:
The court noted that prior to the 2005 amendment, a Trade Notice dated 04.07.1997 clarified that "Consulting Engineer" included companies. The court also referenced earlier judicial decisions that supported the inclusion of companies within the definition. The court found that excluding "body corporates" would lead to absurd results and create unjust distinctions between different types of entities providing the same services.

Conclusion:
The court concluded that the definition of "Consulting Engineer" under Section 65(31) of the Finance Act, 1994, prior to the 2005 amendment, included "body corporates." Consequently, the respondent was liable to pay service tax for the services rendered. The judgment of the CESTAT was set aside, and the matter was remanded for further consideration of other issues raised in the appeal. The CESTAT was directed to complete this exercise within three months. The appeal was allowed to the extent of clarifying the liability of "body corporates" under the pre-amendment definition of "Consulting Engineer."

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