2022 (8) TMI 994 - SC - Service Tax

Classification of services - rendering of services of the nature of advice , consultancy or technical assistance while executing the works contract - Consulting Engineer service or not - HELD THAT - Considering the various services rendered by the assessee like erection/installation/commissioning of goods at customers site and incidentally they may also be providing the services of drawing, design etc., it cannot be said that the services rendered by the assessee was as a consulting engineer. The contract can be said to be works contract . Hence, the assessee cannot be said to be rendering the services as a consulting engineer and therefore liable to pay the service tax. Once, the assessee at the relevant time cannot be said to be consulting engineer and/or rendering services as a consulting engineering the assessee is not liable to pay the service tax on the works contract or the contract rendering services as consulting engineer for the period under consideration namely July, 1997 to December, 2000. No error has been committed by the learned Tribunal in setting aside the order passed by the Commissioner and restoring the Order in Original passed by the Deputy Commissioner dropping the show cause notice and demand of service tax and penalty considering the nature of services rendered by the assessee. All the appeals filed by the Revenue fail and the same deserve to be dismissed - Decided against Revenue.

Summary

Issues:
Dispute over demand of duty and penalty based on service tax for the period July 1997 to December 2000.

Analysis:
The case involved a dispute regarding a show cause notice issued against the respondent-assessee for a demand of duty and penalty related to service tax. The respondent company was engaged in manufacturing goods falling under specific chapters of the Central Excise Tariff Act, and also provided services like construction, civil works, installation, and commissioning of machinery to customers. The Revenue claimed that the assessee collected a substantial sum towards post-clearing activities during the relevant period, making them liable to pay service tax. The original authority dropped the show cause notice, but the Commissioner, through suo moto revision, held that the services provided could be categorized as consulting engineering services, thus attracting service tax.

The matter was taken to the Tribunal, where there was a difference of opinion among the members. The Technical Member upheld the demand of duty, interest, and penalty, while the Judicial Member disagreed, supporting the dropping of proceedings by the Deputy Commissioner. A third member was involved, who ultimately set aside the Commissioner's order and ruled that the services provided did not qualify as consulting engineering services subject to service tax. The Revenue, dissatisfied with the Tribunal's decision, appealed to the Supreme Court.

Upon hearing arguments from both sides, the Supreme Court analyzed the nature of services provided by the assessee. It was observed that while the Commissioner had confirmed the demand of service tax on the basis of considering the services as those of a consulting engineer, a closer examination revealed that the services were more in the nature of a works contract. The Court concluded that since the assessee was not engaged in consulting engineering services during the relevant period, they were not liable to pay service tax. Therefore, the Court upheld the Tribunal's decision to set aside the Commissioner's order and dismiss the Revenue's appeals.

In the final judgment, the Supreme Court ruled in favor of the assessee, stating that the services provided did not fall under the category of consulting engineering, and hence, the demand for service tax was unwarranted. Consequently, all appeals filed by the Revenue were dismissed, and no costs were awarded in the case.