2008 (4) TMI 64 - AT - Service Tax

Agreement involved HCCL undertaking work of engineering design as well as construction of Water Treatment and Distribution Project (TWP) - HCCL did not render engineering consultancy to client - Therefore the impugned amount of service tax paid as Consulting Engineer by assessee (HCCL) was not due to be paid refund of same is allowed

Summary

Issues:
Appeal against rejection of service tax refund claim by HCCL for engineering consultancy services provided under a turn-key contract.

Analysis:
1. Issue of Service Tax Refund Claim Rejection:
- HCCL filed an appeal against the rejection of its claim for a service tax refund amounting to Rs. 2,84,16,309 paid on 8-1-2004 for engineering consultancy services provided to NTDCL.
- The Deputy Commissioner found that HCCL had rendered taxable services as an Engineering Consultancy to NTDCL, leading to the tax payment by HCCL.
- HCCL claimed a refund stating that they had not provided such services and instead implemented a turn-key contract for a Water Treatment and Distribution Project (TWP) for NTDCL.
- The appeal argued that HCCL designed and executed the project itself, not providing engineering consultancy services to any other party.

2. Interpretation of Turn-Key Contract and Service Tax Liability:
- The Tribunal analyzed the nature of the turn-key contract between HCCL and NTDCL, where HCCL undertook both engineering design and construction work for the TWP project.
- Referring to legal precedents, including the Daelim Industrial case, the Tribunal emphasized that a turn-key contract cannot be dissected to separately tax the service portion.
- Clauses of the coordination agreement highlighted the combined obligation of HCCL to perform both engineering and construction work as part of a single turn-key contract.
- The letter from NTDCL confirmed that the Engineering and Construction Contracts were to be treated as a single turn-key contract, rejecting HCCL's liability for service tax as a Consulting Engineer.

3. Decision and Rationale for Allowing the Appeal:
- Considering the contractual arrangements and the actual execution of the project by HCCL, the Tribunal concluded that HCCL did not provide engineering consultancy services to NTDCL.
- The Tribunal found that HCCL's payment of service tax as a Consulting Engineer was not justified based on the contract terms and actual project implementation.
- Relying on the legal principles and precedents cited, the Tribunal allowed the appeal, stating that the impugned service tax amount paid by HCCL was not due.

This detailed analysis of the judgment from the Appellate Tribunal CESTAT, CHENNAI highlights the issues, legal interpretations, and the rationale behind allowing the appeal against the rejection of the service tax refund claim by HCCL.