2006 (1) TMI 29 - AT - Service Tax

Service Tax - Consulting Engineer service - The nature of services rendered by respondents such as basic engineering involving designing, erection, commissioning, training to the clients amounting to

Summary

Issues Involved:
- Appeal challenging the Commissioner (Appeals) order dated 18.06.2003
- Classification of services rendered by the respondent as "Consultant Engineering"
- Interpretation of the definition of "Consulting Engineer's Service"
- Application of service tax on erection and commissioning charges

Analysis:
1. Appeal Challenge: The Revenue filed an appeal against the Commissioner (Appeals) order dated 18.06.2003. The respondent, Agnice Fire Protection Ltd., was found providing services as "Consultant Engineering" during the period from July '97 to June 2000. The show-cause notice issued to them on 18.10.2001 outlined various activities admitted by the appellants, such as receiving work orders, preparation of engineering drawings, procurement of equipment, erection, commissioning, and training of client personnel. The SCN clarified that the supply of materials/equipment did not fall under taxable services. The ACCE confirmed a demand, penalty, and interest, which was set aside by the Commissioner (Appeals).

2. Classification of Services: The Commissioner (Appeals) set aside the Order-in-Original, stating that after the Finance Bill 2003, erection and commissioning charges became liable to service tax. The Commissioner noted that the appellants supplied fire-fighting equipment, undertook erection and commissioning as per consultants' directions, and ensured proper functioning. The issue revolved around whether the appellants could be classified as a "consulting engineer" based on the definition under clause 13 of Section 65. The ld. SDR elaborated on the definition of "Consulting Engineer's Service" and cited relevant judgments to support the Revenue's position.

3. Interpretation of Definition: The definition of "Consulting engineer" was crucial in determining the applicability of service tax. The definition encompassed the rendering of advice, consultancy, or technical assistance by a professionally qualified engineer or engineering firm to a client in one or more disciplines of engineering. The ld. SDR referenced judgments like M.N. Dastur & Company Ltd. vs. Union of India and TATA Consultancy Services vs. UOI to emphasize the scope of the definition. The Board's Circular further clarified that erection and commissioning charges were considered taxable as they involved providing technical assistance.

4. Application of Service Tax: Despite the absence of representation from the respondent, the Tribunal analyzed the nature of services rendered by the respondent during the material time. The Tribunal concluded that the services provided fell within the framework of "consulting engineer's services" as defined in the Finance Act, 1994. The services involved tasks requiring professional engineering skills, including designing, erection, commissioning, and training. The Tribunal upheld the Order-in-Original, with a reduced penalty considering the challenges faced by both the assessees and the Department due to the nascent levy of service tax at the time.

In conclusion, the Tribunal disposed of the appeal by affirming the applicability of service tax on the services provided by the respondent as "Consultant Engineering" and modified the penalty imposed in light of the circumstances surrounding the nascent levy of service tax.