2009 (8) TMI 337 - AT - Service Tax

Consulting Engineer- The assessee company was involved in distribution of energy through two schemes, the assessee itself installed the necessary infrastructure for supply of electricity to consumers after collecting the contribution from the latter. For the other scheme known as outright contribution Scheme the material and the labour for installation of the necessary infrastructure for supply of electricity were provided by the consumers at their own cost as supervision charges. The original authority demanded service tax from the assessee in respect of the entire amount contributed /spent by the consumers. The Commissioner Appeals) held that service tax was leviable only on the amount collected by the assessee as supervision charges from the consumers of electricity and remanded the matter to the original authority. Held that- the commissioner (Appeals) cannot remand back the matter as amendment brought to section 35A, also held in the case of MIL India Ltd. v. CCE 2007 -TMI - 1196 - SUPREME COURT OF INDIA., thus the Tribunal remand back the matter to the commissioner (Appeals) to quantify himself service tax leviable on assessee in respect of supervision charges collected by it from consumers.

Summary

Issues:
1. Whether the appellant company was providing taxable service as "consulting engineers service" to consumers of electrical energy.
2. Jurisdiction of the lower appellate authority in remanding the case to the original authority.
3. Applicability of service tax on the supervision charges collected by the appellant from consumers.
4. Ownership of infrastructure and its impact on the taxable service provided by the appellant.

Issue 1:
The judgment revolves around the issue of whether the appellant company, as the successor to the Maharashtra State Electricity Board (MSEB), was providing taxable service in the form of "consulting engineers service" to consumers of electrical energy. The dispute arose from two distribution schemes employed by the appellant, one involving the installation of infrastructure by the company and the other where consumers provided materials and labor. The lower appellate authority held that service tax was leviable only on the supervision charges collected by the appellant from consumers. The appellate authority found that the service tax was applicable to technical advice, inspection, and testing provided by the appellant to consumers under the second scheme. The judgment analyzed the definition of "consulting engineers service" under the Finance Act, 1994, and concluded that the service rendered by the appellant's electrical engineers fell within the ambit of taxable service.

Issue 2:
The second issue addressed the jurisdiction of the lower appellate authority in remanding the case to the original authority. The appellant argued that the lower appellate authority exceeded its jurisdiction by remanding the case. The judgment referred to a Supreme Court decision that limited the power of remand by appellate authorities. It was noted that the lower appellate authority had directed the original authority to quantify the service tax leviable and reconsider the penalty issue, which was deemed as exceeding its jurisdiction. The judgment highlighted the need for the appellate authority to exercise its powers within the defined legal framework.

Issue 3:
The judgment delved into the applicability of service tax on the supervision charges collected by the appellant from consumers. It was established that under the outright contribution scheme, the appellant's electrical engineers provided advice and technical supervision during the installation of infrastructure by consumers. The court concluded that this service fell within the definition of taxable service as per the Finance Act, 1994. The ownership of the infrastructure by the appellant after installation did not negate the taxable service provided by the appellant's engineers during the installation process.

Issue 4:
The final issue addressed the ownership of infrastructure and its impact on the taxable service provided by the appellant. The judgment rejected the appellant's argument that they were providing a service to themselves due to ownership of the infrastructure. It emphasized that the service rendered by the appellant's engineers to consumers during the installation process constituted taxable service under the law. The judgment highlighted that ownership of the property post-installation did not affect the taxable nature of the service provided by the appellant.

In conclusion, the judgment allowed the appeal by remanding the case back to the Commissioner (Appeals) for quantification of service tax on supervision charges and reconsideration of any applicable penalties, ensuring the appellant's right to a fair hearing.