2010 (2) TMI 484 - AT - Service Tax

Consulting Engineer s Service - The department issued a show-cause notice in 2007 proposing that this activity fall in the category of Consulting Engineer and proposed to impose Service Tax on the said activity. The Commissioner held that as the applicants have obtained this designs and drawings for a particular project, this activity amounts to Consulting Engineer and demand was confirmed. Held that - in the light of the decision of Kirloskar Electric Co. Ltd. v. CCE 2007 -TMI - 991 - CESTAT, BANGALORE, that mere supply of drawing, design, technical data, etc, was not covered under definition of Consulting Engineer . Further cbEC Circular No. 36/4/01-CX, dated 8.10.2001, clarified that services provided beyond territorial water of India are not eligible to service tax prior to 18.04.2006. thus there is a strong case for the waiver of pre-deposit.

Summary

Issues:
1. Whether the activity of mere supply of drawings and designs falls under the category of "Consulting Engineer" for imposing Service Tax.

Analysis:
The case involved the appellant obtaining designs and drawings for modernizing their plant, leading to a show-cause notice proposing Service Tax as "Consulting Engineer" activity. Initially dropped, the Commissioner later upheld the demand, considering the designs for a specific project as falling under "Consulting Engineer." The appellant argued against this classification, citing a precedent where mere supply of designs was not deemed as such. Reference was made to a CBEC Circular exempting services beyond Indian territorial waters from Service Tax before 2006. The appellant sought a stay on the tax liability.

The advocate for the appellant contended that the activity did not meet the criteria for "Consulting Engineer," emphasizing the lack of professional advice and technical help provided directly to customers, as per the definition. Additionally, the appellant highlighted the exemption under the CBEC Circular for services provided outside India before 2006, suggesting no liability for Service Tax in this case. The appellant requested a stay on the tax liability during the appeal process.

After hearing both parties, the Tribunal focused on determining whether the mere supply of drawings and designs constituted "Consulting Engineer" activity, rather than a matter of service classification. Dismissing the argument for a classification issue, the Tribunal rejected the contention raised by the Departmental Representative. Acknowledging a strong prima facie case in favor of the appellant, the Tribunal granted a waiver of the pre-deposit of the entire Service Tax amount and penalty, staying the recovery during the appeal period.