2006 (9) TMI 15 - AT - Service Tax

Service Tax Consulting engineer service Turnkey project entered into by respondent is divisible contract as separate bill were raised for designing and engineering work Designing and engineering work liable to service tax

Summary

Issues involved:
- Appeal challenging order of Commissioner (Appeals) setting aside order-in-original demanding payment.
- Determination of whether services rendered by respondent qualify as taxable consulting engineering services.
- Interpretation of "divisible contract" in relation to service tax liability.
- Application of previous judgments by CESTAT in similar cases.
- Analysis of relevant documents such as invoices and contract terms.
- Comparison of facts with previous case law to establish distinction.

Detailed Analysis:

1. Appeal Challenge: The appeal filed by the Revenue challenges the order of Commissioner (Appeals) that set aside the order-in-original demanding payment of Rs. 12,36,516/- along with interest and penalty. The issue at hand is whether the decision of the Commissioner (Appeals) was legally sound.

2. Taxable Consulting Engineering Services: The main contention revolves around whether the services provided by the respondent, including designing and engineering, qualify as taxable consulting engineering services. The Assistant Commissioner initially deemed the services as consulting engineering, while the Commissioner (Appeals) held that the work contracts were comprehensive and that service tax could not be charged for design and engineering activities.

3. Divisible Contract Interpretation: The concept of a "divisible contract" plays a crucial role in determining the service tax liability. The Tribunal analyzed various documents, such as invoices and contract terms, to establish that the respondent had separate charges for designing and engineering services, making the contract divisible for tax purposes.

4. Application of Previous Judgments: The Tribunal referred to previous judgments by CESTAT, such as the Daelim Industrial Co. Ltd. case, to draw parallels and distinctions. The Tribunal highlighted the importance of distinguishing between activities comprising taxable services within a contract.

5. Documentary Evidence Analysis: The Tribunal scrutinized invoices and contractual terms to ascertain the nature of services provided by the respondent. The breakdown of charges for designing and engineering services in invoices, along with clear terms in the contract, supported the argument for tax liability.

6. Comparison with Previous Case Law: The Tribunal compared the facts of the present case with the decisions in previous cases to establish the applicability of legal principles. The Tribunal noted the distinction in the nature of the contract and the absence of a need for further dissection due to the contract's divisible nature.

In conclusion, the Tribunal found that the services rendered by the respondent qualified as taxable consulting engineering services, and the order of the Commissioner (Appeals) was set aside. The original order demanding payment was restored, and the appeal filed by the Revenue was allowed.