2013 (1) TMI 348 - HC - Service Tax

Services of a Valuer - Ambit and scope of Consulting engineer services under service tax - Service provided to a client - held that - for the purpose of falling within the ambit of consulting engineer , a person should provide advice, consultancy or technical assistance in any one or more disciplines of engineering. From the above discussion, it is apparent that the services rendered by a valuer, whether it be by an engineer or any other person, is not in relation to advice, consultancy or technical assistance in any one or more disciplines of engineering. In the circumstances, the said services would not fall within the ambit of consulting engineer as defined under Section 65(31)/65(48) of the Finance Act, 1994. The services rendered by the petitioners as valuers would not fall within the ambit of services rendered by a consulting engineer as defined under the Finance Act, 1994. The respondents are, accordingly, restrained from levying service tax in respect of services provided by the petitioners as valuer to a client/any person as taxable service liable for payment of service tax as consulting engineer .

Summary

Issues Involved:

1. Whether the service provided by a valuer can be classified as a service provided by a consulting engineer under the Finance Act, 1994.
2. Whether the levy of service tax on valuers who are consulting engineers is arbitrary and discriminatory.

Issue-wise Detailed Analysis:

1. Classification of Valuer Services as Consulting Engineer Services:

The petitioner questioned whether the service provided by a valuer could be considered as a service provided by a consulting engineer under the Finance Act, 1994. The term "consulting engineer" is defined in Section 65(31) of the Act as any professionally qualified engineer or body corporate or firm who renders advice, consultancy, or technical assistance in any manner to any person in one or more disciplines of engineering. The taxable service under Section 65(105)(g) includes any service provided to any person by a consulting engineer in relation to advice, consultancy, or technical assistance in any manner in one or more disciplines of engineering.

The petitioners argued that valuation is not a recognized discipline of engineering and can be provided by individuals with diverse qualifications, including law, economics, accountancy, town planning, and environmental science. They supported this by referencing the syllabus of various colleges and the eligibility criteria for valuation courses, which do not mandate an engineering degree.

The respondents contended that the qualifications for registration as a valuer under the Wealth Tax Rules suggest that a valuer must have an engineering qualification, making the service of valuation a technical job in the field of engineering. They relied on the Madras High Court judgment in Dr. V. Shanmughavel v. CCE, which held that registered valuers of plant and machinery fall within the definition of consulting engineers.

The court analyzed the qualifications prescribed under Rule 8A of the Wealth Tax Rules, which include graduates in civil engineering, architecture, town planning, or post-graduates in valuation of real estate. The court noted that the syllabus for valuation courses includes subjects from various disciplines, not predominantly engineering. Therefore, the services rendered by valuers, whether by engineers or others, do not fall within the ambit of consulting engineering.

2. Arbitrariness and Discrimination in Levying Service Tax:

The petitioners argued that the levy of service tax on consulting engineers providing valuation services is arbitrary and discriminatory since other qualified valuers are not subject to such tax. They cited a government clarification stating that services provided by insurance surveyors and loss assessors, who can be engineers or other professionals, are not taxable as consulting engineer services.

The court agreed with the petitioners, noting that the function of valuers involves preparing valuations based on economic and legal principles, not engineering. The court found that the services provided by valuers, including those who are engineers, do not pertain to advice, consultancy, or technical assistance in any discipline of engineering.

Conclusion:

The court concluded that the services rendered by valuers do not fall within the ambit of services rendered by a consulting engineer under the Finance Act, 1994. Consequently, the respondents were restrained from levying service tax on the services provided by the petitioners as valuers. The petition was allowed, and the rule was made absolute with no order as to costs.