9911796707
TMI Blog2013 (1) TMI 348X X X X Extracts X X X X X X X X Extracts X X X X ..... a government approved valuer and authorized signatory of the petitioner No. 1. 3. "Service tax" was introduced for the first time in the year 1994 by making provisions in Chapter V of the Finance Act, 1994 (hereinafter referred to as "the Act"). By virtue of Section 84 of the Finance Act, 1997, Sections 65, 66 and 68 of the Act came to be substituted and Section 67 of the Act was amended so as to impose and levy a tax on services rendered inter alia by a "consulting engineer" to a client in relation to one or more disciplines of engineering. At the relevant time when the petition came to be filed, service tax was sought to be levied on the enumerated services including that rendered by a "consulting engineer" as stated above at the rate of 5% on the gross amount charged to the client. 4. Section 64 of the Act provides for extent, commencement and application of the Act and provides that the same shall come into force on such date as the Central Government may, by notification in the Official Gazette, appoint and that it would apply to taxable services provided on or after the commencement of that Chapter. In relation to the service tax on taxable services by a "consulting enginee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that "valuers" of immovable property (other than agricultural lands, plantations, forests, mines and quarries) plant and machinery do fall within the purview of "consulting engineer" and these services shall attract service tax since engineering knowledge is deployed for valuing the subject assets. It was further stated therein that, as such, services rendered by approved valuers as above will attract service tax, they may kindly instruct their members to get themselves registered by filing ST-1 forms duly filled in. 9. The respondent No. 2 herein initiated proceedings vide notice dated 28-6-2001 issued to the petitioner No. 2 seeking imposition of service tax on the service as valuer provided by consulting engineers. It is in this context that the petitioners have filed the present petition posing the aforesaid question of law. 10. The case of the petitioners, as stated in the petition, is that valuation broadly means assessing the worth of something, which may be a tangible asset like land or something intangible like goodwill. Valuation has an impact on economic activity relating to property comprising of land and building, plant and machinery, movables and also intangible ass ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng degree programme in valuation. The admission criterion to the course is that the applicant should be a graduate in any stream, viz., either Science, Commerce, Arts etc. Out of 94 credits prescribed under the programme of studies, majority are for subjects like economics, accounts, valuation, law, real estate management, principles of rating, insurance and loss assessment etc. The Institution of Surveyors conducts examination which is equivalent to a degree and is recognized by the Ministry of Education, Government of India, for recruitment to superior posts and services in the Central Government. Students who pass final examination in valuation discipline are eligible for recruitment as valuers in public sector undertakings. The eligibility prescribed is having passed the 12th Standard Examination in 10+2+3 system of examination with mathematics, physics and chemistry and that the candidate should possess a degree in either, Arts, Science, Commerce or Law. The subjects included in the examinations conducted by the institutions are as under : (i) First examination: Building technology, law, elementary surveying, elements of economics, accounting principles, drawing a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he ratio of this decision is squarely applicable to the facts of the present case and on the very same grounds relied upon in the said decision, the services of valuation cannot be treated as service in any discipline of engineering. 15. It is also the case of the petitioner that rendering of such services cannot be said to be advice, consultancy or technical assistance to a client inasmuch as valuation is the assessment of worth of tangible or intangible assets and would not in ordinary or commercial parlance mean advice, consultancy or technical assistance at all. That the service as a valuer provided to a client by a consulting engineer is not in any discipline of engineering and can at the best be stated to be a discipline of economics and levy of service tax on the value of such service is clearly without jurisdiction and authority of law. According to the petitioners, service as a valuer is neither, advice consultancy nor technical assistance by a consulting engineer to the client and therefore also, the value of such service is not exigible to service tax. It is the case of the petitioner that levy of service tax on the value of service as a valuer when provided to a client ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y the petitioner to submit that valuation is not a branch of engineering, it is contended that the prospectus of Sardar Patel University itself states that this course is imparted by the Faculty of Engineering & Technology of the University, which clearly explains that valuation is a branch of Engineering. According to the respondents, the course content is also mostly in the field of engineering with a few papers in economics and statistics etc. It is submitted that economics and statistics as subjects are taught in almost all branches of engineering and merely a teaching of economics does not make the post graduate course in valuation as not related to engineering. In support of the said contention, reliance is placed on the decision of the Madras High Court in the case of Dr. V. Shanmughavel v. CCE [2007] 6 STT 183. 19. As regards the clarification dated 30-4-2001 issued by the Government on which reliance has been placed by the petitioner, it is submitted that an insurance surveyor and loss assessor is governed by the provisions of the Insurance Act, 1938 as per which any qualified engineer, chartered accountant, cost accountant, actuary or any person holding diploma in insura ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ry provisions. The attention of the court was drawn to the provisions of Section 34AB of the Wealth Tax Act, which makes provision for "Registration of valuers". Referring to the qualifications prescribed under Rule 8 of the Rules, it was submitted that under sub-rule (2) thereof, the qualification for registration as valuer, inter alia, includes a graduate in civil engineering and that under sub-rule (8) thereof, the qualification for registration as valuer, inter alia, includes the qualification of graduate in mechanical or electrical engineering. However, it is not mandatory that in every case, the candidate has to be a civil engineer or a mechanical or electrical engineer, as the case may be. People from other disciplines are also eligible for registration as valuer under Rule 8 of the said Rules. It was submitted that when identical services as valuer are rendered by persons other than civil engineers or mechanical or electrical engineers, the same are not taxable as services rendered by a consulting engineer. Furthermore, consulting engineer envisages services rendered in any of the disciplines of engineering. The very fact that persons with qualifications other than engineer ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... so offered by universities and colleges all around the world, as well as in India, recognize the valuation as a separate course altogether and are very different from any fields or discipline of engineering. Valuation as a discipline, whether in plant and machinery or in real estate, is poles apart from mechanical, electrical or civil engineering. Though a valuation course might contain a subject or two having an engineering background, the discipline of valuation predominantly consists of law, economics, finance, town planning, industrial process and insurance. It was, accordingly, submitted that considering the qualifications required for a course in valuation, even a degree in commerce or arts is sufficient. It was submitted that for the purpose of falling within the ambit of "consulting engineer" as defined under Section 65(31) of the Act, the person has to be a qualified engineer in any one or more disciplines of engineering. However, for the purpose of rendering services as a valuer, the person concerned is not required to be a qualified engineer in any one or more disciplines of engineering. Hence, the services rendered as a valuer even by a "consulting engineer" would not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the assessee under the Wealth Tax Act, then, it cannot be said that the advice is not in the "engineering discipline". The court held that wherever an advice is given by an engineer on the basis of his engineering knowledge, skill and experience, then such an advice would be in the realm of "engineering advice" or at least pertaining to the "engineering discipline". The court was of the view that such an advice would fall in "civil engineering discipline" and that, even adopting the strict view of a taxing statute, it would have to be held that the advice offered by an engineer on the basis of his engineering knowledge in respect of immovable property valuation would certainly amount to an advice which is integrally connected with the "engineering discipline". Therefore, when an "engineer" becomes a "registered valuer" of immovable property or plant and machinery, he is obviously rendering the services as a "consulting engineer" within the meaning of Section 65(48)(g) of the Finance Act. 25. Referring to the qualifications prescribed for becoming a "registered valuer" for immovable property or for plant and machinery, it was submitted that the same are suggestive of the fact that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n to advice, consultancy or technical assistance in any one or more disciplines of engineering, including the discipline of computer hardware engineering, such person is liable to pay service tax as contemplated under Section 65(105)(g) of the Act. In the present case, the court is required to consider as to whether the services rendered by a valuer would fall within the ambit of services rendered by a "consulting engineer" so as to be liable as service tax as such, under the provisions of the Finance Act, 1994. 29. It appears to be common ground between the parties that there is no legislation in India to regulate the profession of valuation. For the restricted purposes of the Wealth Tax Act, 1957, valuation of assets can be carried out by persons who are registered by the Central Government under Section 34AB of the said Act read with Rule 8A of the Wealth Tax Rules, 1957. Both the learned advocates for the respective parties have placed reliance upon the provisions of Rule 8A of the Wealth Tax Rules in support of their respective submissions. 30. In this regard, it may be relevant to refer to Section 34AB of the Wealth Tax Act, which makes provision for registration of valuers ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a post under Government as a gazetted officer; or (b) in a post under any other employer carrying a remuneration of not less than Rs. 2,000 per month, and, in either case, must have retired or resigned from such employment after having rendered service for not less than ten years as a valuer, architect or town planner, or in the field of construction of buildings, designing of structures, or development of land; or (c) as a professor, reader or lecturer in a university, college or any other institution preparing students for a degree in civil engineering, architecture or town planning, or for [any qualification] referred to in clause (i), and must have retired or resigned from such employment after having taught for not less than [ten] years any of the subjects of valuation, quantity surveying, building construction, architecture, or town planning; OR (B) he must have been in practice as a consulting engineer, valuer of real estate, surveyor or architect for a period of not less than ten years and must have acquired experience in any of the following four fields: (a) valuation of buildings and urban lands; or (b) quantity surveying in bui ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... such practice should not be less than fifty thousand rupees in any three of the five preceding years : Provided that in the case of a person, possessing a post-graduate degree in valuation of machinery and plant from a recognized university, the provisions of this sub-rule shall have effect as if, (a) for the words ten years, the words two years had been substituted; (b) for the words fifty thousand rupees in any three of five preceding years, the words fifty thousand rupees in any one of the two preceding years had been substituted." 32. On a perusal of sub-rule (2) of rule 8A of the Rules, it is apparent that for the purpose of registration as a valuer of immovable property (other than agricultural lands, plantations, forests, mines and quarries), a person must (i) be a graduate in civil engineering, architecture or town planning of a recognized university; or (ii) be a post-graduate in valuation of real estate from a recognized university; or (iii) possess a qualification recognized by the Central Government for recruitment to superior services or posts under the Central Government in the field of civil engineering, architecture or town planning; and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . As regards the second and third semester, there are some subjects related to engineering, however, as rightly contended by the learned advocate for the petitioner, out of total credits of 34 in the second semester and 40 in third semester, the credits related to engineering are only eight in each of the semesters. Similarly, in the case of Programme of Studies leading to the Master of Valuation in Plant and Machinery, the syllabus shows that the subjects related to mechanical or electrical engineering are limited to the extent of 8 credits out of 32 in the first semester; 10 credits out of 36 in the second semester and 7 credits out of 36 in the third semester. Thus, the syllabus makes it amply clear that the course in Master of Valuation does not predominantly pertain to any discipline of engineering. 34. The Prospectus of the Master of Valuation (Real Estate) Through Distance Mode (2010-2011) of the Shivaji University, Kolhapur reveals that the subjects which are taught in the said course are Law, Economics, Town Planning, Insurance, Engineering, Statistics and Environmental Science for Proper Understanding of Valuation. In the said prospectus, it is stated that valuation is a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ", 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. 37. The aforesaid view is buttressed by the Service Tax Circular No. 34/2/2001-C.Ex., dated 30-4-2001 (Annexure "F" to the petition) which clarifies the doubts regarding whether services rendered by qualified engineers as insurance surveyor and loss assessor, would come under the purview of service tax levied on the service provided by the "consulting engineer". 38. The said circular clarifies that a number of professionals other than engineers can also be engaged by the insurer for surveying and loss assessments. The very fact that a number of professionals such as Chartered Accountant, Cost Accountant, Actuary or a person holding diploma in relation to insurance ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ngineer as provided under Rule 8A(8) and the prescribed qualifications themselves would speak the necessity of such a person having the knowledge of engineering. The court agreed with the contention raised by the Department that if there was no element of "engineering discipline" involved in the advice or consultancy or technical assistance offered by a registered valuer, there would be no necessity of such a person being an engineer and holding an engineering degree. The court, upon considering the qualifications, was of the view that it is obvious that those qualifications are not merely holding an engineering degree but such persons would be required to have a certain standing as an engineer, which is of quite "high standard". The aforesaid finding of the Madras High Court that for being a registered valuer, an engineering degree is a mandatory qualification, appears to be contrary to the provisions of sub-rules (2) to (8) of Rule 8A of the Wealth Tax Rules. As noticed hereinabove, under sub-rule (2) of Rule 8A of the Rules, which prescribes the qualification for valuer of immovable property (other than agricultural lands, plantations, forests, mines and quarries) civil engineer ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
