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TMI Blog2013 (1) TMI 348X X X X Extracts X X X X X X X X Extracts X X X X ..... as taxable service liable for payment of service tax as "consulting engineer". - SPECIAL CIVIL APPLICATION NO. 9762 OF 2001 - - - Dated:- 27-4-2012 - HARSHA DEVANI AND R.M. CHHAYA, JJ. Anuj Trivedi and Mihir H. Joshi for the Petitioner. Gaurang H. Bhatt for the Respondent. JUDGMENT Harsha Devani, J. - By this petition under Article 226 of the Constitution of India, the petitioner has posed the following question for determination by this Court : Whether service as a valuer can be said to be service provided to a client by a consulting engineer, in relation to advice, consultancy or technical assistance in any manner, in one or more disciplines of engineering, making it a taxable service liable for payment of service tax under the relevant provisions of the Finance Act, 1994 (as amended from time to time)? 2. The facts as appearing in the petition are that the petitioner No. 1 (hereinafter referred to as the petitioner ) is the Gujarat Chapter of the Institution of Valuers representing the interest of about 200 members. The petitioner No. 2 is a government approved valuer and authorized signatory of the petitioner No. 1. 3. Service tax was ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... elation to advice, consultancy or technical assistance in any manner in one or more disciplines of engineering. 7. Under the existing provisions, taxable services is defined under sub-section (105) of Section 65 of the Act. Taxable service under clause (g) thereof is 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 including the discipline of computer hardware engineering. The Explanation thereunder reads thus : Explanation. - For the purposes of this sub-clause, it is hereby declared that services provided by a consulting engineer in relation to advice, consultancy or technical assistance in the disciplines of both computer hardware engineering and computer software engineering shall also be classifiable under this sub-clause. 8. The Office of the Commissioner of Central Excise, Mumbai-I has issued a clarification dated 27-3-1998 addressed to the Institution of Valuers, Maharashtra State Centre, as regards applicability of service tax to valuers clarifying that valuers of immovable property (other than agricultural lands, plantations, forest ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ility of land and the area. 12. According to the petitioner, it appears 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 could be carried out by persons who were registered with the Central Government under Section 34AB of the said Act read with Rule 8A of the Rules framed thereunder. Probably on the basis of one of the alternative eligibility criteria prescribed under the Wealth Tax Act for being registered as a valuer by the Central Government (graduate in civil engineering), the respondents are seeking to classify service as a valuer as a service in a discipline of engineering and therefore, exigible to service tax. 13. According to the petitioner, valuation is not recognized as a discipline of engineering. The service of valuation can be provided by many other qualified persons. Valuation requires knowledge of law, economics, accountancy, town planning, environmental science etc. In support thereof, the petitioner has annexed along with the petition the syllabus of various colleges conducting degree programme in valuation. The admission criterion to the course is tha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ded by any of the persons qualified as aforesaid, the levy of service tax on consulting engineers alone is clearly arbitrary and discriminatory. According to the petitioner, once it is established that valuation is not a discipline of engineering, the value of such services even if otherwise rendered by a consulting engineer will not be includible in the gross value for the purposes of levy of service tax. It is pointed out that a similar issue had arisen as to whether services rendered by qualified engineers as insurance surveyor and loss assessor and would come under the purview of service tax levied on the service provided by consulting engineers. The Government of India considered the issue and came to the conclusion that such service was not in the nature of services in an engineering discipline for the reason that it was a job which could be performed by an engineer and also by other specified professionals, and that the function to be performed by the surveyor/loss assessor was such as would require knowledge of accounting, mathematics, science etc. It is the case of the petitioner that the ratio of this decision is squarely applicable to the facts of the present case and on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d that the required qualifications for registration are prescribed in Rule 8A of the Wealth Tax Rules, 1957. Reference is made to the provisions of Rule 8A of the said Rules to submit that the language of Rule 8A(2) suggests that a graduate in Civil Engineering can become a registered valuer if he fulfils the conditions in Rule 8A(2)(ii). It is further averred in the affidavit-in-reply that the qualification prescribed for becoming a registered valuer for immovable property and plant and machinery under Rule 8A of the Wealth Tax Act, are suggestive of the fact that the valuer must have an engineering qualification or a post graduate qualification specifically in valuation. Therefore, it can be easily interpreted that the service of valuation of immovable property or plant and machinery by a registered valuer is a highly technical job and is in the field of Engineering only. 18. Insofar as the eligibility condition for admission to the post-graduation course for valuation in Sardar Patel University which is graduate in any stream viz. Science, Commerce, Arts etc., on which reliance has been placed by the petitioner to submit that valuation is not a branch of engineering, it is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lth tax liability has to be discharged based on the value of the immovable property or plant and machinery, as the case may be. What a registered valuer does is that he undertakes the valuation of property using valuation techniques and renders advice/consultation regarding the value of property based on which the tax liability is discharged. Similarly, valuation by a registered valuer may be a specified requirement for other purposes; therefore, service rendered, by the valuer is nothing but advice/consultancy. It is, accordingly, submitted that the service provided by a registered valuer in relation to valuation of immovable properties and plant machinery is liable to service tax in the category of consulting engineer and therefore, the action initiated by the Department for recovery of service tax is within the jurisdiction and authority of law. 21. The petitioner has filed an affidavit-in-rejoinder, denying the contentions advanced in the affidavit-in-reply filed by the respondents. 22. Mr. Anuj Trivedi, learned advocate appearing on behalf of the petitioner invited attention to the relevant statutory provisions. The attention of the court was drawn to the provisions of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . It was submitted that for the purpose of valuation, a person does not have to be a graduate in any of the disciplines of engineering and that any person with a background of art, commerce or law can also, after taking an appropriate course, be registered as a valuer. The Valuers Act of South Africa requires a Degree of B. Sc. in property economics or land economy for the purpose of being registered as a valuer or associated valuer. A copy of the Valuers Act of South Africa, along with a list of qualifications recognized by the South Africa Council of Valuers has been annexed to the petition. 23. Inviting attention to the qualifications required by a person for a degree in Valuation under the Valuers Act of Zimbabwe, 1996 as well as the Valuers, Appraisers and Estate Agents Act of Malaysia, the course of land economy offered by the University of Cambridge, the course structure of valuation in real estate taught at Shivaji University, Kolhapur, under the heading Inter Disciplinary Study as well as the course of M. Sc. in real estate valuation offered by Annamalai University, it was submitted that the courses so offered by universities and colleges all around the world, as well ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ding as an engineer which is of quite high standard . The court agreed with the contention raised on behalf of the revenue that as far as the case of valuers of plant and machinery is concerned, there has to be advice, consultancy service or technical assistance in the subjects completely connected with the engineering, and held that such registered valuers of plant and machinery would fall within the definition of consulting engineer and their services of valuation of plant and machinery would be covered as taxable service offered by a consulting engineer . It was further pointed out that in the context of registered valuer of immovable property, the court was of the opinion that a consulting engineer has to use his experience and knowledge of engineering necessarily to arrive at correct valuation of the immovable property. The court further held that the argument that mere valuation of an immovable property is not an advice in the nature of engineering advice is obviously incorrect because where the knowledge in engineering itself is a must and is a basis for giving the valuation for the benefit of the assessee under the Wealth Tax Act, then, it cannot be said that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ch, the petition being devoid of merits, deserves to be dismissed. 27. In the backdrop of the aforesaid facts and contentions advanced by the learned advocates for the respective parties, the main question that arises for the consideration is as to whether the service as a valuer can be said to be a service provided to a client by a consulting engineer in relation to advice, consultancy or technical assistance in any manner, in one or more disciplines of engineering, making it taxable service liable for payment of service tax under the relevant provisions of the Finance Act, 1994. 28. For the purpose of falling within the ambit of definition of consulting engineer as defined under sub-section (31) of Section 65 of the Act, a person has to be a professionally qualified engineer or a body corporate or a firm. Such person should either directly or indirectly render any advice, consultancy or technical assistance in any manner to any person; such advice, consultancy or technical assistance should be in one or more disciplines of engineering. If any service is provided to any person by a consulting engineer in relation to advice, consultancy or technical assistance in any one ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of immovable property (other than agricultural lands, plantations, forests, mines and quarries) and sub-rule (8) which provides for the qualifications for valuer of machinery and plant, are relevant for the present purpose, and read thus : Qualifications of registered valuers. 8A. (1) For the purposes of sub-section (2) of Section 34AB, the qualifications for registration as valuers of different classes of asset shall be as specified in sub-rules (2) to (11). (2) A valuer of immovable property (other than agricultural lands, plantations, forests, mines and quarries) shall have the following qualifications, namely : (i) he must (A) be a graduate in civil engineering, architecture or town planning of a recognized university; or (B) be a post-graduate in valuation of real estate from a recognized university; or (C) 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 (ii) (A) he must be a person formerly employed (a) in a post under Government as a gazetted officer; or (b) in a post under any ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... al or electrical engineering of a recognized university; or (B) possess post-graduate degree in valuation of machinery and plant from a recognized university; or (C) possess a qualification recognized by the Central Government for recruitment to superior services or posts under the Central Government in the field of mechanical or electrical engineering; and (ii) (A) he must be a person formerly employed (a) in a post under Government as a gazetted officer; or (b) in a post under any other employer carrying a remuneration of not less than ₹ 2,000 per month, and, in either case, must have retired or resigned from such employment after having rendered service as a mechanical or electrical engineer or valuer of machinery and plant] for a period of not less than ten years, or (c) as a professor, reader or lecturer in a university, college or institution preparing students for a degree in mechanical or electrical engineering or for any qualification referred to in clause (i), and must have retired or resigned from such employment after having taught for a period of not less than ten years; or 2. he must have been in practice as a consulting engineer o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... engineering, architecture, mathematics, statistics, economics and allied subjects of the said University or an examination recognised as equivalent thereto. The syllabus prescribed for the course shows that the subjects are general in nature. For Master of Valuation in Real Estate, the course titles for the first semester are Principles of Economics, Book Keeping and Accountancy, Elementary Surveying, Introduction to Statistics, Principles of Valuation, Introduction to Computer Applications, Town and Regional Planning, Elements of Law and Jurisprudence; for the second semester are Principles of Insurance and Loss Assessment, Group Discussions, Building Technology-I, Building Technology-II, Law-I, Law-II, Real Estate Management, Principles of Rating, Valuation of Real Estate-I, Urban Land Economics; and for the third semester are Environment Impact Assessment, Finance, Business and Management Studies, Seminar, Maintenance Repairs of Buildings and Dilapidations, Building Technology-III, Valuation in Real Estate, Report Writing and Project Work. On a bare reading of the course prescribed for Master of Valuation in Real Estate, it is evident that the subjects pertaining to civil engi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... jects the only subject related to engineering is Building Construction Practice and in the second year out of eight subjects the only subject related to engineering is Building Repairs and Maintenance. Thus, the syllabi of various Universities for the course of Master of Valuation show that the subjects related to disciplines of engineering are very limited. Further the qualifications prescribed for admission to the said course make it amply clear that it is not mandatory for a person to be a graduate in engineering or to otherwise possess knowledge of civil engineering or a mechanical/electrical engineering, as the case may be, to be eligible for the said course. Thus, it is apparent that a person, who is not an engineer, is also qualified to render services as a valuer and such person would not fall within the purview of consulting engineer as defined under sub-section (31) of Section 65 of the Act. The question that then arises for consideration is whether when a valuer who is also a consulting engineer renders the same services as a valuer who is not a graduate in engineering and not a consulting engineer , the said services would fall within the ambit of consulting engin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aduation course in valuation. The services provided by any qualified engineer in the area of valuation, therefore, not in the nature of services in an engineering discipline. Qualified engineers who act as valuers will to the extent of valuation services rendered by them, not fall within the term ambit of consulting engineer as defined in the Service tax Act. Accordingly, service tax levied on services rendered by consulting engineer in any discipline of engineering will not cover the valuation services rendered by such qualified engineer. 39. On behalf of the respondents, strong reliance has been placed upon a decision of the Madras High Court in the case of Dr. V. Shanmughavel (supra), wherein the court repelled the contention raised by the petitioner therein that such engineers who offered advice in their capacity as registered valuers of immovable property or plant and machinery, cannot be brought into tax net under Section 65(11) read with Section 65(48)(g) of the Finance Act, to submit that the controversy involved in the present case stands concluded by the said decision. A perusal of the above referred judgement of the Madras High Court shows that on behalf of the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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