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Consulting engineer
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CESTAT, AHMEDABAD BENCH (Third Member Order)
Jyoti
Ltd.
v.
Commissioner
of Central Excise, Vadodara
S.
S. Kang, Vice President, As a Third Member
Mrs.
Archana Wadhwa, Judicial Member
and
M. Veeraiyan, Technical Member
Order
No. M/1173 to 1175/WZB/AHD/2007
Appeal
Nos. ST/16 to 18 of 2004
July
31, 2007
Section 65 of the Finance Act, 1994 - Consulting engineer - Period July, 1997 to December, 2007 - Assessee-company was engaged in manufacture of mechanical engineering and electrical goods - In respect of certain buyers, at their request, assessee had undertaken, at customer’s site, certain activities like construction, civil works including installation, erection and commissioning of machinery to specific requirements of customers - Revenue considering activity of assessee as consulting engineering service issued show-cause notice demanding service tax - Whether in view of decision of Tribunal in case of Daelim Industrial Co. Ltd. v. CCE (1994-2006) STT 438 (Trib.-Delhi) wherein Tribunal while interpreting terms of contract which was for design, engineering, procurement, supply, construction, fabrication, erection, testing, installation and commissioning held that service provided under such contracts is not liable for service tax as consulting engineer, assessee was not liable to service tax as consulting engineer - Held, yes [Para 15]
The appellant-assessee was engaged in the manufacture of mechanical, engineering and electrical goods. In respect of certain buyers, the assessee merely sold its products. However, in respect of certain buyers, at their request, the assessee had undertaken, at the customer’s site, certain activities like construction, civil works including installation, erection and commissioning of machinery to the specific requirements of the customers. In such cases, it collected amounts billed variedly as charges towards erection, testing and calibrations, installation and commissioning, construction activities, etc. The revenue considering the activity of assessee as consulting engineering service issued show-cause notice demanding service tax for period July, 1997 to December, 2007. On adjudication, the Deputy Commissioner dropped the demand holding that the assessee undertook said activities at the site of the customers as part of the contract and it did not render advice or consultation or technical assistance and, therefore, it could not be held to be rendering services of consulting engineers. However, the Commissioner reviewed said adjudication order and confirmed demand and imposed penalties upon assessee. On appeal, the Technical Member of the Tribunal rejected the appeal of the assessee holding that activities undertaken by the assessee at the customers end were additional services given to certain buyers and same could not be treated as part of any manufacturing activity but only as services rendered by it. However, the Judicial Member allowed the appeal of the assessee holding that activities undertaken by the assessee were a part of its job of manufacturing goods and undertaking the complete project of its buyers and were related activities to the sale transactions and, therefore, Deputy Commissioner was right in his finding that activities undertaken by assessee could not be held to be as consulting engineering service covered under the provisions of service tax.
Due to difference in opinion of the two Members, the matter was referred to the Third Member.
The contract was one for design, manufacture, supply, storing, erection, testing and commissioning of complete electro-mechanical equipment on turn-key basis. The terms and conditions of payment were as per the progress of work. [Para 14]
The Tribunal in the case of Daelim Industrial Co. Ltd. v. CCE 2003 (1994-2006) STT 438 (Delhi-Trib.) while interpreting the terms of the contract which was for design, engineering, procurement, supply, construction, fabrication, erection, testing, installation and commissioning held that service provided under such contracts is not liable for service tax as consulting engineer. Further, it was found that the service of erection and commissioning had commenced under the service tax from the year 2003 whereas the works contract came under service tax net in the year 2007. The period in dispute was from July 1997 to December, 2007. Thus, the assessee was not liable to pay the service tax as consulting engineer in view of the decision of the Tribunal in the case of Daelim Industrial Co. Ltd. (supra). The impugned order was to be set aside and the appeals were to be allowed. [Para 15]