Consulting
Engineer
CESTAT,
CHENNAI BENCH
Malar
Constructions
v,
Commissioner
of Central Excise
P.G.
CHACKO, JUDICIAL MEMBER
AND
P.KARTHIKEYAN, TECHNICAL MEMBER
FINAL
ORDER NO. 1532/07
STAY
ORDER NO. 1272/07
IN
APPEAL NO. S/PD/132/07 & S/185/07
December
12, 2007
Section 65 of the Finance Act, 1994 - Consulting engineer - Period
2001 to 2003-04 - Assessee was a building contractor - It was executing works
contracts awarded by its clients and it was doing so by making use of its own
machinery, materials, human resources and money - Works were executed on basis
of plan and design furnished by client upon completion of work, building was
transferred to client against full payment of consideration - Department worked
out a demand of service tax on gross value of these payments received by
assessee - In adjudication, Commissioner confirmed demand of service tax under
category of ‘consulting engineer’s services’ along with interest, imposed
penalties - Whether since revenue had not brought out any advice, consultancy
or technical assistance in any manner having been rendered by assessee to its
clients in any discipline of engineering, demand could not be justified in
category of ‘consulting engineer’s service’ - Held, yes - Whether, further
since, works contract become taxable service for first time on 1-06-2007,
demand raised on assessee could not be justified - Held, yes [Para 2]
The assessee was building contractor. During the period 2001 to 2004, the assessee had undertaken certain works contracts awarded by various clients. Each was a turnkey contract, upon execution whereof the building would be transferred to client against full payment of consideration. The department worked out a demand of service tax on the gross value of these payments received by the assessee. In adjudication, the Commissioner confirmed the demand of service tax under the category of ‘Consulting Engineers’ service along with interest, penalties. In the instant appeal, the assessee contended that works contract was not a taxable service during the material period and that it became one only with effect from 1-6-2007 therefore, no service tax could be levied on any amount collected by any works contractor.
In the instant case, the
assessee was executing works contracts awarded by their clients and it was
doing so by making use of its own machinery, materials, human resources and
money. The works were executed on the basis of the approved plan and design
furnished by the client. Upon completion of the works, the building with its site
was handed over to the client against full payment of consideration for the
work. In this exercise, the revenue had not brought out any advice, consultancy
or technical assistance in any manner having been rendered by the assessee to
its clients in any discipline of engineering. Had the assessee been shown to be
professionally qualified engineers and to have rendered such advice,
consultancy or technical assistance to its clients to enable it to execute such
works, the position would have been different. Obviously, the department in the
SCN and the Commissioner in the impugned order misconceived a case against the
assessee. It was not disputed that the works contract became taxable service
for the first time on 1-6-2007 only. On those facts, the demand raised on the
assessee could not be justified even on the ground that it happened to make
stray payments of service tax, now and then, during the material period in the
category of “Consulting Engineer’s service”. In other words, the conduct or the
party could not make an event a taxable service where it was actually not. The
demand was to be unsustainable and so were the penalties. [
In the result, the impugned
order was to be set aside and the appeal was to be allowed. [