Whether operation and maintenance of windmills would amount to ‘Consulting Engineer’s Service’?

PJ/Case law/2014-15/2290

Case:- SUZLON WINDFARM SERVICES LTD. VERSUS COMMISSIONER OF C. EX., PUNE-II

Citation:-2014 (33) S.T.R. 65 (Tri. - Mumbai)

Brief facts:-The appellants herein M/s. Suzlon Windfarm Services Ltd. entered into an agreement with M/s. Suzlon Energy Limited to operate and maintain the windmills sold by the latter to their clients for which they received consideration from the latter. The department was of the view that the said services rendered by the appellant to M/s. Suzlon Energy Ltd. comes under the category of ‘Consulting Engineer’s Service’ and accordingly a show cause notice dated 23-11-2004 was issued to the appellant to show cause why Service Tax demand of ` 87,56,501/- should not be demanded from the appellant for the services rendered during April, 1999 to March, 2003 under the category of ‘Consulting Engineer’s Service’ along with interest thereon and also proposing to impose penalties. The said notice was adjudicated upon and the impugned order was passed wherein the demands were confirmed along with interest and equivalent amount of penalty was imposed under Section 78 apart from penalties under Sections 76 and 77 of the Finance Act, 1994. Aggrieved by the said order the appellant is before Tribunal.

Appellant’s contentions:- The learned counsel for the appellant submits that the appellant has rendered the services of operation and maintenance of windmills which was sold by their client to their customers. These services included round the clock security of the windfarms, continuous operation and maintenance of windfarms, replacement of parts and spares and other accessories, monitoring the performance of the windfarms, collection and compilation of data relating to wind speed, energy generation and liaisoning and coordination with various Government agencies. These are all activities of executory nature rendered by the appellant and there is no advice, consultancy or technical assistance rendered to come within the definition of ‘Consulting Engineer’s Service’. Therefore, he submits that the classification of the service and the consequent demand is unsustainable in law. The learned counsel also relies on the decision of the Tribunal in the case of Rolls Royce Industrial Power (I) Ltd. v. Commissioner of Central Excise, Visakhapatnam - 2006 (3)S.T.R.292 (Tri.) = 2004 (171)E.L.T.189 (Tri.) wherein a question arose as to whether operation and maintenance of a power plant would amount to ‘Consulting Engineer’s Service’ and this Tribunal held that since the appellant therein did not render any advice, the said service did not come within the purview of ‘Consulting Engineer’s Service’. The learned counsel also refers to the decision of this Tribunal in the case of Basti Sugar Mills Co. Ltd. v. Commissioner of Central Excise, Allahabad - 2007 (7)S.T.R.431 (Tri.)wherein an issue arose as to whether actually running a sugar mill would amount to ‘Management Consultancy’ and it was held that managing sugar factory does not come within the scope of ‘Management Consultancy Service’. The Tribunal held that actual performance of a management function is distinct and different from advisory services rendered by a management consultant. The said decision was challenged by Revenue before the Hon’ble Apex Court and the Hon’ble Apex Court dismissed the appeal inter alia on the ground that, since the decision of the Tribunal in the case of Rolls Royce Industrial Power (I) Ltd. relied upon by the Tribunal, was not challenged by the Revenue the same has attained finality and therefore, the appeal was dismissed [2012 (22) S.T.R. A154 (S.C.)]. In view of the above, the learned counsel submits that the ratio of these decisions would apply squarely to the facts of the present case and accordingly he pleads that the impugned order is not sustainable in law and merits setting aside.

Respondent’s contentions:-The learned Commissioner (AR) appearing for the Revenue on the other hand strongly defends the impugned order. He placed reliance on the decision of the Hon’ble High Court of Calcutta in the case of M.N. Dastur & Co. Ltd. v. Union of India - 2002 (140)E.L.T.341 (Cal.) = 2006 (2)S.T.R.532 (Cal.)and submits that, if in the execution of an activity, engineering skills are required and execution of such activity would come within the purview of ‘Consulting Engineer’s Service’. Accordingly he prays for upholding the impugned order.

Reasoning of judgment:- The client of the appellant herein, M/s. Suzlon Energy Ltd., are manufacturers of wind operated windmill generators andsystems. In the sales agreements entered into by them with their customers, there is a provision for operation and maintenance and security of the windmills by M/s. Suzlon Energy Ltd. for a period of 5 years free of cost and, thereafter on payment of charges. To fulfill this contractual obligation as per the agreement, M/s. Suzlon Energy Ltd. entered into an agreement with the appellant to actually undertake the operation, maintenance and security of the windmill sold by M/s. Suzlon Energy Ltd. to their customers and the appellant actually undertook operation and maintenance and security of the windmill system. What the appellant has performed is operation and maintenance of windmills and not rendering any advice, consultancy or technical assistance in any field of engineering, which is the criterion for classifying the service under the category of ‘Consulting Engineer’s Service’. Such executory services do not come under the purview of ‘Consulting Engineer’s Service’. In the case of Rolls Royce Industrial Power (I) Ltd., cited supra, it was held that operation and maintaining of power plants do not come within the category of ‘Consulting Engineer’s Service’ and the ratio of the said decision is relevant to the facts in the present case and the ratio of the said decision squarely applies.
The reliance placed by the learned Commissioner (AR) on the decision in the case of M.N. Dastur & Company Ltd. is not applicable for the reason that in the said case there was an actual tendering of advice by the service provider to the service recipient in a field of engineering and therefore, it was held that rendering advice merits classification under ‘Consulting Engineer’s Service’. Those are not the facts obtaining in the present case.
In view of the above discussion, they find that the impugned order is not sustainable in law. Accordingly, they set aside the same and allow the appeal with consequential relief, if any, in accordance with law.

Decision:-Appeal was allowed.

Comment:- The analogy of the case is that the appellant is undertaking the operation, maintenance and security of the windmill and has not rendered any advice, consultancy or technical assistance in any field of engineering, which merits classification under the category of ‘Consulting Engineer’s Service’. Accordingly, the demand confirmed under consulting engineer service was quashed following the decision in the case of Rolls Royce Industrial Power (I) Ltd.

{Prepared by: Monika Tak}

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PJ/Case law/2014-15/2290

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