whether the engineering service provided by body corporate would fall under the category of a ‘consulting engineer’s service’?

PJ/CASE LAW/2015-16/2974

Case: SHIPPING CORPORATION OF INDIA LTD. versusCOMMISSIONER OF C. EX., MUMBAI

Citation:2015 (40) S.T.R. 468 (Tri. - Mumbai)

Brief Fact:The relevant facts that arise for consideration are that the appellant herein has rendered the services of finalizing acquirement of ship for Union Territory of Lakshadweep and also overseeing the activity of procurement, monitoring other agencies for progress of construction of vessels, conducting shop trials for main engine and to supervise model test at Danish Maritime Institute. For the services rendered the appellant charged the Union Territory of Lakshadweep which according to the Revenue authorities is liable for tax under ‘Consulting Engineer’s Service’. The appellant contested the show cause notice on limitation as well as on merits. After following due process of law, the adjudicating authority confirmed the demand raised with interest and also imposed penalties. On an appeal, the first appellate authority also concurred with the view of the adjudicating authority and rejected the appeal.

Appellant contention:Learned counsel would draw out attention to the facts of the cases. He would submit that the period involved in the case is from 26-2-1999 to 26-1-2004 during which period, it is his submission, that the appellant helped the union territory of Lakshadweep to procure the vessel for movement of men and material between Lakshadweep and main land. It is his submission that the appellant is a company incorporated under the Companies Act and cannot be considered as a ‘consulting engineer’ as per the definition under Section 65(31) of the Finance Act, 1994 during the relevant period. He would submit that the issue is now squarely covered by the decision of the Hon’ble High Court of Delhi in the case of Commissioner of Central Excise and Service Tax v. Simplex Infrastructure and Foundry Works - 2014 (34)S.T.R. 191 and judgment of the Hon’ble High Court of Karnataka in the case of Commissioner of Service Tax v. Turbotech Precision Engineering Pvt. Ltd. - 2010 (18)S.T.R. 545 wherein the definition of ‘consulting engineer’, as it stood during the relevant period and post its amendment, were considered and a view was taken in favour of the appellant.

Respondent contention:The learned Departmental Representative would reiterate the findings of the lower authorities.

Reasoning of Judgment:On consideration of the submissions made by both the sides and on perusal of the records, we find that the issue involved in this case is whether the services rendered by the appellant to Union Territory of Lakshadweep during the period 26-2-1999 to 26-1-2004 would amount to services rendered by a consulting engineer. It is undisputed that the appellant had been engaged by the Union Territory for finalizing vessels/ships for movement of men and material from the island to mainland, overseeing of the progress of construction of the vessel and also undertook the tests that require to be done on the various machinery parts of the ship.
Revenue’s contention that such an activity would fall under the category of a ‘consulting engineer’s service’ is totally incorrect. In order to appreciate the contention of the Revenue, the definition of ‘consulting engineer’ during the relevant period under Section 65(31) of the Finance Act, 1994 is reproduced below:
“consulting engineer” means any professionally qualified engineer or an engineering firm who, either directly or indirectly, renders any advice, consultancy or technical assistance in any manner to a client in one or more disciplines of engineering;”
It can be seen from the above reproduced definition of ‘consulting engineer’, it has to be noted that the ‘consulting engineer’ means a professionally qualified engineer and would also include an engineering firm. We find that, subsequently in 2006 an amendment was carried out and the definition of ‘consulting engineer’ was changed to include ‘any body corporate’ or any other firm. It is the case of the Revenue that the firm includes ‘body corporate’ and hence the tax liability under ‘consulting engineer’s service’ would arise. We are not convinced with the arguments put forth by the learned Departmental representative as well as the findings recorded by the first appellate authority for more than one reason.
The appellant herein is not a consulting engineer. They are experts in the shipping business and were called upon by the Union Territory of Lakshadweep to assist them in finalizing the kind of a ship that may be required for movement of men and material from island to mainland. Secondly, a similar issue, as to whether a private limited company registered under the Companies Act gets covered under the definition of ‘consulting engineer’ during the period in question was decided by the Hon’ble High Court of Delhi in the case of Simplex Infrastructure and Foundry Works (supra) which we reproduce below :
“2. The only question which is sought to be raised in the present appeal is whether the definition of ‘Consulting Engineer’ as appeared in Section 65(31) of the Finance Act, 1994 as applicable to the period 1997-2001, includes a ‘company’ or not.
3. It is an admitted position that the respondent is a private limited company incorporated under the Companies Act, 1956. According to the appellant, the respondent would be covered by the definition of ‘Consulting Engineer’ in Section 65(31) of the Finance Act, 1994 as it existed at the relevant time. In order to appreciate the argument advanced on behalf of the appellant, it would be appropriate if we set out the provisions of this Section; to the extent relevant, as it existed during the relevant time:
“Section 65. Definitions In this Chapter, unless the context otherwise requires: -
xxxx xxxx xxxx xxxx xxxx
(31) “consulting engineer” means any professionally qualified engineer or an engineering firm who, either directly or indirectly, renders any advice, consultancy or technical assistance in any manner to a client in one or more disciplines of engineering;
xxxx xxxx xxxx xxxx xxxx”
4. It may be relevant to point out that the words ‘an engineering firm’ appearing in the above definition, were substituted by the Finance Act, 2006 with effect from 1-5-2006 with the words ‘any body corporate or any other firm’. It is, therefore, clear that the expression ‘any body corporate’ was introduced with effect from 1-5-2006. But, in the present case, the relevant period is 1997-2001. At that point of time, the expression ‘any body corporate’ was not included in the said definition of ‘consulting engineer’.
5. The learned counsel for the appellant submitted that Section 3(42) of the General Clauses Act, 1897 ought to be pressed into service. He submitted that the word ‘person’ includes any company or association or body of individuals whether incorporated or not. However, we fail to understand as to how the learned counsel for the appellant can place reliance on Section 3(42) of the General Clauses Act. That provision would only apply where the word ‘person’ is used in any Act or Regulation. The definition of ‘consulting engineer’ as provided in Section 65(31) of the Finance Act, 1994, as it existed during the relevant period, did not employ the word ‘person’ at all. Consequently, the provisions of Section 3(42) of the General Clauses Act, 1897 would not apply.
6. From a reading of the impugned order, we find that the Karnataka High Court has also taken the view that the expression ‘consulting engineer’ as it appeared in Section 65(31) of the Finance Act, 1994, at the relevant time (i.e. prior to 1-5-2006), did not include “a private limited company or any other body corporate”.”
It can be seen from the above reproduced ratio of the Hon’ble High Court’s judgment that the issue involved in the case in hand is squarely covered in favour of the appellant. Respectfully following the ratio, we hold that the impugned order which upholds the service tax liability with interest and penalties imposed is unsustainable and liable to be set aside and we do so.

Decision: Appeal allowed.

Comment:The gist of the case is that appellant is rendering service to union territory of Lakshadweep. According to department, appellant is liable for tax under ‘consulting engineer service ‘category as per the revenue’s contention. It can be seen from the definition of consulting engineer service that the professionally qualified engineer and would also include an engineering firm. Appellant was a body corporate and definition of ‘consulting engineer’, does not include a body corporate. Further on a similar issue, as to whether a private limited company registered under the Companies Act gets covered under the definition of ‘consulting engineer’ during the period in question was decided by the Hon’ble High Court of Delhi in the favour of assessee in case of Simplex Infrastructure and Foundry Works (supra). Therefore appellant herein is not covered under the definition of consulting engineer. Hence appeal allowed.

Prepared By:Anash kachaliya

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