Read Time: 05 minutes

Synopsis

The Supreme Court on Wednesday held that while considering various services rendered by a company like erection, installation and commissioning of goods at a customers’ site, if it incidentally provides the services of drawing, design etc., it cannot be said that the service rendered by it was as a consulting engineer.

Court added that keeping this in mind, service tax cannot be levied.

"The contract can be said to be works contract. Hence, the assessee cannot be said to be rendering the services as a consulting engineer and therefore liable to pay the service tax. Therefore, once, the assessee at the relevant time cannot be said to be consulting engineer and/or rendering services as a consulting engineering the assessee is not liable to pay the service tax on the works contract or the contract rendering services as consulting engineer..." a bench of Justices MR Shah and BV Nagarathna has observed.

The Revenue Department had filed an appeal before the Top Court challenging the Customs, Excise and Service Tax Appellate Tribunal's (CESTAT) order wherein the Tribunal had allowed the appeals preferred by the respondent-assessee and set aside the demand of duty and penalty as per the Revisional Authority’s order.

A show cause notice was issued against the assessee, proposing demand of duty (service tax demand) of Rs.1,84,75,749 and
proposing the imposition of penalty on the grounds, inter alia, that the assessee is providing the services to its customers as
consulting engineer and therefore liable to pay the service tax.

The original authority dropped the show cause notice on considering the various contracts and opined that the services rendered by the assessee could not be said to be rendering services of consulting engineering.

The Commissioner took up the order by way of suo moto revision and held that the services rendered by the assessee could be said to be rendering of services of the nature of "advice", "consultancy" or "technical assistance" while executing the works contract and therefore could be said to be services of consulting engineer and were liable to pay the service tax.

This was reversed by CESTAT.

Supreme Court held that no error was committed by the Tribunal as the original order passed by the Deputy Commissioner dropping the show cause notice and demand of service tax and penalty considering the nature of services rendered by the assessee was correct.

Case Title: Commissioner of Customs and Central Excise Vadodara – I vs. M/s Jyoti Limited and Ors.