Finance Act, 1994 Mandated Body Corporate Providing Services As Consulting Engineer To Pay Service Tax - Supreme Court
The Supreme Court has recently observed that the definition of "consulting engineer" under the Finance Act, 1994, included "body corporate" within its sweep prior to the amendment in 2005.
"…we are in complete agreement with the view taken by the High Court of Karnataka in the case of TCS (supra) and the Calcutta High Court in the case of M.N. Dastur (supra), taking the view that a "firm" and a" company" can be said to be a "consulting engineer" as defined under the Finance Act, 1994 and liable to pay the service tax as a service provider.", the Bench of Justice MR Shah and Justice Sanjiv Khanna held.
The Court was adjudicating upon the issue of whether the definition of "consulting engineer" under Section 65(31) of the Finance Act, 1994, included "body corporate" within its sweep prior to the amendment in 2005.
In this case, the Respondent had rendered "Consulting Engineer Services" to a company. As per the Revenue department, the respondent was liable to pay the service tax on the services rendered by it as "Consulting Engineer Services".
The Commissioner of Central Excise, Raipur vide Order-in-Original confirmed the demand of service tax and ordered for its recovery along with interest. Feeling aggrieved the Respondent preferred an appeal before the Customs, Excise & Service Tax Appellate Tribunal.
CESTAT allowed the said appeal setting aside the demand of service tax by holding that during the relevant period of dispute, namely, August, 2003 to November, 2005, the Respondent being a body corporate was not covered under the definition of "Consulting Engineer".
Feeling aggrieved and dissatisfied with this order of CESTAT, the Revenue approached Supreme Court.
Additional Solicitor General Balbir Singh, appeared on behalf of the Revenue Department, and Advocate P.K. Sahu, appeared on behalf of the Respondent.
The Supreme Court observed that post 2005 the definition of "consulting engineer" under Section 65(31) has been amended and now it specifically includes a "body corporate".
The Court while considering whether the original definition of "consulting engineer" under the Finance Act, 1994 may include "any body corporate" or not, noted that "If the submission on behalf of the respondent is accepted and the "body corporate" is excluded from the service tax, in that case, it would not only lead to absurdity but also would create two different classes providing the same services. That cannot be the intention of the legislature to create two separate classes providing the same services and to exclude one class."
The Court perused the definition of "consulting engineer" under the Finance Act, 1994 and observed that the legislation never intended to exclude "body corporate" from the definition of "consulting engineer" and from the "service tax net".
The Court further noted that during the Finance Act, 1994 regime and prior to amendment 2005, the definition of "consulting engineer" applicable under the Finance Act, 1994 fell for consideration before the Karnataka High Court and Calcutta High Court in the case of TCS v. Union of India and also in M.N. Dastur Ltd. v. Union of India 2006. It was held in those cases that a "firm" and a" company" can be said to be a "consulting engineer" as defined under the Finance Act, 1994 and liable to pay the service tax as a service provider.
In view of this, the Court held "…under the Finance Act, 1994, in the definition of "consulting engineer", a "body corporate" is included and/or to be read into so as to bring a "body corporate" being a service provider providing the consultancy engineering services within the service tax net, as such, it is not necessary to consider whether the subsequent amendment amending the definition of "consulting engineer" by way of 2005 amendment adding a "body corporate" within the definition of "consulting engineer" would be retrospective and/or whether it can be said to be a clarificatory in nature or not and the said issue would become academic now."
The Court held that the respondent being a service provider providing consultancy engineering services, was/is liable to pay the service tax for such services being "consulting engineer" within the definition of Section 65(31) of the Finance Act, 1994 and therefore and thereby liable to pay the service tax under Section 66 r/w Section 68 of the Finance Act, 1994.
The Court also observed that the CESTAT had considered only one issue namely whether "body corporate" was covered within the definition of "consulting engineer" under Section 65 (31) of the Finance Act, 1994 and had not considered any other issues/grounds raised in the Memo of Appeal before the CESTAT.
In that context, the Court held "Therefore, the matter is remanded to the CESTAT to examine and decide the appeal on other grounds, if any, raised in the Appeal Memo before it afresh in accordance with law and on its own merits and in light of the observations made hereinabove and the law laid down by this Court in the present judgment and order."
Click here to read/download the Judgment
