The Supreme Court has observed that services rendered in the nature of erection/installation/commissioning of goods at customers' site cannot be said to be services rendered by a consulting engineer.

The Bench of Justice MR Shah and Justice BV Nagarathna while being in complete agreement with the decision of the Tribunal observed thus "…considering the various services rendered by the assessee like erection/installation/commissioning of goods at customers' site and incidentally they may also be providing the services of drawing, design etc., it cannot be said that the services rendered by the assessee was as a consulting engineer. The contract can be said to be 'works contract'."

The Court was dealing with an appeal filed by the Commissioner of Customs and Central Excise challenging the decision of the Customs, Excise and Service Tax Appellate Tribunal whereby the Tribunal had held that the services rendered by the assessee-respondent cannot be said to be services rendered as Consulting Engineer.

The facts of the case are that the assessee company was engaged in the manufacture of mechanical, engineering and electrical goods falling under Chapters 84 and 85 of Central Excise Tariff Act, 1985. In respect of certain buyers, the assessee merely sold their products. In respect of certain buyers, at their request, the assessee had undertaken, at the customer's site, certain activities like construction, civil works including installation, erection and commissioning of machinery to the specific requirements of the customers.

A show cause notice was issued against the respondent – assessee, proposing a demand of service tax 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 cannot be said to be rendering services of consulting engineering.

However, the Commissioner took up the order by way of suo moto revision and held that the services rendered by the assessee can be said to be services of consulting engineer and were liable to pay the service tax.

The Tribunal by virtue of a 2-1 majority overturned this decision of the commissioner.

Aggrieved, revenue-appellant approached Supreme Court.

Senior Advocate AK Panda appeared for the Appellants whereas Advocate Nisha Bagchi appeared for Respondent-Assessee.

The Court held considering the various services rendered by the assessee like erection/installation/commissioning of goods at customers' site and incidentally they may also be providing the services of drawing, design etc., it cannot be said that the services rendered by the assessee were as a consulting engineer. The contract can be said to be 'works contract.'

"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 for the period under consideration namely July, 1997 to December, 2000.", the Court added further.

Accordingly, the Court dismissed the appeals of the Revenue.

Cause Title- Commissioner of Customs and Central Excise Vadodara v. M/s Jyoti Limited and Ors.

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Supreme CourtJustice MR ShahJustice BV NagarathnaService Tax

Ashish Shaji