2022 Supreme(SC) 587

SUPREME COURT OF INDIA
M.R. SHAH, SANJIV KHANNA, JJ.
Commissioner of Central Excise, Raipur - Appellant
Versus
M/s Sepco Electric Power Construction Corporation - Respondent
Civil Appeal No. 4928 of 2018
Decided On : 11-07-2022

A “body corporate” is covered within the definition of “consulting engineer” under Section 65(31) of the Finance Act, 1994, prior to the amendment in 2005.

Headnote:

SERVICE TAX - CONSULTING ENGINEER SERVICE - DEFINITION - SCOPE - BODY CORPORATE - PRE AMENDMENT 2005 - HELD, A BODY CORPORATE IS COVERED WITHIN THE DEFINITION OF CONSULTING ENGINEER UNDER SECTION 65(31) OF THE FINANCE ACT, 1994, PRIOR TO THE AMENDMENT IN 2005.

Fact of the Case:

The respondent, M/s Sepco Electric Power Construction Corporation, a Government of China company, entered into a contract dated 26.04.2003 with M/s. Bharat Aluminium Co. Ltd., Korba (for short, “BALCO”) for providing “Design Engineering Services” and “Project Management & Technical Services”. In terms of the said agreement, it rendered “Consulting Engineer Services” to M/s BALCO. As per the Revenue, on the services rendered by the respondent as “Consulting Engineer Services”, the respondent was liable to pay the service tax. According to the Revenue, neither the respondent was registered under the Service Tax Act nor it paid the service tax on receipt of payments for such services. According to the Revenue, under the contract, taxable service valued at Rs. 1,12,90,53,457/- was already rendered and the payments were made to the respondent by M/s. BALCO, on which service tax liability worked out was Rs. 10,42,71,437/- which was not paid by the respondent. According to the Revenue, it also failed to obtain Service Tax Registration from the department.

Finding of the Court:

The definition of “consulting engineer” has been tested on this principle in the decision of the Karnataka High Court in Tata Consultancy Services v. Union of India, 2001 (130) ELT 726. It is submitted that the High Court proceeded on the principle that it is fairly well settled that where the language of a statute in its ordinary meaning leads to a manifest anomaly or contradiction, the Court is entitled to put upon it a construction which modifies the meaning of the words used in the same. It is submitted that thereafter in para 11, it is observed and held as under: “The position is no different in the instant case. There is, in my opinion, nothing repugnant in the subject or context of the Act, which should prevent the inclusion of a Company for purposes of levy of service tax on any advice, consultancy or technical assistance provided by it to its clients in regard to one or more disciplines of engineering. Indeed, if the argument advanced on behalf of the petitioner is accepted, it would remove all companies providing technical services, advice or consultancy to their clients from the tax net while any such services rendered by an individual or a partnership concern would continue to remain taxable. The Act does not, in my opinion, envisage any such classification let alone create and perpetuate anomalies that would flow from the same. The view taken by the Additional Commissioner of Central Excise that the petitioner-company was liable to pay service tax cannot therefore be found fault with.”

Issues: Whether a “body corporate” is covered within the definition of “consulting engineer” under Section 65(31) of the Finance Act, 1994, prior to the amendment in 2005.

Ratio Decidendi: The definition of “consulting engineer” under the Finance Act, 1994 falls for consideration before the High Courts of Karnataka and Calcutta in the cases of TCS (supra) and M.N. Dastur (supra). In both the aforesaid cases, the respective High Courts had an occasion to consider in detail the definition of the term “consulting engineer”. In the case of TCS (supra), it was held that a service provided by a technically qualified person in regard to advice, consultancy or technical assistance in one or more disciplines of engineering is taxable only if the same is provided either by an individual, who is a professionally qualified engineer or by an engineering firm. Any service provided by a Company even when based on the advice of professionally qualified engineers is not a taxable service so as to attract the levy under the Act. Since the petitioner-Company is neither an individual nor a partnership concern, any service provided by it even when the same may relate to any discipline of engineering and be based on the opinion of qualified engineers engaged by it cannot be regarded as a taxable service. The argument is no doubt attractive though not equally sound. The reasons are not far to seek. The question in essence is whether the Scheme of the Act makes any distinction between services rendered or provided by individuals and partnership concerns on the one hand and incorporated companies on the other. The answer has to be in the negative. As noticed earlier, the Act aims at levying a tax on the services declared taxable regardless whether the same are provided by a natural or a juristic person. There is no distinction under the Act between the provider of a service, who is an individual, a partnership concern or an incorporated company. The liability to pay tax on the service provided falls uniformly on all the three, provided the service is of a kind that has been declared taxable under Section 65(48) of the Act. Viewed thus, what is taxed by the Act in the case of service provided by consultant engineers is the service provided directly or indirectly in the nature of advice, consultancy or technical assistance in any manner and relating to any disciplines of engineering. The fact that the service is provided by an individual or a partnership or by a Company is wholly inconsequential.

Final Decision: The impugned judgment and order dated 04.12.2015 passed by the CESTAT in Appeal No. ST/136/2007 is hereby quashed and set aside. However, from the impugned judgment and order passed by the CESTAT, it appears that the CESTAT has considered only one issue namely whether for the period pre 01.05.2006 – the Finance Bill, 2006 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. 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. The aforesaid exercise shall be completed by the learned CESTAT within a period of three months from the date of receipt of the present order, which shall be produced by the Revenue before the learned CESTAT within a period of four weeks from today without fail.