M. Veeraiyan, Technical Member. - This is an appeal against the order of Commissioner (Appeals) No. dated 28-3-2004, by which the order of original authority dated 29-3-2004 has been upheld.

2. Heard both sides. The Ld. Advocate for the appellants also filed a written submission dated 18-5-2007.

3. The relevant facts, in brief, are as follows :

a.M/s. Petronet LNG Ltd. (PLL) was engaged in the business of setting up and operating LNG terminal for receiving, storage, degasification facility at Dehej, Gujarat. For the said purpose, PLL entered into two contracts which are mentioned below.

b.PLL entered into an PEC contract with M/s. Ishikawajma-Harima Heavy Industries Ltd., Japan to develop, design, engineer and procure equipment, materials and supplies, to erect and construct storage tanks of 5 MMTPA capacity, with potential expansion to 10 MMTPA capacity at the specified temperatures. The EPC contract also envisaged providing marine facility (jetty and island brake water) for transmission and supply of LNG to purchasers. The project involved, inter alia, offshore supply, offshore services, onshore supply, onshore services and construction & erection.

c.PLL entered into an agreement dated 15-1-2001 with the appellant for project management consultancy in relation to setting up and operating the above said LNG terminal. (This agreement is directly relevant for the present proceedings.)

d.The agreement detailed the various areas in which the appellant was required to advise, assist in relation to the execution of the project.

e.The agreement contemplated the provisions of both offshore services and onshore services. For the said purpose, the agreement also defined the terms like onshore services and offshore services. The rates specified are different for offshore services and onshore services.

f.PLL settled the amounts as per the invoices issued by the appellants after making a verification of the particulars.

g.The original authority held that the services rendered by the appellant to PLL came under the category of consulting engineers. Accordingly, he confirmed a sum of Rs. 1,03,73,013 as service tax along with interest on the fee collected amounting to Rs. 21,65,63,780 on onshore services relating to the period January, 2001 to April, 2003. Similarly, he confirmed a sum of Rs. 48,05,821 as service tax along with interest towards offshore services rendered by them on the total fee collected amounting to Rs. 10,05,40,183 relating to the period. In addition a penalty of Rs. 500 under section 75A and a penalty of Rs. 1000 under section 77 were imposed. Further under section 76, a penalty of Rs. 200 every day during period of default from 26-6-2001 until the service tax is fully paid was imposed. Further a penalty of Rs. 2 crores under section 78 was also imposed.

h.Commissioner (Appeals) upheld the order of original authority.

4.1 Ld. Advocate appearing for the appellant took us through the various clauses contained in the project management consultancy agreement dated 15-1-2001. In particular, he drew our attention to the definition relating to home places, onshore services/offshore services. He took us through clause No. 3.13 which relates to the locations for performing the services by the appellant. He took us through the provisions relating to the fees payable which is partly a fixed component and a variable component in respect of both onshore services and offshore services as provided in sub-clause 7.1 he also took us through the scope of services provided by the appellant in the light of said agreement.

4.2 He submits that the services rendered by the appellant is not limited to the field of engineering. The appellant is not stopping with the rendering advice, but actively involved in monitoring implementation and in trouble shooting; they cannot be treated as rendering ‘consultancy engineering services’; further services rendered by them cannot be treated as merely in the field of engineering and therefore, the contract should