MALAR CONSTRUCTIONS Vs. CCE

JUDGEMENT

(1.) AFTER examining the records and hearing both sides, we are of the view that the appeal itself requires to be finally disposed of at this stage. Accordingly, after dispensing with predeposit, we take up the appeal.

(2.) THE appellants are building contractors. During the period of dispute (2001 to 2003 -04), they had undertaken certain works contracts awarded by various clients. Some of these works involved construction of new buildings for commercial or industrial purposes and others involved construction of new residential buildings. Each was a turnkey contract, upon execution whereof the building would be transferred to the client against full payment of consideration. The department worked out a demand of service tax on the gross value of these payments received by the appellants during the above period and issued a show -cause notice. In adjudication, ld.Commissioner confirmed the demand of service tax amounting to over Rs. 13 lakhs against the assessee for the above period after taking into account certain minor payments of tax already made by the party at the instance of the department. This demand, for which the extended period of limitation under the proviso to Section 73 of the Finance Act, 1994 was invoked, is in the category of "Consulting Engineers' Service". The Commissioner also demanded interest on service tax and also imposed penalties. In the present appeal, the main contention of the appellants is that works contract was not a taxable service during the above period and that it became one only w.e.f. 1.6.2007 after the enactment of the Finance Act, 2007. Prior to 1.6.07, no service tax could be levied on any amount collected by any works contractor. Ld.consultant has reiterated this case of the appellant, with reference to Sub -clause (zzzza) of Clause 105 of Section 65 of the Finance Act, 1994, which came into force on 1.6.2007. He has also relied on the decision of the Tribunal in Daelim Industrial Co. Ltd. v. Commissioner , wherein works contract was held to be not liable to service tax in the category of 'Consulting Engineers Service'. It is submitted that this decision of the Tribunal was upheld by the Supreme Court vide Commissioner v. Daelim Industrial Co. Ltd. . We have heard ld.JDR also, who has reiterated the findings of the Commissioner.

(3.) AFTER considering the submissions, we have to accept the case of the appellants. Section 65(13) of the Finance Act 1994 defines "Consulting Engineer". Accordingly, "Consulting Engineer" means "any professionally qualified engineer or an engineering firm who, either directly or indirectly, renders any advice, consultancy or technical assistance in any manner to a client in one or more disciplines of engineering". In the present case, the appellants were executing works contracts awarded by their clients and they were doing so by making use of their own machinery, materials, human resources and money. The works were executed on the basis of the approved plan and design furnished by the client. Upon completion of the work, the building with its site was handed over to the client against full payment of consideration for the work. In this exercise, the Revenue has not brought out any advice, consultancy or technical assistance in any manner having been rendered by the appellants to their clients in any discipline of engineering. Had the appellants been shown to be professionally qualified engineers and to have rendered such advice, consultancy or technical assistance to their clients to enable them to execute such works, the position would have been different. Obviously, the department in the SCN and the Commissioner in the impugned order misconceived a case against the appellants. It is not disputed that the works contract became taxable service for the first time on 1.6.07 only. On these facts, the demand raised on the appellants cannot be justified even on the ground that they happened to make stray payments of service tax, now and then, during the above period in the category of 'Consulting Engineers' Service'. In other words, the conduct of the party cannot make an event a taxable service where it is actually not. The demand is unsustainable and so are the penalties. In the result, the impugned order is set aside and this appeal is allowed.