COMMISSIONER OF CENTRAL EXCISE Vs. BSBK PVT. LTD.

JUDGEMENT

(1.) THIS appeal by the Revenue is directed against the order -in -appeal of Commissioner (Appeals) dated 28 -4 -2005 setting aside the order -in -original of the Assistant Commissioner, Central Excise, Bhilai, and allowing the appeal of the assessee -respondent.

(2.) THE respondent, M/s. BSBK Pvt. Ltd., are engaged in the business of execution of turnkey contracts for engineering works like drawing, designing, engineering, fabrication, testing, erection and commissioning of plants and equipments at the site of their clients. On scrutiny of the records, the officials of the Central Excise found that during the period from 7 -7 -1997 to 31 -3 -2002, the respondent had received from their clients amounts for different services including those falling under 'consulting engineer service' - a taxable service - but failed to pay service tax on it. Show cause notice was issued followed by adjudication by the Assistant Commissioner, Central Excise, who finally by order dated 2 -2 -2005 held that for the period in question the respondent were liable to pay Rs. 12,36,516/ - as service tax on the amount of Rs. 2,47,30,312/ - received on account of 'design and engineering' work done by them. Respondent were also held liable to pay penalty equal to the amount of tax under Section 76 of the Finance Act, and further penalties of Rs. 2,000/ - under Section 77 and Rs. 500/ - under Section 75A of the said Act. The respondent preferred appeal before the Commissioner (Appeals) who set aside this order. Hence this appeal by the Revenue.

(3.) THE case of the respondent is that in a case of turnkey works contract, service tax is not payable as the contract cannot be vivisected and the services relating to 'design and engineering' forms a minor portion of the total work. The case of the Revenue on the other hand is that works contract in respect of turnkey projects can be dissected on the basis of supply of goods, materials, the property in which passes on in some form or the other on the one hand and the services rendered on the other hand. In other words, the contract can be divided into sale contract and service contract in accord with the 46th amendment in the Constitution of India. In the grounds of appeal, reference is made to the CBEC's -S.T., dated 18 -12 -2002 holding that in the case of turnkey project, a lot of preparatory work is required to be done, such as, soil testing, survey, planning, designing, drawing etc. before the civil construction work can commence. The design and drawing proposed by the construction company i.e. the contractor is subject to approval of the plan and any modification suggested by the client has to be incorporated in the design. This portion of the work falls in the realm of "consulting engineer" service and hence taxable.