Binding circular on consulting engineer service excludes erection and commissioning charges from service tax classification.

Erection, installation and commissioning charges were held outside the consulting engineer service entry after the Board issued a binding clarification narrowing the taxable scope. The Tribunal noted that an earlier departmental reliance on a pre-circular ruling could not override the later circular, which expressly excluded such charges from assessment under consulting engineer services. On that basis, the service tax demand on the disputed charges was not sustainable and the impugned confirmation was set aside.

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Issues: Whether erection, installation and commissioning charges could be subjected to service tax as consulting engineer services in view of the Board's subsequent circular clarifying the taxable scope of the levy.

Analysis: The levy on consulting engineer services was introduced with effect from 7-7-1997, but the Board later issued clarifications showing that erection, installation and commissioning were not to be treated as covered under the consulting engineer category. The Tribunal noted that an earlier ruling relied upon by the department pre-dated the later circular and therefore could not prevail against the Board's binding clarification. As the circular had modified the earlier view and expressly stated that such charges were outside the consulting engineer entry, the departmental order assessing service tax on that basis could not be sustained.

Conclusion: The demand on erection and commissioning charges was not sustainable and the appeal was allowed.

Final Conclusion: The binding departmental clarification governed the classification of the disputed activity, with the result that the impugned service tax confirmation was set aside.

Ratio Decidendi: A binding circular clarifying the scope of a taxable service prevails over an earlier contrary view, and charges outside the clarified taxable entry cannot be assessed under that entry.

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