Composite works contracts cannot be split to tax a design element separately as consulting engineer service.

A composite turnkey works contract cannot be artificially split to levy service tax on an alleged consulting engineer element when the contract is executed as an integrated whole. The Tribunal followed its earlier view that such contracts cannot be vivisected for tax purposes, and the Board circular cited by the Revenue did not justify a different conclusion. The design component was therefore not separately taxable as consulting engineer service, and the assessee succeeded with consequential relief.

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Issues: Whether the design element in turnkey works contract projects could be treated as a taxable service as a consulting engineer, and whether a composite works contract could be split up for levy of service tax.

Analysis: The Tribunal noted that the facts were identical to an earlier decision in which it had been held that a works contract cannot be vivisected and one part subjected to service tax. The Board circular relied upon by the Revenue was noted, but the Tribunal found no reason to reconsider its earlier view and followed the same reasoning for the present contracts.

Conclusion: The design element of the composite works contracts was not separately liable to service tax as a consulting engineer service, and the issue was decided in favour of the assessee.

Final Conclusion: The appeal succeeded and the assessee became entitled to consequential relief.

Ratio Decidendi: A composite works contract cannot be artificially split to impose service tax on an alleged consulting engineer component where the contract is executed as an integrated whole.

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