Architectural consultancy receipts attract service tax, while penalty may be moderated when excessive on the facts.

Receipts treated as architectural consultancy were held taxable where the appellant was a registered architect and the record showed advisory services linked to civil contractors; the service tax demand with interest was therefore sustained. The Tribunal rejected the characterisation of the work as mere liaison or back-office activity. While liability was confirmed, the penalty under section 78 was found excessive on the facts and was reduced to the amount of the service tax demand, moderating the penal consequence without disturbing the underlying tax finding.

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Issues: (i) whether the appellant was liable to service tax on receipts treated as architectural consultancy and whether the demand with interest was sustainable; and (ii) whether the penalty imposed under section 78 of the Finance Act, 1994 was liable to be reduced.

Issue (i): whether the appellant was liable to service tax on receipts treated as architectural consultancy and whether the demand with interest was sustainable.

Analysis: The appellant was a registered architect and the record showed receipts described as architectural consultancy. The appellant's association with civil contractors and the admitted role as an advisor to those contractors supported the conclusion that the services fell within the statutory understanding of architectural services. The Tribunal found no merit in the claim that only liaison work or back-office work had been done, and held that the demand and interest were correctly confirmed.

Conclusion: The demand of service tax with interest was upheld against the appellant.

Issue (ii): whether the penalty imposed under section 78 of the Finance Act, 1994 was liable to be reduced.

Analysis: Although liability was sustained, the Tribunal considered the quantum of penalty to be excessive in the facts and treated the penalty as deserving moderation to match the tax demand.

Conclusion: The penalty was reduced to the amount of the service tax demand.

Final Conclusion: The liability to service tax and interest was sustained, but the penal consequence was curtailed by reducing the penalty to the quantified tax amount.

Ratio Decidendi: A registered architect receiving consultancy-linked payments for advisory services to civil contractors can be subjected to service tax, and the penalty may be moderated where the quantum is found excessive in the circumstances.

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