2007 (7) TMI 30 - AT - Service Tax

Tribunal rules appellant not a 'Consulting Engineer' under Finance Act, sets aside Service tax demand

The Tribunal set aside the Service tax demand, ruling that the appellant, despite being considered a professionally qualified engineer, did not meet the ... Demand(Service tax) - Department contended that appellant is liable to pay service tax under 'Consulting Engineer service' and accordingly demand were made along with penalty - Held that department contention was not correct and set aside Issues:Challenge against Service tax demand on the grounds of the definition of 'Consulting Engineer' under Section 65(13) of the Finance Act, 1994.Analysis:The appellant, aged 81 years, sought waiver of pre-deposit and stay of recovery regarding a Service tax amount of Rs. 4,650/- demanded by lower authorities. Despite the appellant's absence, the request for dispensing with his presence was on record. The Tribunal proceeded to examine the appeal, finding it necessary to be finally disposed of after considering the records and hearing the learned SDR. The appeal challenged the Service tax demand on an amount received by the appellant for services rendered to a company. The appellant contended that he was not a 'Consulting Engineer' as defined under Section 65(13) of the Finance Act, 1994, as he was only a diploma-holder and his relationship with the company was that of employment, not service provision.The definition of 'Consulting Engineer' was crucial to the case, describing a professionally qualified engineer or engineering firm providing advice, consultancy, or technical assistance to a client in one or more disciplines of engineering. The appellant was held by the Commissioner (Appeals) to be a professionally qualified engineer, despite not holding an engineering degree but only a diploma. However, the Tribunal noted that the definition did not clarify whether a diploma-holder could be considered a professionally qualified engineer. The appellant was engaged by the company for supervising electrical works and received a retainer allowance, indicating an employment relationship rather than a service provider-client arrangement. The transaction lacked the principal-to-principal basis required for service provision, leading the Tribunal to vacate the Service tax demand without delving into the diploma-holder's status as a professionally qualified engineer.Consequently, the Tribunal set aside the impugned order and allowed the appeal, emphasizing that the demand of Service tax was not sustainable due to the absence of a genuine service provider-client relationship.