2011 (7) TMI 832 - AT - Service Tax

Private Limited Companies Exempt from Service Tax as Consulting Engineers Pre-2006 Amendment

The Tribunal allowed the appeal, finding that private limited companies were not liable for service tax as Consulting Engineers before the 2006 amendment ... Demand - Consultancy Engineer Services - Karnataka High Court in the case of CST Bangalore Vs Toyoda Iron Works Co Ltd (2010 -TMI - 77723 - KARNATAKA HIGH COURT) and CST Bangalore Vs Turbotech Precision engineering Pvt Ltd (2010 -TMI - 77320 - KARNATAKA HIGH COURT), after taking into consideration the amendment made vide Finance Act 2006, held in two decisions that prior to 1.5.06, limited companies were not under the scope of Consulting Engineer Service - Appeal is allowed Issues:1. Interpretation of the definition of Consulting Engineer under Section 65(13) of the Finance Act.2. Liability of private limited companies for service tax as Consulting Engineer.3. Relevance of judicial precedents in determining liability for service tax.Analysis:The appellant contested a demand for service tax as a Consulting Engineer for the period 1997 to 2001. The crux of the issue revolved around the definition of Consulting Engineer under Section 65(13) of the Finance Act. The appellant argued that during the said period, only professionally qualified engineers or engineering firms could be considered Consulting Engineers, excluding body corporates. The appellant, being a private limited company, claimed exemption from service tax until the amendment on 1.5.06. The appellant cited decisions of the Hon'ble Karnataka High Court supporting their stance, emphasizing that private limited companies were not liable for service tax as Consulting Engineers. The Revenue, however, relied on a different judgment to counter this argument.The Tribunal scrutinized the conflicting judicial precedents presented by both parties. While the Revenue referenced a single-bench decision of the Hon'ble Karnataka High Court, the appellant relied on two division bench judgments post the Finance Act 2006 amendment. Notably, the division bench rulings clarified that prior to 1.5.06, limited companies did not fall within the ambit of Consulting Engineer services. Consequently, the Tribunal found merit in the appellant's contentions, ultimately allowing the appeal and granting consequential relief in accordance with the law.In conclusion, the judgment delves into the nuanced interpretation of the statutory definition of Consulting Engineer, the applicability of service tax to private limited companies, and the weightage given to judicial precedents in resolving tax liability disputes. The decision underscores the significance of legal amendments and subsequent judicial interpretations in determining the tax obligations of entities providing consultancy services in the engineering domain.