Consulting engineer tax scope: body corporates and sub-contractors were outside liability before the 1-5-2006 amendment.

Before the 1-5-2006 amendment, the definition of consulting engineer covered a professionally qualified engineer or engineering firm, but not a body corporate, so a company was outside the taxable category for the relevant period. Services rendered by a sub-contractor to a prime consultant were also not treated as consulting engineer service liable to tax, because the service was attracted where work was rendered directly to the client. On those points, the tax demand and penalties were unsustainable, and the assessee succeeded.

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Issues: (i) whether a body corporate was covered by the definition of consulting engineer for the period prior to 1-5-2006; (ii) whether a sub-contractor rendering services to a prime consultant was liable to service tax under the consulting engineer service category.

Issue (i): whether a body corporate was covered by the definition of consulting engineer for the period prior to 1-5-2006.

Analysis: The definition of consulting engineer, as it stood before the 2006 amendment, applied to a professionally qualified engineer or an engineering firm. The amended definition, effective from 1-5-2006, expressly brought body corporates within its scope. The dispute related to a period prior to that amendment, and the pre-amendment entry did not include companies within the taxable category.

Conclusion: The body corporate was not covered by the definition of consulting engineer for the relevant period, and the demand could not be sustained on that basis.

Issue (ii): whether a sub-contractor rendering services to a prime consultant was liable to service tax under the consulting engineer service category.

Analysis: The trade notice clarified that consulting engineer service is attracted when services are rendered directly to a client, and that a sub-consultant rendering services to a prime consultant is not the person liable to pay tax on that service. The factual position accepted in the record was that the appellant acted as a sub-contractor to the prime consultant.

Conclusion: The sub-contractor was not liable to pay service tax on the services rendered to the prime consultant.

Final Conclusion: The tax demand and penalties were unsustainable and the assessee succeeded in the appeal.

Ratio Decidendi: A body corporate was not taxable as a consulting engineer before the 1-5-2006 amendment, and services rendered as a sub-consultant to a prime consultant did not attract liability under that category for the relevant period.

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