Construction services for power plant not taxable as consulting engineer services

The Tribunal held that the services provided for the construction of a power plant did not qualify as "consulting engineer services" and were not subject to service tax during the relevant period. The appeal by the Revenue was rejected based on precedents and a CBEC Circular, determining the services were not taxable as consulting engineer services.

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Issues: Demand of service tax on "Consulting Engineer" services for a turnkey project involving a power plant construction; Classification of services as "Consulting Engineer" or "works contract"; Applicability of service tax based on CBEC Circulars and judicial precedents.

Analysis:
1. Demand of Service Tax on "Consulting Engineer" Services: The case involves a dispute regarding the liability of service tax on services provided for the erection, procurement, and construction of a power plant. The respondent, M/s. Hyundai Engineering & Construction Co. Ltd., argues that the services rendered fall under the category of "works contract service" and are not subject to service tax during the relevant period. The total sum involved in the project was US $123.99 million, with US $15 million representing the service component. The disputed amount of service tax is Rs. 40.83 lakhs along with applicable interest.

2. Classification of Services: The appellant, Commissioner of Central Excise, Mangalore, contends that the services in question are covered under the classification of "Consulting Engineer" services and are therefore liable to service tax. Reference is made to CBEC Circular No.49/11/2002-ST, which states that the work of erection and commissioning of machinery and plants constitutes technical assistance akin to services provided by a "consulting engineer" and is chargeable to service tax.

3. Applicability of CBEC Circulars and Precedents: The respondent's advocate cites CBEC Circular No.79/9/2004-ST, which clarifies that charges for erection, installation, and commissioning are not encompassed under Consulting Engineer services. The Circular states that commissioning or installation services are separately taxable and not chargeable under Consulting Engineer Services. Relying on this clarification, the advocate argues that the services in question are not taxable during the relevant period but only after 1.6.2007 when the "works contract" service was introduced. Judicial precedents, such as the CESTAT decision in Suzlon Windfarm Services Ltd. vs. CCE, Punt-II, are also referenced to support the argument that executory services do not fall under "Consulting Engineer service."

4. Judgment: After considering the arguments, the Tribunal concludes that the impugned services do not fall under the category of "consulting engineer's services" based on the precedents cited and the CBEC's clarificatory Circular dated 13.5.2004. Therefore, the services are not taxable during the relevant period. The appeal filed by the Revenue is deemed unsustainable and is rejected accordingly.

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