Service tax upheld for consulting engineer, Computer Software Development Industries liable, no retrospective exemption, relief available.

The Court upheld the order demanding service tax and penalties, ruling that the petitioner-Company was classified as a 'consulting engineer' under the Finance Act, 1994, and thus liable for service tax. The Court also held that service tax applied to Computer Software Development Industries, rejecting the argument for retrospective application of an exemption notification. The petitioner was directed to pay service tax for the relevant period, with an interim order continuation granted for eight weeks to seek relief from the Appellate Court.

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Issues Involved:
1. Validity of the order demanding payment of service tax and imposing penalties.
2. Classification of the petitioner-Company as a 'consulting engineer' under Section 65 of the Finance Act, 1994.
3. Applicability of service tax to Computer Software Development Industries.
4. Retrospective applicability of the exemption notification dated 28th February, 1999.

Detailed Analysis:

1. Validity of the Order Demanding Payment of Service Tax and Imposing Penalties:
The petitioner challenged the validity of the order dated 18th/24th November 1999, passed by the Additional Commissioner, Central Excise, Bangalore, which demanded payment of service tax and imposed penalties for defaults. The petitioner argued that it was not liable to pay service tax as it did not fall under the definition of 'consulting engineer' as per Section 65 of the Finance Act, 1994. The Court, however, upheld the validity of the order, stating that the petitioner-Company was liable to pay service tax and the penalties imposed were justified.

2. Classification of the Petitioner-Company as a 'Consulting Engineer' Under Section 65 of the Finance Act, 1994:
The petitioner contended that it was not a 'consulting engineer' as defined under Section 65(13) of the Finance Act, 1994, which defines a consulting engineer as "any professionally qualified engineer or an engineering firm who, either directly or indirectly, renders any advice, consultancy or technical assistance in any manner to a client in one or more disciplines of engineering." The Court found that the definition of 'consulting engineer' was broad enough to include companies providing such services. It concluded that the petitioner-Company, engaged in providing technical assistance, consultancy, or advice in engineering disciplines, fell within the scope of a 'consulting engineer' and was liable to pay service tax.

3. Applicability of Service Tax to Computer Software Development Industries:
The petitioner argued that according to a resolution of the Planning Commission and a subsequent notification, service tax was not applicable to Computer Software Development Industries. The Court examined the provisions of the Finance Act, 1994, and found that the service tax was applicable to services provided by consulting engineers, regardless of the industry. The Court held that the petitioner-Company, being engaged in providing technical services, was liable to pay service tax even if it was part of the Computer Software Development Industry.

4. Retrospective Applicability of the Exemption Notification Dated 28th February, 1999:
The petitioner contended that the exemption notification dated 28th February 1999, which exempted industries engaged in software development from service tax, should be applied retrospectively. The Court rejected this argument, stating that the notification did not provide for retrospective exemption and that judicial interpretation could not grant such retrospective effect. Consequently, the petitioner-Company was liable for service tax for the period before the exemption notification came into effect.

Conclusion:
The Court dismissed the writ petition, upholding the order demanding service tax and imposing penalties. It clarified that the petitioner-Company fell within the definition of 'consulting engineer' and was liable to pay service tax on the services provided. The exemption notification could not be applied retrospectively, and the petitioner-Company was liable for service tax for the relevant period. The Court granted an interim order continuation for eight weeks to enable the petitioner to seek appropriate relief from the Appellate Court.

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