Operation and maintenance of a power plant for electricity generation is not consulting engineering or repair service when maintenance is only incidental.

Operation and maintenance of a power plant for electricity generation did not amount to Consulting Engineer Service because the operator was performing the plant's principal function, not giving technical advice or consultancy; the demand was set aside. The same arrangement was not taxable as Maintenance or Repair Service because generation of electricity was the dominant object of the contract and any maintenance element was merely incidental, so the charges for operating the plant could not be treated as taxable repair or maintenance services; that demand was also set aside. The Tribunal followed earlier decisions on identical operation-and-maintenance arrangements and allowed relief to the assessee on the substantive tax demands.

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Issues: (i) Whether operation and maintenance of a power plant for generating electricity fell within Consulting Engineer Service. (ii) Whether the charges received for operating the power plant were taxable under Maintenance or Repair Service.

Issue (i): Whether operation and maintenance of a power plant for generating electricity fell within Consulting Engineer Service.

Analysis: The activity in question was the operation and maintenance of the plant for generation of electricity, and not rendering technical advice or consultancy to the owner. The arrangement showed that the appellant was itself operating the plant, with any maintenance being incidental to the principal activity of generation of electricity. Following the earlier Tribunal view on identical facts, such activity did not answer the statutory description of consulting engineering services.

Conclusion: The demand under Consulting Engineer Service was not sustainable and was set aside in favour of the assessee.

Issue (ii): Whether the charges received for operating the power plant were taxable under Maintenance or Repair Service.

Analysis: The Tribunal applied the settled principle that the dominant object of the agreement was generation of electricity, while any management or maintenance element was only incidental. Operation of the plant was not the same as maintenance or repair, and the contract was not one for rendering taxable service to another person in the manner alleged by the department. The reasoning from earlier decisions on identical operation-and-maintenance arrangements was followed.

Conclusion: The demand under Maintenance or Repair Service was not sustainable and was set aside in favour of the assessee.

Final Conclusion: The departmental appeal failed, while the assessee succeeded on the substantive tax demands arising from operation charges and the alleged consulting engineering liability; the remaining matters were disposed of in terms of the respective partial reliefs.

Ratio Decidendi: Where the dominant purpose of an operation-and-maintenance arrangement is generation of electricity and the alleged consultancy or maintenance element is merely incidental, the activity does not become taxable as consulting engineering or maintenance/repair service merely because the operator performs plant-related functions.

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