2019 (8) TMI 1236 - AT - Service Tax

Tribunal confirms tax liability for consultancy services, rejects exemption claim.

Environment Protection Training & Research Institute Versus Commissioner of Customs, Central Excise and Service Tax-Hyderabad-IV

The Tribunal upheld the Commissioner's decision, confirming the tax liability of the appellant under 'scientific and technical consultancy service' and ... Classification of service - whether the appellant was performing a statutory function? - main objective of the institute is to provide technical assistance and consultancy in applied research and training services in the area of environmental protection to various organisations in the fields related water and waste water treatment, air pollution control, Environmental Impact Assessment (EIA), etc. - HELD THAT:- The appellant is a society registered under Registration of Societies Act by the State Government supported by it but it is an autonomous organisation. The statute does not place any responsibility upon the society. The society provides training and consultancy in the field of environment - The definition of State under Part-III (Fundamental Rights) of the Constitution of India does not extend to several other parts of the Constitution or to other laws. In Para-III, the definition of State is meant to determine which are organisations have a responsibility to ensure “right to equality, equality in matters of public employment”, etc. - what the appellant was doing is more or less akin to the job of a Chartered Accountant with respect to the Income Tax Act, Companies Act, etc. Scientific and technical consultancy service - liability of service tax - the Assistant Commissioner has divided value of the services rendered by them under the scientific and technical consultancy service into testing charges and report preparation charges. He sought classify testing charges under ‘technical testing and inspection services’ and held that the same were exempted as the service was rendered with respect to environmental clearances - HELD THAT:- As per Section 65A of the Finance Act, 1994, where a service is rendered is a composite service consisting a combination of different services it shall be classified as if they consisted of a service which gives them their essential character. In this case, the essential character of the service rendered by the appellant is scientific and technical consultancy service and the same cannot be divided into different services for the purpose of calculation of service tax. This mistake of the Assistant Commissioner was corrected by the Commissioner in his impugned Order-in- Revision. Therefore, we find no infirmity in said order. Appeal dismissed - decided against appellant. Issues:1. Taxability of services provided by the appellant under 'scientific and technical consultancy service.'2. Whether the appellant should be considered a statutory organization and exempt from taxation.Analysis:1. Taxability of services under 'scientific and technical consultancy service': The appellant, engaged in consultancy services related to environmental issues, was under dispute regarding the classification of their services for service tax. The Assistant Commissioner had earlier divided the demand into testing and report preparation components, exempting testing charges. However, the Commissioner revised this decision, considering the nature of the services provided as integral to scientific and technical consultancy. The Commissioner upheld a demand of &8377; 18,86,603 under technical consultancy service, which included the entire amount charged by the appellant. The Tribunal agreed with the Commissioner, stating that the appellant's services fell under the definition of scientific and technical consultancy service as per Section 65(92) of the Finance Act, 1994. The Tribunal held that the services could not be vivisected into separate components for taxation purposes, affirming the Commissioner's decision and rejecting the appellant's appeal.2. Consideration as a statutory organization for tax exemption: The appellant argued that being a society registered by the State Government, their activities should be considered statutory functions and exempt from taxation. They contended that their services, mainly involving the preparation of reports for environmental impact assessments, should be deemed statutory and not taxable. However, the Tribunal found that the appellant, though supported by the State Government, operated autonomously and did not perform statutory functions. The Tribunal compared the appellant's role to that of a Chartered Accountant certifying accounts for tax purposes, stating that the preparation of environmental reports was akin to this service. The Tribunal clarified that the judgment cited by the appellant regarding the definition of 'State' in the Constitution of India was in the context of fundamental rights and did not extend to tax laws. Therefore, the Tribunal concluded that the appellant was liable to pay service tax for the services rendered, dismissing the argument for tax exemption based on being a statutory organization.In conclusion, the Appellate Tribunal upheld the Commissioner's decision, confirming the tax liability of the appellant under scientific and technical consultancy service and rejecting the appellant's claim of being a statutory organization exempt from taxation.