Executing agency providing expertise and supervision for residential complex qualifies as Consulting Engineer Service, not Construction Service

CESTAT Kolkata ruled that the appellant's role as executing agency for residential complex construction in Bihar constituted Consulting Engineer Service, not Construction of Complex Service, as they provided expertise and supervision rather than actual construction work performed by contractors. The tribunal set aside service tax demand under construction category and confirmed appellant's correct payment on 8.5% agency fees. CENVAT credit on architectural consultancy services was upheld as valid input service essential for consulting engineer work per MOU requirements. However, differential service tax calculation of Rs.29,31,401 was remanded to adjudicating authority for proper determination with appellant's opportunity to explain differences. Appeal partly allowed, partly remanded.

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Issues involved:
The issues involved in the judgment are the demand of Service Tax under the category of 'Construction of Complex service' and denial of CENVAT Credit on Architectural Consultancy services.

Issue 1: Demand of Service Tax under 'Construction of Complex service':
The Appellant, appointed as an Executing Agency for construction work in Bihar, received consultancy fees and paid Service Tax under 'Consulting Engineer Service'. However, the Department contended that the Appellant should pay Service Tax on the full amount received for the JNNURM Project under 'Construction of Complex service'. The Tribunal observed that the Appellant's role was limited to consultancy and coordination, not actual construction. Therefore, the demand for Service Tax under 'Construction of Complex service' was set aside.

Issue 2: Denial of CENVAT Credit on Architectural Consultancy services:
The Appellant availed CENVAT Credit on Architecture services, which the Department proposed to deny as not covered under 'input service'. The Tribunal found that the Architecture service was essential for the Appellant's role as a Consulting Engineer and thus, qualified as an 'input service'. Consequently, the denial of CENVAT Credit on Architectural Consultancy services was deemed unsustainable.

The judgment modified the impugned order as follows:
1. The demand of Service Tax of Rs.87,01,440/- was set aside as the Appellant had already paid Service Tax under 'Consulting Engineer Service'.
2. The issue of Service Tax demand of Rs.3,62,321/- was remanded back to ascertain the correctness of the differential value of taxable service for the period 2005-06 to 2008-09.
3. The CENVAT Credit availed by the Appellant of Rs.4,92,438/- was allowed.

In conclusion, the appeal was partly allowed and partly remanded for further proceedings.

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