2024 (3) TMI 919 - AT - Service Tax

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, ... Levy of Service Tax - Consulting Engineer Service - execution of work of construction of Residential Complexes in the state of Bihar - denial of CENVAT Credit on architectural Service - input service or not - HELD THAT:- The Executing Agency has not been assigned the work of actual construction, which has been done by the contractors. The role of the Appellant as an Executing Agency is to ensure that the works are executed as per drawings and specifications. They have to provide their expertise and experience for smooth completion of the projects. Accordingly, the Appellant has not rendered 'Construction of Complex Service'. The service rendered by the Appellant is rightly classifiable as 'Consulting Engineer Service' and the Appellant has rightly paid service tax on the 8.5% agency fees received, under this category. Accordingly, the demand of service tax along with interest and penalty confirmed in the impugned order under the category of 'Construction of Complex service' is not sustainable and hence we set aside the same. The impugned order has confirmed the Service Tax of Rs.3,63,321/- on the differential value of Rs.29,31,401/- during the period 2005-06 to 2008-09 - the calculation has been done unilaterally by the adjudicating authority without giving an opportunity to the appellant to explain the actual difference. Accordingly, it is found that it is required to remand it back to the adjudicating authority to arrive at the differential value after giving an opportunity to the appellant to explain the difference. Hence, the matter is remanded back to the adjudicating authority only for the limited purpose of arriving at the differential value of taxable service of Rs.29,31,401/- worked out by the Department as above. CENVAT Credit availed and utilized by the Appellant on Architectural Consultancy services - HELD THAT:- This is an essential input service required for rendering of the 'Consulting Engineer service rendered by the Appellant. As per the MOU signed on 18.01.2008, it is the responsibility of the Appellant to ensure that the works are executed as per drawings and specifications. The Appellant cannot fulfill this responsibility without the input service of architecture received from the Architects. Thus, there is no merit in the findings in the impugned order that ‘architectural Service’ is not covered within the definition of ‘input service’. Accordingly, the 'Architecture ' service received by the Appellant is an 'input service' in terms of Rule 2 of CENVAT Credit Rules,2004 and the Appellant has rightly availed and utilized the credit on such input service. Hence, the denial of CENVAT Credit availed and utilized by the Appellant on 'Architecture service' is not sustainable. Accordingly, the impugned order demanding reversal of this credit along with interest and penalty set aside. The appeal is partly allowed and partly remanded. 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.