Composite turnkey contract cannot be vivisected to tax engineering design as consulting engineer service.

A composite turnkey contract for project construction and implementation could not be split to isolate and tax the engineering design element as Consulting Engineer service where the agreement and correspondence showed a single inseparable arrangement. The engineering and construction obligations were merged into one combined undertaking, and the assessee was found to have executed the project as a whole rather than rendered independent engineering consultancy. On that basis, the service tax demand on the impugned amount was not sustainable, and the refund claim ought not to have been rejected.

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Issues: Whether service tax was payable under the category of Consulting Engineer on amounts attributable to engineering design performed as part of a single turnkey contract for construction and implementation of a project.

Analysis: The agreement and contemporaneous correspondence showed that the engineering and construction obligations were merged into a single turnkey arrangement, under which the assessee undertook both design and execution of the project. The governing principle applied was that a composite turnkey contract cannot be split or vivisected so as to tax separately the service element when the contract is inseparable in substance and the engineering work is performed in aid of the overall works contract. On the facts found, the assessee did not render independent engineering consultancy to the recipient; it executed the project as a single combined obligation.

Conclusion: Service tax was not payable on the impugned amount under the category of Consulting Engineer, and the assessee's refund claim ought not to have been rejected.

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