Power plant operations under O&M Agreement not taxable as Consulting Engineer services, refund allowed

CESTAT Kolkata held that services rendered by appellant under O&M Agreement during power plant operations period did not constitute Consulting Engineer services liable to service tax. The tribunal found appellant operated the plant for their own benefit rather than providing engineering advice, consultancy or technical assistance to the client. Since service tax was paid under mistaken belief, provisions of limitation and unjust enrichment under Section 11B of Central Excise Act were inapplicable. Appeal allowed; refund of service tax with interest granted.

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Issues Involved:

1. Whether the services rendered by the Appellant under the O & M Agreement during the operations period would be liable to service tax under the category of 'Consulting Engineer service'.
2. Whether the Appellant is eligible for a refund of service tax paid by them along with interest.

Summary:

The present appeal was filed by M/s. Nuovo Pignone International SRL against the Order-in-Appeal dated 17.02.2010, where the refund of Rs. 2,74,28,487 along with interest was rejected. The Appellant had entered into an Operations and Maintenance Agreement (O & M Agreement) with HPL Cogeneration Ltd. (HPLCL) for operating a Power Plant. During the period July 2003 to October 2007, the Appellant paid service tax under the category of Consulting Engineering Service but later realized that the services rendered were not liable to service tax.

Issue 1: Liability of Service Tax under 'Consulting Engineer Service'
The Tribunal examined the definition of 'Consulting Engineer Service' u/s 65(31) of the Finance Act, 1994, which involves advice, consultancy, or technical assistance in engineering. The Tribunal found that the Appellant's role was to operate, maintain, and run the Power Plant for their own benefit and not to provide any advice, consultancy, or technical assistance to HPLCL. Thus, the services rendered did not fall under the category of 'Consulting Engineer Service'. The Tribunal cited the decision in Rolls Royce Indus Power (I) Ltd - 2006 (3) STR 292 (T), which supported their conclusion.

Issue 2: Eligibility for Refund
The Appellant cited the decision in Commr. of C. E. (Appeals), Bangalore Vs. KVR Construction- 2012 (26) STR 195 (Kar.), where it was held that when tax is paid under a mistake, the provisions of Section 11B of the Central Excise Act, 1944, and the provisions of limitation and unjust enrichment would not be applicable. The Tribunal relied on this decision and similar cases to conclude that the tax paid by the Appellant was under a mistaken belief and thus, the provisions of Section 11B were not applicable. The Tribunal also noted that the issue of time bar was not raised in the Notice and the department did not appeal against the adjudicating authority's observation on this issue. Regarding unjust enrichment, the Tribunal held that since service tax was not payable, the question of unjust enrichment did not apply.

The Tribunal concluded that the Appellant is eligible for the refund of service tax paid, along with interest, and set aside the impugned order, allowing the appeal with consequential relief as per law.

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