A two-judge bench of the Supreme Court comprising Justice M R Shah and Justice Sanjiv Khanna has held that a “firm” and a” company” can be said to be a “consulting engineer” as defined under the Finance Act, 1994 and liable to pay the service tax as a service provider even prior to the amendment in the Finance Act clarifying that the provision is applicable to “body corporates”.
The assessee, M/s Sepco Electric Power Construction Corporation is a Government of China company incorporated in the Republic of China, having its office at SPEC Site Office, Balco Nagar, Korba (C.G), entered into a contract dated 26.04.2003 with M/s. Bharat Aluminium Co. Ltd., Korba for providing “Design Engineering Services” and “Project Management & Technical Services”. In terms of the said agreement, it rendered “Consulting Engineer Services” to M/s BALCO. As per the Revenue, on the services rendered by the respondent as “Consulting Engineer Services”, the respondent was liable to pay the service tax.
The service tax department held that neither the respondent was registered under the Service Tax Act nor it paid the service tax on receipt of payments for such services.
On appeal, the CESTAT quashed the demand by holding that during the relevant period of dispute, namely, August, 2003 to November, 2005, the respondent being a body corporate was not covered under the definition of “Consulting Engineer”.
The Court has held that in many places under the Finance Act, 1994, the Parliament/Legislature has used the word “person”.
“At this stage, Section 3(42) of the General Clauses Act, 1897 is also required to be referred to, considered and applied. The word “person” includes any company or association or body of individuals, whether incorporated or not. Therefore, there is no logic and/or reason to exclude a” body corporate” from the definition of “consulting engineer” and to exclude the services of a “consulting engineer” rendered by a “body corporate” to exclude and/or exempt from the service tax net. Such an interpretation would lead to anomaly and absurdity. As observed hereinabove, it will create two different classes providing the same services which could not be the intention of the Parliament/Legislature,” the Court said.
Quashing the CESTAT order, the Apex Court ruled that “In view of our above finding that under the Finance Act, 1994, in the definition of “consulting engineer”, a “body corporate” is included and/or to be read into so as to bring a “body corporate” being a service provider providing the consultancy engineering services within the service tax net, as such, it is not necessary to consider whether the subsequent amendment amending the definition of “consulting engineer” by way of 2005 amendment adding a “body corporate” within the definition of “consulting engineer” would be retrospective and/or whether it can be said to be a clarificatory in nature or not and the said issue would become academic now.”
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