ORDER
CNB Nair, Member (T)
1. The appellant executes engineering projects on works contract terms. The issue raised is whether the appellant is liable to service tax (which is leviable on a Consulting Engineer) in relation to such projects. The projects in question are the following:-
Sl.No. Particulars of contract Value of Service Tax taxable @ 5% (RS) Service (RS) 1. DHDS Contract 58,29,45,821 2,91,47,291 2. Optic Fibre Contract 5,22,000 26,100 3. KSEB Contract 1,38,17,139 6,90,857 4. Traction Contract 10,09,959 50,498 Total amount 58,82,94,919 2,99,14,746 The impugned order has held that the design element of these works contract would be liable to service tax.
2. It is the submissions of the learned Counsel for the appellants that this issue remains settled in favour of the appellant by this Tribunal decision in the case of Daelim Industrial Company Ltd Vs. CCE Vadodara 2003-Taxindiaonline-110-Cestat-Del wherein the Tribunal held that a work contract cannot be vivisected and a part of it is subjected to service tax.
3. The learned SDR points out that CBEC has issued circular No. 49/11/2002 ST dated 18.12.2002 clarifying as under :-
“Some construction agencies take up turnkey projects for construction of flats, administrative building etc. For constructing these flats they have to do some designing, drawing and also provide advise and technical assistance. The contract is generally for a lumpsum amount with no separate allocation for the above charges. Some field officers are taking part of the contract as a ‘service’ provided by a ‘consulting engineer’ and levying service tax on the same. Representations have been received that in respect of such turnkey contracts for carrying out construction activities, the designing and drawing work is a service provided to themselves in the course of the construction activity and there is, therefore, no question of charging any service tax on this amount.
This issue has been examined in the Board. For any civil construction work to commence, a lot of preparatory work is required, e.g. soil testing, survey, planning, designing, drawing, etc. Once the design and drawings are completed by the construction company, it always seeks the approval of the client before proceeding with the construction. If the client suggests some changes they are incorporated in the design. This portion of the work is provided to its client and the service is definitely of a ‘consulting engineer’ and hence taxable.”
It is the SDR’s submission that the order the Tribunal in Daelim Industrial Company Ltd has been passed without considering this circular.
4. We have perused the records and considered the submissions made by both sides. The facts in the present case are identical to the facts in Daelim Industrial Co Ltd case and our order in that appeal was passed following the decision of the Supreme Court in the case of State of Punjab Vs Associated Hotels India Ltd. 2002-Taxindiaonline-65-SC-CT. We find no reason to re-consider our decision. The appeal is allowed following the decision in Daelim Industrial Co Ltd. The appellants shall be entitled to consequential relief.