ORDER
P. Karthikeyan, Member (T)
1. This application has been filed by M/s. Ravi Paints & Chemicals Ltd (for short RPCL) seeking waiver of predeposit and stay of recovery of service tax of Rs. 51,600/-, interest and various penalties including Rs. 51,600/- under Section 78 of the Finance Act, 1994 as per the Revision Order No. 4/2006 dated 9.8.06 of the Commissioner of Service Tax, Chennai. The impugned order was passed on revision of Order-in-Original passed by the Assistant Commissioner of Service tax whereby he had dropped proposal to demand service tax from RPAL for consulting engineer’s service rendered by them during the period 1998-99 to 2000-01. The original authority had found that the applicant had rendered only the service of testing of materials and had not rendered engineering consultancy service as proposed in the Show Cause Notice. In the impugned order, the Commissioner found that the applicants had rendered taxable service falling under the category of consulting engineer and confirmed the proposals made in the Show Cause Notice. After hearing both sides on the application, I find that the appeal itself can be finally disposed. Accordingly, after dispensing with requirement of predeposit, the appeal is taken up for final disposal.
2. Appearing for the appellants ld. Counsel submits that the appellants had entered into an agreement with M/s. Brilliant Coating Private Limited (BCPL) for rendering several services and that they had not rendered service as consulting engineer. He invites my attention to the following definition of ‘Consulting Engineer’:
‘Consulting Engineer means any professionally qualified engineer or an engineering firm who, either directly or indirectly, renders any advice, consultancy or technical assistance in any manner to a client in one or more discipline of Engineering.
The appellants did not conform to the above definition of ‘Consulting Engineer’. It is submitted that the appellants had collected charges only towards the testing of pigments manufactured by Brilliant Coatings Pvt. Ltd. It is also submitted that they had received the Show Cause Notice dated 20.5.03 only on 15th March, 2004 and therefore, the Show Cause Notice was time barred.
3. Ld. JDR submits that as per the agreement between the appellants and M/s. Brilliant Coatings Pvt. Ltd dated 19.8.96 renewed on 15th March, 2000, the appellants had agreed to provide know-how for manufacture of dry cement paint by M/s. Brilliant Coating Private Limited and also to provide services such as periodical testing of raw materials, finished products, exercising quality control, maintenance of machinery of BCPL for manufacturing dry cement paints etc. The agreement had indicated that the appellants were providing ‘Consulting Engineer’ service to BCPL during the material period and they had failed to register themselves with the Department and to pay the duty due for the services rendered. The demand was not barred by limitation.
4. I have carefully considered the case records and the submissions made by both sides. The appellants had entered into the following agreement with Brilliant Coatings Pvt. Ltd. On 19.8.1996.
After discussion and deliberations between us, it was re-considered and agreed that the quantum of fees payable by you would be 0.04 paise per kg, subject to minimum of Rs. 40,000/- p.m but not exceeding Rs. 4.8 lakhs per annum, for the goods produced from the year ending 31.3.1997, towards the arrangement existing between us in connecting with the manufacture of dry cement paints with the technical know-how supplied by us, receiving and processing charges and other allied services like periodical testing of raw materials, testing of finished product, exercising of quality control, maintenance of machinery of B.C. used in the manufacture of dry cement paints and any other services rendered.
2. The matter can be reviewed periodically by mutual consent on terms and conditions to be agreed upon by parties mutually.
3. Kindly acknowledge receipt of this letter confirming and expressing consent thereon to the conditions mentioned above.
5. This was modified on 1.5.2003 revising the charges payable to Rs. 30,000/- per month. From the agreement it is obvious that the finding of the Commissioner that the appellants were receiving monthly remuneration of Rs. 40,000/- till 1st March, 2000 and Rs. 30,000/- from then onwards was not merely for testing but for various services as indicated in the Agreement dated 19.8.96/15.3.2000 is correct. As per the arrangement RPCL had been furnishing technical know-how to BCPL and providing service such as periodical testing of raw materials, finished products, exercising quality control and maintaining machinery of BCPL used in the manufacture of dry cement paints. Obviously, the service rendered involved knowledge of engineering and the services appear to be engineering consultancy. However, the adjudicating authority has not met the challenge raised by the appellants in the reply to the Show Cause Notice to the effect that the appellants did not conform to the definition of ‘Consulting Engineer’ in the Act. They were neither provisionally qualified engineers nor were they a firm of engineers, rendering engineering consultancy service. In the circumstances, I find that the matter has to go back to the Commissioner to examine whether the appellants satisfy the statutory definition of ‘Consulting Engineer’. It is essential that the firm satisfies the definition of ‘Consulting Engineering’ before any tax liability or penal liability can be fastened on them. Commissioner may examine the question of limitation. The appeal is allowed by way of remand. Needless to say, that the appellants shall be provided adequate opportunity of being heard.
(Dictated and pronounced in open court)