1. This is an appeal filed by Revenue against the Order dated 28-10-1999 passed by the Commissioner of Central Excise & Customs (Appeals), Bangalore.
2. The short point to be considered in this case is whether services rendered by the respondent who is engaged as a Valuer of immovable property, would be liable to pay service tax leviable under the Finance Act, 1994, as a Consulting Engineer.
3. Shri L. Narasimha Murthy, learned JDR, appearing for the Revenue submitted that the Commissioner (Appeals) ordered in holding that valuation of immovable property is different from the advice/technical assistance normally rendered by a Consulting Engineer. The finding given by the Commissioner (Appeals) is in para 8 of the order which is as under :- "8. The task undertaken by a valuer is basically in the nature of expression of an opinion. It does not involve any consultancy or technical assistance. The valuation aspect, though has some engineering content in it, involves economic as well as commercial aspects such as market perceptions, real estate conditions etc. It is also seen from the constitution of the Institution of Valuers that, to be a valuer, one need not be an Engineer. In fact, valuation could be done of any property having no engineering content in it e.g. art objects. Thus, in my view, valuation of immovable property is different from the advice/technical assistance normally rendered by a Consulting Engineer. In more than one respect, I think the valuer's task is comparable to the Architect's task and if the services rendered by an Architect are held to be outside the purview of service tax, there is no reason why the services of valuers should be covered within it." 4. Shri L. Narasimha Murthy contended that valuation of immovable property to be regarded as advice in the nature of 'engineering advice' on the basis of knowledge of engineering and accordingly valuers rendering service as 'consulting engineer' within the meaning of Section 65(48)(g) of Finance Act, 1994. He said that precisely this was the view of the Madras High Court in the case of V. Shanmughavel (DR) v. Commissioner of Central Excise, Chennai, reported in 2001 (131) ELT 14. In that case, it was clearly held that "Valuers of plant and machinery being professionally qualified engineers to be regarded as 'consulting engineers' and services rendered by them to be considered as 'taxable service'. Accordingly, service tax leviable thereon with reference to Section 65(13), 65(41)(g) and 65(48)(g) of Finance Act, 1994 as amended." Particularly, he drew our attention to para 17 of the said decision, which is as under :- "17. The learned Counsel says that the "service" offered by an "engineer" in his capacity as "registered valuer" of immovable property cannot be covered under any of these ten categories. The argument has to be mentioned only to be rejected. The last sentence itself suggests that the "list is not exhaustive and it only illustrates the wide scope and nature of the services rendered by a consulting engineer". In our opinion, a consulting engineer has to use his experience and knowledge of engineering necessarily to arrive at a correct valuation of the immovable property. The argument that mere valuation of an immovable property is not an advice in the nature of "engineering advice" is obviously incorrect because where the knowledge in engineering itself is a must and is a basis for giving the valuation for the benefit of the assessee under the Wealth Tax Act then, it cannot be said that the advice is not in the 'engineering discipline." It must be first remembered that what has fallen for consideration before us is a subject of service tax and the provisions under the Finance Act and not the provisions under the Wealth Tax Act, which are being relied upon by the learned Counsel for the petitioner. Wherever an advice is given by an engineer on the basis of his engineering knowledge, skill and experience then such an advice would be in the realm of "engineering advice" or atleast pertaining to the "engineering discipline". In our opinion, such an advice would fall in "civil engineering discipline". Again, the term "engineering discipline" as used in Section 65(11) and Section 65(48)(g) of the Finance Act cannot be interpreted in a manner as suggested by the petitioner. Even adopting the strict view of a taxing statute, it would have to be held that the advice offered by an engineer on the basis of his engineering knowledge in respect of immovable property valuation would certainly amount to an advice which is integrally connected with the "engineering discipline." Therefore, when an "engineer" becomes a "registered valuer" of immovable property or plant and machinery, he is obviously rendering the services as a "consulting engineer" within the meaning of Section 65(48(g) of the Finance Act.
We cannot, therefore, accept the contention raised by the petitioner that such engineers who offer the advice in their capacity as the "registered valuers" of immovable property or plant and machinery cannot be brought into the tax-net under Section 65(11) read with Section 65(48)(g) of the Finance Act. We do not find any merit in the petition and would dismiss the same. No costs".
5. Shri Aswathanarayana, learned Chartered Accountant, appearing for the respondents, justified the action of the Commissioner (Appeals) in allowing the appeal. He said that in the case referred to and relied upon by the Revenue, composite service was rendered by the Engineer and accordingly, it was held that valuation of immovable property to be regarded as advice in the nature of 'engineering advice.' In the instant case, since the valuer has valued only the property, that cannot be considered to be a taxable service to attract service tax, with reference to the relevant sections under the Finance Act of 1994.
He requested that at any rate, imposition of penalty is not justified in the facts and circumstances of this case.
6. We have carefully considered the matter. In the case of Shri V.Shamughavel referred to by the Revenue, the High Court of Madras has clearly held that "Wherever an advice is given by an Engineer on the basis of his engineering knowledge, skill and experience, then such an advice would be in the realm of "engineering advice" or atleast pertaining to the "engineering discipline." However, it was held that even adopting the strict view of a taxing statute, it would have to be held that the advice offered by an engineer on the basis of his engineering knowledge in respect of immovable property valuation would certainly amount to an advice which is integrally connected with the "engineering discipline". Therefore, when an "engineer" becomes a "registered valuer" of immovable property or plant and machinery, he is obviously rendering the service as a "consulting engineer" within the meaning of Section 65(48)(g) of the Finance Act, 1994. Since this position has been analysed by the Madras High Court, respectfully following the same, we accept the plea of the Revenue and accordingly held that service rendered by the Appellant, as valuer of immovable property would be liable to pay service tax under the Finance Act, 1994 as a consulting engineer. In the view we have taken, we have no alternative but to confirm the duty as levied by the original authority.
7. As regards penalty, we find that the Assistant Commissioner, as per his orders, apart from interest, imposed a penalty of Rs. 9,372/- and Rs. 6,926/-respectively. Since the Commissioner was of the view that the activity undertaken by the party does not amount to service, he dropped the service tax as well as penalty. In view of the decision of the Madras High Court referred to above, we have taken the view that the activity attracts service tax, consequently, it attracts penalty also. But, we find that the quantum of penalty is excessive. The authorities have got a discretionary power while imposing the penalty.
The Supreme Court, time and again, has taken the view though penalty is imposable as per the statute; the minimum penalty can be imposed depending upon the facts and circumstances of each case. On taking the overall facts and circumstances of this case and on giving credence to the submissions made on behalf of the party with reference to the bona fides, we are of the view that the quantum of penalty is excessive. It calls for reduction. Accordingly, penalty is reduced to Rs. 5,000/- as against the penalty of Rs. 16,298/- in total. But for the reduction of penalty amount, the Order passed by the original authority is otherwise upheld. The Department's appeal is disposed of in the above terms.
8. The operative portion of this order has already been pronounced in open court on conclusion of the hearing on 12th November, 2003.