Full Judgment
The relevant show-cause notice demanded tax treating the above service as Engineering Consultancy Service. The assessee argued that it calibration of measuring instruments was purely a scientific activity and not an engineering activity. The original authority held thus: "...But they omitted to think that Engineering is also a Science.
Regarding the question of 'faculty of engineering' that the noticee may have application during the process, of calibration, the logic that follows is that, if the instruments are calibrated through electronic devices it is Electronic Engineering, if calibrated by mechanical device it is Mechanical Engineering, if calibrated through computers it is Computer Engineering. Even if taken in a broader way, all the processes of calibration shall come under the branch of 'Instrumentation Engineering'." The authority accordingly confirmed the demand of Service tax against the assessee and imposed penalties on them. This decision of the adjudicating authority was upheld by the Commissioner (Appeals). Hence the present appeal.
2. Heard both sides. Ld. Counsel for the appellants submits that calibration of measuring instrument is covered by "technical inspection and certification" which became a taxable service with effect from 1-7-2003 only and that the appellants obtained registration certificate from the department in respect of this service only in August, 2003.
Prior to 2003, this service was not taxable, nor was it covered by Engineering Consultancy Service. According to ld. Counsel only intangible services such as advice, consultancy etc. could be taxed as Engineering Consultancy Service. The service rendered by the appellants viz. calibration of measuring instrument was a tangible service and the same did not attract the definition of "consulting engineer" or "Engineering Consultancy Service." Moreover, it was not the department's case that the calibration of instrument was done by engineers. The findings and observations made by the original authority are based on its own personal notions rather than on a positive evidence. Ld. Counsel, therefore, prays for vacating the demand of Service tax for the period of dispute. Ld. DR reiterates the findings of the Commissioner (Appeals) and submits that the appellants have not shown that the activity in question was performed by the somebody other than engineer. It is argued that calibration of measuring instruments is an area of Engineering and the same requires to be treated is coming within the scope of Engineering Consultancy service.
3. After considering the submissions, I find that the show cause notice issued by the department correctly describes the subject activity thus :- on an arbitrary or inaccurate scale on an instrument, by employing qualified personnel exclusively for such work, on separate premises, adjoining to the said unit." The notice did not specify as to whether the activity was performed by an Engineer. It is said to have been performed by "qualified personnel." According to the definitions of "Consulting Engineer" and "Engineering Consultancy Service", such service, should be rendered by a professionally qualified Engineer or Engineering firm. Show cause notice did not claim that the appellants were a professionally qualified engineering firm, nor did it allege that the activity in question was performed by any professionally qualified engineer. In the absence of such specifics, it is impossible to accept the Revenue's contention that calibration of instrument done by the appellants constituted "Engineering Consultancy Service" under Section 65 of the Finance Act, 1994. Moreover, what are envisaged under this service are intangibles like advice, consultancy etc. and not tangibles like calibration of instruments. Admittedly, calibration of measuring instrument is covered by "technical inspection and certification" under Clause 108 of Section 65 of the Finance Act, 1994 which became a taxable service with effect from 1-7-2003 only. Therefore, during the period of dispute (prior to 1-7-2003), calibration of measuring instrument was not a taxable service, nor was it liable to be treated as part of Engineering Consultancy Service for the reasons already noted.
4. In the result, the impugned order is set aside and the appeal is allowed.