Full Judgment
2. Revenue proceeded against the appellant on the ground that they had rendered services like design development, design review, installation and commissioning and technology transfer for study and design of oil free compression systems, etc. to their clients to the total billed value of Rs. 4,71,60.135/- for the period from 07.07.1997 to 31.03.2001 without obtaining Registration under the category of 'Consulting Engineer'. The Assistant Commissioner of Central Excise Service Tax Division, in his OIO No. 98/2003 dated 31.12.2003 confirmed the demand of Service Tax amounting to Rs. 23,58,008/-under Section 73 of the Finance Act, 1994. Interest under Section 75 was demanded. Penalties of Rs. 500/- under Section 75A, Rs. 2,50,000/- under Section 76 and Rs. 1,000/- under Section 77 were imposed for failure to take registration, failure to pay the Service Tax and failure to file prescribed returns respectively. The appellants approached the Commissioner (Appeals). The Commissioner (Appeals) held that the activity of installation and commissioning would not fall under the category of Consulting Engineer services as the said activities became taxable only w.e.f. 01.07.2003.
With regard to the transfer of technology, he held that under the provisions of Section 3 of the Research and Development Cess Act, 1986 vide Notification No. 18/2002-ST dated 16.12.2002, the same would not be leviable to Service Tax. All the other activities were held to come within the purview of the category of 'Consulting Engineer' for purposes of Service Tax. To that extent, he upheld the OIO. The appellant strongly challenges the impugned order.
3. Shri K.S. Ravi Shankar, the learned Advocate appeared for the appellants and Shri R.K. Singla, the learned JCDR for the Revenue.
(i) That the appellant entered into a contract with his clients for completion of tooling, supply of spares, completion of teb facility, fabrication of turbo power pack, testing charges, charges for development of turbo power, designs, manufacture and supply of turbo power pack, development, fabrication and supply of pump jet propulsors, manufacture and supply of wave model, packing and forwarding, design development test and supply of Ait Turbine starting system and system equipments, modification on shafting or artouste gearbox, manufacture and supply of generator and accessories for IMWOTEC plant, balancing and spar test on ECT supplied earlier, supply of fuel process adopter and nozzle blanking, complete assembly of bought out items and testing and manufacture and supply of energy conservation stem turbine. It was urged that the above activities would not come within the purview of services rendered as 'Consulting Engineer'.
(ii) The above activities amount to transfer of Intellectual Property Rights (IPR). IPR came within the purview of Service Tax only w.e.f. 10.09.2004.
(iii) The appellants were engaged in the manufacture of turbines and no service was rendered because the turbines were cleared under a Central Excise Notification.
(iv) The alleged service was pursuant to a works contract and that a works contract could not be bisected and service tax levied on a part of the works contract. The following cases-laws were relied on: 6. We have gone through the records of the case carefully. The present appeal deals with the contracts entered by the appellant with their clients. The first contract has been entered with the Naval Science & Technology Lab, Government of India, Ministry of Defence, Vizag. This contract is for "Design, development and supply of turbo power pack and spares" and billing was done part by part at various stages as per terms and conditions; that each billing cannot be treated as a separate entity, but has to be considered as part obligation of the whole contract. The contracted amount is Rs. 2,52,35,000/-. It is very clear that the contract is for the supply of Turbo Power Pack and Spares. It is actually a works contract consisting of number of activities. The A contention of the appellant that these activities would not come within the purview of the category of Consulting Engineer services has great force. On the goods cleared, excise duty is separately paid. In view of the decided case-laws, the works contract cannot be vivisected to levy Service Tax on different activities. Similar is the case in respect of the contracts entered with other clients. In our view, during the relevant period, the activities undertaken by the appellant under the contracts in the impugned order are not liable to Service Tax under the category of 'Consulting Engineers'. All the case-laws cited by the appellant are very relevant. In the above view of the matter, the impugned order deserves to be set aside. Hence, we allow the appeal with consequential relief, if any.
(Operative portion of this Order was pronounced in open court on conclusion of hearing)