ST - Wikipedia has universal appeal among internet users but fails to acquire oracular significance - it is a source of knowledge for amateur research - Project titles may, in general, indicate content, however, determination of tax liability without examining specifics is inappropriate: CESTAT
By TIOL News Service
MUMBAI, OCT 05, 2015: NATIONAL Environmental Engineering Research Institute (NEERI), Nagpur is in appeal against the Order-in-Appeal passed by Commissioner (Appeals) which has modified the liability of service tax determined by the Dy. Comm. (Service Tax) to the extent of Rs. 1,86,17,905/- for the period July 1997 to March 2001 while upholding the penalties imposed u/ss 76 & 77 of FA, 1994.
Brief facts are that the appellant is a constituent laboratory of the Council for Scientific & Industrial Research (CSIR) and is registered under the Registration of Societies Act, 1960. It has an elaborate mandate encompassing the field of environmental science and engineering since its creation in 1958. About 125 scientists from various disciplines figure on its rolls and, supported by technical staff, undertake various studies and projects in the field of environmental science and engineering.
The case of Revenue is that the appellant was engaged in rendering "consulting engineer" service valued at Rs. 46,78,48,801/- during the period 7 th July 1997 to 31 st March 2001 without being registered as service provider and on which they had failed to discharge service tax liability of Rs. 2,33,92,441/-. A SCN demanding ST came to be issued on 10.10.2002.
After the matter was remanded by the first appellate authority, the appellant admitted that 151 projects undertaken during the period were classifiable as "consulting engineer" service and they remitted tax of Rs. 1,20,06,928/- by 28 th April 2006 but contested the demand relating to 116 other projects which they claimed were classifiable under "scientific or technical consultancy" services which was made leviable to tax only from 16 th July 2001.
In denovo adjudication, the original authority allowed exemption of a turnkey project and confirmed tax liability of Rs. 2,32,17,905/- including the amount admitted by the appellant.
In appeal, the Commissioner(A) dropped another portion of the demand pertaining to one more turnkey contract [with M/s Paramount Pollution Control Ltd] and further set aside the penalty u/s 78 on the ground that this provision was not invoked in the SCN. This was in the year 2011. And the demand confirmed is of Rs. 1,86,17,905/-.
Before the CESTAT, the appellants submitted that they, being a society, are excluded from the definition of service provider and that the identified projects are not liable to Service Tax. Reliance is placed on the decisions in Shakumbari Sugar & Allied Ind Ltd. - 2006-TIOL-1119-CESTAT-DEL and Shree Sidhbal Steels Ltd. - 2007-TIOL-687-CESTAT-DEL to submit that tendering of a few engineering advices does not detract from the main activity to make it an engineering firm.
The Member (T) writing for the Bench in his inimitable style (also see - 2015-TIOL-2062-CESTAT-MUM observed that the lower authorities as well as the appellant and the AR found the allure of Wikipedia irresistible insofar as relying upon the entry for the term 'environmental engineer' and that that was not a good idea since, in his words, - Wikipedia has universal appeal among internet users because of the range of subjects covered, its widespread accessibility and its amenability to updating but, by reason of the same attributes, it fails to acquire oracular significance. Indutiably, it is a source of knowledge for amateur research and may map out directions for extensive foray into any topic but being subject to emendation at any time from all and sundry, with or without appropriate qualification, it can, at best, fill up gaps that are not particularly critical to a final conclusion. Placing sole or near absolute reliance on its contents for tax determination detracts from the credibility of the findings.
Proceeding further, the Member (T) noted that the disputed projects are -
-Environmental Biotechnology (5)
-Environmental Impact Assessment (56)
-Environmental Monitoring (38)
-Environmental Policy Analysis (7)
-Hazardous Waste Management (1)
Thereafter, the Member (T) referred to the Encyclopaedia Britannica and Merriam Webster dictionary & observed that the lower appellate authority has relied upon the "unauthenticated source" to conclude that all five are engineering projects and that while titles may, in general, indicate content, determination of tax liability without examining the specifics is inappropriate.
The Member(T) further held -
"11. The appellate authority, in considering the 38 environmental monitoring projects, does not entertain any doubt that that these, besides actual measurement, involve predicting, evaluation and suggestions for remedial action. And in the specific analysis of one project, he unhesitatingly regards it as natural resource management and thereby within the ambit of the exposition on environmental engineering in the unauthenticated source. It should be amply clear that mere measurement of phenomena and comparison with the normative cannot be equated with activity that suggests altering of matter to achieve a desired outcome. Monitoring studies are not in the realm of engineering though subsequent remedial action maybe.
12. The appellate authority classified the remaining eight projects as other applications of environmental engineering as stated in the unauthenticated source. Such superficial fitment within the segregation cited in the unauthenticated source is not sufficient to deem the said activity as engineering. More so, as the distinction between the two types of consulting is so visibly apparent.
13. From the above it is amply evident that the disputed projects do not involve engineering. Levying of tax on the consideration received for the disputed projects on the ground that these arise from rendering "consulting engineer" service is, therefore, not sustainable. The appellant has admitted these to be scientific and technical studies. We find that the appellant has registered itself as "scientific and technical consultants" with effect from 4 th January 2002 shortly after this service was made taxable and has discharged tax liability on the projects admitted as "engineering consulting". As the disputed projects are not "engineering", they were not taxable during the relevant period…."
The Service Tax demand of Rs.1,86,17,905/- was set aside and the appeal was allowed.
Relief in passing: What has a writer to be bombastic about? Whaever good a man may write is the consequence of accident, luck, or surprise, and nobody is more surprised than an honest writer when he makes a good phrase or says something truthful - Edward Dahlberg .
(See 2015-TIOL-2104-CESTAT-MUM)
