Calcutta High Court
M.N. Dastur And Co. Ltd. And Anr. vs Union Of India (Uoi) And Ors. on 15 October, 2001
Equivalent citations: [2002]254ITR391(CAL), 2006[2]S.T.R.532
Author: Pinaki Chandra Ghose
Bench: Pinaki Chandra Ghose
JUDGMENT Pinaki Chandra Ghose, J.
1. In view of the said circular the petitioner applied for registration under the service tax with the authorities and on July 10, 1997, registration certificate was granted. On August 6 and 21 of 1997, the petitioner applied to the Central excise authorities for permission to collect and deposit service tax centrally at Calcutta.
2. On September 4, 1997, the petitioner received any service tax from its clients in July and August, 1997. In September, 1997, the petitioner received Rs. 3,95,573 by way of service tax from some of its clients which the petitioner deposited on October 3, 1997. Petitioner No. 1 also filed its first quarterly service tax return on October 14, 1997, pertaining to the period July to September, 1997. Subsequent thereto, the petitioner from time to time collected service tax arid also filed quarterly returns with the Department.
3. According to the petitioner, although some of the clients of the petitioner paid service tax, many of them have refused to pay service tax to petitioner No. 1. Accordingly, petitioner No. 1 has filed returns in respect of its clients from whom petitioner No. 1 has actually received the service tax.
4. On June 1, 1998, petitioner No. 1 wrote to the Commissioner of Central excise and expressed its views that petitioner No. 1 was not liable to pay service tax which petitioner No. 1 charged the client but failed to collect since the clients of petitioner No. 1 have refused to pay.
5. Petitioner No. 1 further sought for clarification and guidance of respondent No. 3, but the petitioner did not receive any reply in respect thereof. On September 21, 1999, the petitioner received a notice dated September 20, 1999, whereby the petitioner was directed to appear before respondent No. 5 on September 23, 1999, for taking up the assessments for the period July, 1997, to March, 1999. The petitioner prayed for time from respondent No. 5. According to the petitioner, the petitioner thereafter, engaged consultants in the matter and the said consultants expressed their opinions that petitioner No. 1 is not liable to pay its service tax and does not come within the purview of "consulting engineer" within the meaning of the said expression occurring in Chapter V of the Finance Act, 1994.
6. Petitioner No. 1 also sought for the opinion of legal experts and got the same view. In these circumstances, the petitioner has filed this application and submitted that the petitioner under a mistaken view of law has filed such returns and is entitled to get refund of the said amount so deposited by the petitioner.
7. Dr. Pal, appearing on behalf of the petitioner, contended that in the definitions of various types of service providers appearing in Section 65 the term "firm" has been used only with respect to the consulting engineer in Section 65(13). In all the other cases either the term person or commercial concern has been used. The term "person" like the term "firm" has neither been defined in the service tax laws nor in the Central Excise Act. The term "person" has been defined in Section 3(42) of the General Clauses Act, 1897, to include any company or association or body of individuals, whether incorporated or not. In other words, in the case of all service providers other than the consulting engineer the scope and ambit of the definition has been enlarged to bring within themselves a company or any other commercial organisation as well. However, in the case of a consulting engineer the definition has been restricted to only either an individual or a firm of engineers. The Legislature having specifically restricted the definition of consulting engineer, to an individual and a firm and further the Legislature having expressly extended the definition of other services providers to include, inter alia, a company as well, it can be safely contended that the Legislature consciously left out from the definition of the term "consulting engineer", inter alia, a company, being a body corporate.
8. He further relied upon a judgment reported in Mohammad Ali Khan v. CWT [1997] 224 ITR 672 (SC) and contended that the intention of the Legislature is primarily to be gathered from the language used, which means that attention should be paid to what has been said, as also to what has not been said. He also relied upon a judgment reported in J.K. Cotton Spinning and Weaving Mills Co. Ltd. v. State of Uttar Pradesh , where the Supreme Court held that the courts always presumed that the Legislature inserted every part thereof for a purpose and the legislative intention is that every part of the statute should have effect. Therefore, he contended that the definition of "consulting engineer" as defined in the Act relates to only an individual and a firm, such act was a conscious one on the part of the Legislature and no effort or attempt can be made to do any violence to the same so as to include the term "company". He further placed reliance on a decision reported in C.A. Abraham v. ITO and contended that in interpreting a fiscal statute, the court cannot proceed to make good deficiencies if there be any, the court must interpret the statute as it stands and in the case of doubt in a manner favourable to the taxpayer.
9. He further contended that the Explanation to Section 81 provides that for the purposes of the said Section company means, any body corporate and includes a firm and other association of individuals. Therefore, without the Explanation a firm cannot include a company nor a company include a firm.
10. He further relied upon Section 65(13) of the said Act and contended that the definition given under the said Act should be read as it has been given and no other meaning can be assigned to the expression.
11. He further relied upon the judgments reported in Punjab Land Development and Reclamation Corporation Ltd. v. Presiding Officer, Labour Court ; Gough v. Gough [1891] 2 QB 665 (CA); Mrs. Bacha F. Guzdar v. CIT , in the matter in support of his contention and he submitted that the notification and the notice go beyond the scope of the parent Act and are ultra vires.
12. Mr. Roy Chowdhury, appearing on behalf of the respondent, contended that the relevant provisions of the Finance Act, 1994, introduce service tax from Section 64 onwards, the Act and in particular its definition clause was amended by the Finance Bill, 2001 (see [2001] 248 ITR (St) 77, 78, 82).
"65. Definitions.--(18) '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 disciplines of engineering.
(63) 'service tax' means tax leviable under the provisions of this Chapter.
(72) 'taxable service' means any service provided,--
(g) to a client, by a consulting engineer in relation to advice, consultancy or technical assistance in any manner in one or more disciplines of engineering."
13. He further contended that the writ petitioner's contention that the words "engineering firm" in the definition clause cannot apply to a limited company but only to a partnership firm cannot be the correct interpretation for the following reasons :
(a) The dictionary meaning of the word "firm" does not confine it only to partnership.
(b) Black's Law Dictionary (5th edition) defines "firm" as follows :
"Firm--'Business entity or enterprise'."
14. Shorter Oxford English Dictionary, volume I, defines "firm--Firm the style or name under which a commercial house transacts business" ;
15. In view of the various provisions of the Act and its purpose and object the word "firm" cannot be given a narrow and restricted meaning.
16. The tax is on the service rendered and any person rendering service of advice, consultancy or technical assistance in any manner in one or more disciplines of engineering (section 65(72)(g)).
17. Similarly, the various other provisions of the Act, Sections 66, 68(3), 69(1) and (2), 70, 72(a) and (b), 75, 76, etc., clearly show that "every person" responsible for giving designated service is responsible and accountable under the Act.
18. He further submitted that this point has been considered by the High Court in Karnataka wherein it held that the word "engineering firm" would include a company.
19. In a decision reported in Tata Consultancy Services v. Union of India [2001] 130 ELT 726 (Karn), wherein it has held that the petitioner's contention that the levy is confined only to individuals and partnership firms and that incorporated companies are excluded is not acceptable and the detailed recent judgment has been deliberated.
20. In this connection, it is relevant that the Madras Division Bench in V. Shanmughavel (Dr.) v. Commissioner of Central Excise [2001] 131 ELT 14, has held that "consulting engineer is a class by themselves" and as such does not violate article 14.
21. In a case reported in V. Shanmughavel's case [2001] 131 ELT 14 (Mad), it has been held that "in respect of challenge under article 14 of the Constitution of India the argument is that while the other professionals are not taxed, the "consulting engineers" are taxed and, therefore, it is arbitrary. The argument is clearly untenable and has to be rejected as "consulting engineers" are a "class" by themselves.
In the Supreme Court judgment reported in Trustees of Gordhandas Govindram Family Charity Trust v. CIT [1973] 88 ITR 47, held that the word "individual" in Section 3 of the Act included trustees of the trust constituted an assessable unit under the Act.
22. After considering the facts and circumstances of this case I do not have any hesitation to accept the contention of Mr. Roy Chowdhury and express the same view as has been expressed by their Lordships in V. Shanmughavel's case [2001] 131 ELT 14 (Mad) and Tata Consultancy Services case [2001] 130 ELT 726 (Karri) and I do not have any hesitation to accept the opinion expressed by their Lordships in the said judgments and hold that every person provides this service which expression includes natural persons as well as juristic persons and further hold that the court made no distinction between different categories of service providers, be they individuals, partnership concerns or incorporated companies, and I do not have any hesitation to hold that the contention of Dr. Pal cannot be accepted by me that the levy confines only to individuals and partnership firms and the companies are excluded and I am of the same view expressed by their Lordships in the said judgment and come to the conclusion that even adopting the strict view of the taxing statute it would have to be held that the advice offered by an engineer whether it is a firm or an individual or a company 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 gives his advice or when engineers form an association or a firm or a company consisting of engineers rendering their service or services as a "consulting engineer" within the meaning of Section 65(72)(g) of the Finance Act cannot have any separate footing than that of the definition given in the said section. Therefore, in my opinion, the petitioners are well within the said definition and, therefore, there cannot be any exemption whatsoever in respect of petitioner No. 1. In my opinion, the question is to see the rendering of the service in what capacity--if it is consulting engineer in my opinion certainly they will attract the said definition whether it is an individual, or a firm or a company and furthermore, where the knowledge of such service based upon knowledge in engineering then automatically they must come within the purview of the said section and it cannot be said that the action on the part of the respondent authorities is illegal and in my opinion the petitioner cannot get any benefit by merely corning within the purview of the Companies Act. Therefore, I specifically hold that the petitioners are rendering service as a consulting engineer within the meaning of Section 65(72)(g) of the Finance Act. Therefore, in my opinion, the application cannot be entertained and is hereby dismissed.