Customs, Excise and Gold Tribunal - Delhi
Ircon International Limited vs Commissioner Of C. Ex. on 28 July, 2005
Equivalent citations: 2006[ ]S.T.R.46
ORDER C.N.B. Nair, Member (T)
1. The appeal is directed against demand of service tax of about Rs. 12 lakhs and penalties. The demand is in regard to the appellant's receipts in connection with the construction of a hanger for Air India at Mumbai. The lower authorities have held that appellant's role in the construction of the hanger was that of consulting engineer and attracted levy of service tax under the heading "consulting engineering service". According to the order, appellant is an consulting engineer and Air India the client in regard to the hanger construction.
2. The contention of the appellant is that the role of the appellant in the hanger project is one of getting the construction project executed and not one of rendering any consultancy service. During the hearing of the case, learned Counsel for the appellant has taken us through various provisions in the contract to show that appellant was not rendering any engineering consultancy service and the project was basically one of construction and the appellant was being paid 6% of the project cost for executing the project.
3. We have perused the records and heard DR also.
4. Clause 1.2 of the contract defines the project and states that the project shall mean "construction of the hanger and annexe building along with their respective attendant facilities complete, as provided for in Annexure" Para 2.1 of the contract is as under :
2.1 AI hereby agrees to award to IRCON the work of undertaking to get done and complete the Project right through and including Project Completion and IRCON thereby agrees to get done and complete the said Project right through and including Project Completion within the maximum cost and the time presented and on the other terms & conditions herein contained, employing/utilizing such consultants and/or contractors as may be necessary for the purpose.
5. The details of the scope of work also mention cost estimate, design and detailed engineering, erection and commissioning, installation air-conditioning etc. of particular significance is that the appellant is not to carry out the consulting work for design and other engineering aspects. Clause 2.6 speaks of "the appellant shall appoint a suitable foreign consultant for basic design packages for the hanger." The clause also speaks of appellant engaging "a suitable Indian consultant for detailed designing and engineering". The appellant was also to arrange for procurement of materials, contractors for construction etc. For all these services, the appellant was to be paid 6% of the cost of the project. The learned Counsel for the appellant points out that it is well settled Daelim Industrial Company Limited v. CCE, Vadodara - that construction contracts cannot be subjected to service tax as engineering consultancy, either in their entirety or in part, on the basis that contract involves consultancy also. Learned Counsel also points out that the aforesaid decision of the Tribunal remains confirmed by the Apex Court.
6. As already noted, the appellant's contract with Air India was to manage a construction project in its entirety. It was to locate various experts for the work, get drawings etc. prepared and procure materials and supervise construction. Thus, basically it was a project management role. Naturally, in an advanced civil construction project, engineering expertise would be involved. But contract is not for obtaining the appellant's expertise as a consultant. It is for project management. The appellant is right in the contention that such construction contracts cannot be subjected to service tax as consulting engineering service, either as a whole or in part. This position remains covered by the decision in the case of Daelim Industrial Company Limited (supra).
7. In view of what is stated above, the service tax demand and the imposition of penalties on the appellant are not sustainable. The impugned order is, therefore, set aside and the appeal is allowed with consequential relief, if any, to the appellant.
(Dictated and pronounced in open court on 28-7-2005)