By Puloma Dalal, Jayesh Gogri, Mandar Telang Chartered Accountants
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Whether activity of operation, maintenance and security of a windmill would be classifiable under “Consulting Engineering Service”?
Facts:
Appellant entered into an agreement with M/s. Suzlon Energy Limited (SEL) for operation & maintenance of the windmills sold by the said SEL to its customers. As per the sale contract entered between SEL and its customers, SEL would be looking after operation, maintenance & security of the windmills free of cost for the first 5 years from the date of purchases and thereafter with charges. SEL assigned the said operation and maintenance activity to the Appellant for an agreed consideration. The agreement also required them to provide round-the-clock security, monitoring the performance of the windmills, collection & compilation of the data relating to wind speed, energy generation & liaisoning and coordination with various Government departments. Demand of service tax was confirmed under “Consulting Engineering Service” along with imposition of penalties u/s. 76, 77 & 78 of the Finance Act.
Held:
The Tribunal after observing the terms of the agreement entered between Appellant and SEL and the activities carried out by the Appellant, held that an advice, consultancy or assistance in any field of engineering would be classifiable under ‘Consulting Engineering Service’ and not activities which are in the nature of execution. Executory services do not come within the purview of ‘Consulting Engineering Service’ as decided in Rolls Royce Industrial Power (I) Ltd. vs. CCE, Visakhapatnam 2006 (3) STR 292. Further, in the case of Basti Sugar Mills Co. Ltd. vs. CCE, Allahabad 2007 (7) STR 431, the Supreme Court while rejecting department’s appeal held that, since department had not challenged Rolls Royce decision before it, the said decision had attained finality and the appeal thus was allowed.
