COMMISSIONER OF CENTRAL EXCISE RAIPUR vs. M/S SEPCO ELECTRIC POWER CONSTRUCTION CORPORATION

REPORTABLE IN THE SUPREME COURT OF INDIA CIVIL APPELLATE JURISDICTION CIVIL APPEAL NO. 4928 OF 2018 Commissioner of Central Excise, Raipur …Appellant Versus M/s Sepco Electric Power Construction Corporation …Respondent J U D G M E N T M.R. SHAH, J. 1. Feeling aggrieved and dissatisfied with the impugned judgment and order dated 04.12.2015 passed by the Customs, Excise & Service Tax Appellate Tribunal, Principal Bench, West Block No.2, R.K. Puram, New Delhi (hereinafter referred to as the ‘CESTAT) in Appeal No. ST/136/2007, by which the learned CESTAT has allowed the said appeal Signature Not Verified Digitally signed by R Natarajan Date: 2022.07.11 17:11:57 IST Reason: preferred by the respondent herein and has set aside the demand towards the service tax by holding that the services rendered by the 1 respondent – “Consulting Engineer Service” were not subjected to service tax, the Revenue has preferred the present appeal. 2. That the respondent herein – M/s Sepco Electric Power Construction Corporation is a Government of China company incorporated in the Republic of China, having its office at SPEC Site Office, Balco Nagar, Korba (C.G), entered into a contract dated 26.04.2003 with M/s. Bharat Aluminium Co. Ltd., Korba (for short, “BALCO”) for providing “Design Engineering Services” and “Project Management & Technical Services”. In terms of the said agreement, it rendered “Consulting Engineer Services” to M/s BALCO. As per the Revenue, on the services rendered by the respondent as “Consulting Engineer Services”, the respondent was liable to pay the service tax. According to the Revenue, neither the respondent was registered under the Service Tax Act nor it paid the service tax on receipt of payments for such services. According to the Revenue, under the contract, taxable service valued at Rs. 1,12,90,53,457/- was already rendered and the payments were made to the respondent by M/s. BALCO, on which service tax liability worked out was Rs. 10,42,71,437/- which was not paid by the respondent. According to the Revenue, it also failed to obtain Service Tax Registration from the department. 2 2.1 A show cause notice dated 26.05.2006 was issued by the Commissioner of Central Excise, Raipur to the respondent under Section 73 read with Sections 65, 66 and 68 of the Finance Act, 1994 demanding the service tax along with interest under Section 75 and for imposition of penalty under Sections 76 & 77 of the Finance Act, 1994. 2.2 The Commissioner of Central Excise, Raipur vide Order-in-Original dated 31.01.2007 confirmed the demand of service tax amounting to Rs.10,42,71,437/- and ordered for its recovery along with interest. The Commissioner also imposed penalty amounting to the same amount under Section 78 of the Finance Act, 1994, besides imposing penalty of Rs. 150/-per day under Section 76 and Rs.1000/- under Section 77 of the Finance Act, 1994. 2.3 Feeling aggrieved and dissatisfied with the Order-in-Original dated 31.01.2007, the respondent preferred an appeal before the CESTAT, New Delhi bearing Appeal No. ST/136/2007. 2.4 By the impugned judgment and order, the CESTAT has allowed the said appeal setting aside the demand of service tax by holding that during the relevant period of dispute, namely, August, 2003 to November, 2005, the respondent being a body corporate was not covered under the definition of “Consulting Engineer”. Solely on the aforesaid ground, the CESTAT has set aside the demand. 3 2.5 Feeling aggrieved and dissatisfied with the impugned judgment and order passed by the learned CESTAT in setting aside the demand by holding that during the relevant period the respondent being a body corporate was not covered under the definition of “Consulting Engineer”, the Revenue has preferred the present appeal. 3. Shri Balbir Singh, learned Additional Solicitor General of India has appeared on behalf of the Revenue and Shri P.K. Sahu, learned Advocate has appeared on behalf of the respondent. 3.1 Shri Balbir Singh, learned ASG appearing on behalf of the Revenue has submitted that the issue involved in the present appeal relates to the scope of the definition of “Consulting Engineer” under Section 65 (31) of the Finance Act, 1994, specifically as to whether a “body corporate” is covered within its sweep prior to the amendment in 2005. It is submitted that the definition of “Consulting Engineers” in Section 65 (31) covers services provided to a client by a professionally qualified engineer or an Engineering firm consisting of professionally qualified engineers. It is submitted that the taxable attribute is that the services must be rendered in a professional capacity. 3.2 It is submitted that it is well settled that while construing taxation statutes, the Courts have to apply the strict rule of construction. It is submitted that strict interpretation does not encompass strict literalism 4 into its fold. This could result in ignoring an important aspect that is “apparent legislative intent”. It is submitted that in the case of Commissioner of Customs (Import), Mumbai v. Dilip Kumar & Co., (2018) 9 SCC 1 (para 28) , this Court has held and observed that ‘strict interpretation’ does not encompass such literalism, which lead to absurdity and go against the legislative intent. It is submitted that if literalism is at the far end of the spectrum, wherein it accepts no implications or inferences, then strict interpretation can be implied to accept some form of essential inferences which literal rule may not accept. It is submitted that in the aforesaid decision it is further held and reiterated that essential inferences can be read in while construing a taxing statute. 3.3 It is submitted that the definition of the term “Consulting Engineer” has been tested on this principle in the decision of the Karnataka High Court in Tata Consultancy Services v. Union of India, 2001 (130) ELT 726 . It is submitted that the High Court proceeded on the principle that it is fairly well settled that where the language of a statute in its ordinary meaning leads to a manifest anomaly or contradiction, the Court is entitled to put upon it a construction which modifies the meaning of the words used in the same. It is submitted that thereafter in para 11, it is observed and held as under: 5 “The position is no different in the instant case. There is, in my opinion, nothing repugnant in the subject or context of the Act, which should prevent the inclusion of a Company for purposes of levy of service tax on any advice, consultancy or technical assistance provided by it to its clients in regard to one or more disciplines of engineering. Indeed, if the argument advanced on behalf of the petitioner is accepted, it would remove all companies providing technical services, advice or consultancy to their clients from the tax net while any such services rendered by an individual or a partnership concern would continue to remain taxable. The Act does not, in my opinion, envisage any such classification let alone create and perpetuate anomalies that would flow from the same. The view taken by the Additional Commissioner of Central Excise that the petitioner-company was liable to pay service tax cannot therefore be found fault with.” 3.4 It is submitted that the aforesaid decision of the Karnataka High Court in the case of Tata Consultancy Services (supra) was followed by the Calcutta High Court in the case of M.N. Dastur Limited v. Union of India, 2006 (2) STR 532 CAL. It is further submitted that the aforesaid two decisions have been subsequently affirmed by the Division Benches of the respective High Courts. 3.5 It is submitted that in the case of TCS v. Union of India 2016 (44) STR 33 (KAR) , it was held that the intention of the legislature is to bring within the ambit of the service tax, the “consulting engineer” and so long as the person is a consulting engineer, whether it be an individual, firm or even a company, they come under the ambit of “consulting engineer”. 3.6 It is submitted that in the case of M.N. Dastur Ltd. v. Union of India 2006 (4) STR (3) CAL, it was inter alia held that it is inconceivable that a “consulting engineer” as an individual or constituting a partnership 6 firm or a proprietorship firm would be liable to pay tax under the service tax laws, but the same persons forming a company, a different juristic person, a distinct legal entity apart from the shareholders, would be outside the tax net. It is submitted that it is further held that there is no reason as to why a company providing “taxable service” as defined under Section 65 (48)(g) would not be a taxable service, when it would be so when provided by an individual qualified engineer or a proprietorship or partnership firm of engineers. It seems to be little absurd. It is submitted that in the aforesaid two decisions, the respective High Courts have considered in detail the entire scheme of the statute and the context. 3.7 It is submitted that while passing the impugned order, the learned CESTAT has relied upon the decision of the Delhi High Court in the case of CCE v. Simplex Infrastructure & Laundry Works 2014 (34) STR 191 (DEL) which followed an earlier decision of the Karnataka High Court in the case of CST Bangalore v. Turbotech Precision 2010 (18) STR 545 . It is submitted that in the case of Turbotech Precision (supra) , the High Court followed its earlier decision in the case of Commissioner of Service Tax, Bangalore v. ARACO Corporation, Japan 2010 SCC OnLine KAR 5448 . It is submitted that both these decisions contain no reasoning or any reference to the earlier binding decisions of a Co-ordinate Bench in the cases of TCS (supra) and M.N. 7 Dastur (supra) . It is submitted that in fact the department had filed appeals to this Court against the decisions in Turbotech Precision (supra) and Simplex Infrastructure (supra) being Civil Appeal Nos. 6429/2015 and 6430/2015 respectively. However, the same have been dismissed on separate issue of taxability of works contract in Commissioner, Central Excise & Customs, Kerala v. Larsen & Toubro Limited, (2016) 1 SCC 170. 3.8 It is further submitted that in the present dispute, the learned Tribunal has not at all applied its mind though it noted that it would require consideration of the contracts, to the aspect of works contract. Therefore, the said decision has no application to the present case. 3.9 It is further submitted that the amendment of 2005 was purely clarificatory in intent and purpose and the substitution of the words “engineering firm” with the words “any body corporate or any other firm” is only a clarification. The amendment did not aim at inclusion of the term “body corporate” simpliciter. 3.10 Relying upon the decision of this Court in the case of Motipur Zamindari Co. Ltd. v. State of Bihar, AIR 1953 SC 320 , it is further submitted by Shri Balbir Singh, learned ASG that it is observed and held by this Court that there is no reason to differentiate between an individual proprietor and a company which owns estates or tenures. 8 3.11 Relying upon the decision of this Court in the case of Vanguard Fire & General Insurance Co. Ltd., Madras v. Fraser and Ross, AIR 1960 SC 971 , it is submitted by Shri Balbir Singh, learned ASG that it is observed and held by this Court that all statutory definitions or abbreviations must be read subject to the qualification variously expressed in the definition clauses which created them and it may be that even where the definition is exhaustive inasmuch as the word defined is said to mean a certain thing, it is possible for the word to have a somewhat different meaning in different sections of the Act depending upon the subject or the context.

that the statutory provisions must be so construed, if possible, that absurdity and mischief may be avoided. It is submitted that following the

that the plain and literal interpretation of a statutory provision produces a manifestly absurd and unjust result, the Court might modify the language used by the Legislature or even do some violence to it so as to achieve the obvious intention of the Legislature and produce a rational construction. 9

learned Advocate appearing on behalf of the respondent.

was prevailing before the amendment on 01.05.2006 on interpretation of Section 65 (31) of the Finance Act, 1994 and considering the fact that the definition of “consulting engineer” has been subsequently amended from 01.05.2006 to specifically include such services of “any body corporate or any other firm”, the learned Tribunal has not committed any error in holding that prior to 01.05.2006, the company/body corporate was not included within the meaning of ”consulting engineer”.

Commissioner of Trade Tax, U.P, Lucknow (1998) 7 SCC 228 and

subsequent legislation may be looked into to fix the proper interpretation of the statutory provision that stood earlier.

prospective and not by way of clarification/removal of any doubt. It is submitted that the Government in Part-III of the Explanatory 10 Memorandum to Finance Bill, 2006, relating to service tax at Para (III) (10) and in Letter F. No. 334/2006-TRU dated 28.02.2006, explaining the changes in Budget 2006-07 at para 3.12(10) explained specifically that “consulting engineer service” has been amended to include “engineering consulting services provided by any firm or body corporate”. It is submitted that thus the intention was to bring in for the first time “engineering consulting services by body corporate”. It is submitted that therefore “body corporate” was not within the meaning of “consulting engineer” during the disputed period.

that the said decisions/rulings of the High Courts on “consulting engineer” were before the amendment of 2006. It is submitted that after the amendment, the High Courts of Delhi and Karnataka have relied upon the subsequent legislation to interpret the earlier language and held that “body corporate” was not within the meaning of “consulting engineer”. It is submitted that there is no High Court ruling after the amendment which has taken a different view. It is submitted that the learned CESTAT has been following consistently the view that “body corporate” became taxable from 01.05.2006. 11

colour from the expression “professionally qualified engineer”, an engineering firm should mean a partnership firm of professionally qualified engineers. After the amendment, all other kinds of firms and body corporates were included within the expression “consulting engineer”.

in legal circles, “firm” is understood as partnership firm and not as company. Service tax was introduced in 1994, twenty-seven years back.

“firm” as “Business entity or enterprise. An unincorporated business.

states that traditionally this term has referred to a partnership, but today it frequently refers to a company.

using “firm” and “company” as different expressions. In most of the enactments, including Finance Act, 1994, Income Tax Act, 1961, CGST Act, 2017, Companies Act, 2013, the word “person” has been defined in the definitions clause to include “company” and “firm” separately. The 12 service tax law (Finance Act, 1994) has considered firm and company/body corporate as separate entities in several provisions:

and “company” in sections 65(105) (zzzl) and 73D Explanation. CGST Act, 2017, mentions these terms separately in sections 90, 94, 137 Explanation and 159. In Companies Act, 2013, sections 2(49(, 7, 25, 215 and 341, the expressions firm and company/body corporate have been used side by side. In other enactments, company has been defined to include firm for specific purposes, implying that both are not the same.

Spinning and Manufacturing Co. Ltd. (1953) 24 ITR 499 and Vazir Sultan Tobacco Co. Ltd. v. CIT, A.P., Hyderabad, (1981) 4 SCC 435 =

13 the Court shall resort to the ordinary natural meaning as understood in common parlance. It is submitted that in common parlance, Court rulings and legislations, “firm” has been always understood as partnership firm. Therefore, in the present case, “consulting engineer” before its amendment in 2006 should include only individual and partnership firm and not “body corporate”.

the provision is ambiguous and is susceptible to two interpretations, the interpretation which favours the assessee, as against the Revenue, has to be preferred.

appeal.

length.

Court is, the scope of definition of “consulting engineer” under Section 65(31) of the Finance Act, 1994, specifically as to whether a “body corporate” is covered within its sweep prior to the amendment in 2005. 14

of “consulting engineer” under Section 65(31) has been amended and now it specifically includes a “body corporate”. Therefore, as such, with respect to the proceedings post amendment 2005, there will be no difficulty. After the amendment, any “body corporate”, a service provider providing the services as “consulting engineer” is liable to pay the service tax. The only question which remains is, whether under the erstwhile definition of “consulting engineer” under Section 65(31) of the Finance Act, 1994, a “body corporate” providing services as “consulting engineer” was liable to pay the service tax or not?

provisions under the Finance Act, 1994 are required to be referred to, which are as under:

xxx xxx xxx xxx xxx

xxx xxx xxx xxx xxx

15

xxx xxx xxx xxx xxx

Charge of service tax.

xxx xxx xxx xxx xxx Payment of service tax

Registration.

Furnishing of returns.

16

amendment 2005, reads as under:

the words “any body corporate”, post 2005, we have to consider whether the original definition of “consulting engineer” under the Finance Act, 1994 may include “any body corporate” or not.

engineer” in Section 65(31) covers services provided to a client by a professionally qualified engineer or an engineering firm consisting of professionally qualified engineers. The taxable attribute is that the services must be rendered in a professional capacity.

referred to hereinabove, “taxable service” means any service provided or to be provided. Under the relevant provisions of Finance Act, 1994, at many places, the word used is “person”. For example, as per Section 68, every “person” providing taxable service to any “person” 17 shall pay service tax. Section 69 provides that every “person” liable to pay the service tax….may make an application for registration. In Section 70 also, the words used are “every person liable to pay the service tax…”

case, it would remove all companies providing technical services, advice or consultancy to their clients from the service tax net, while any such services rendered by an individual or a partnership firm would continue to remain taxable. That does not seem to be an intention on the part of the legislature to exclude the “body corporate” from the definition of “consulting engineer”. There does not seem to be any logic to exclude “body corporate” from the definition of “consulting engineer”. If the submission on behalf of the respondent is accepted and the “body corporate” is excluded from the service tax, in that case, it would not only lead to absurdity but also would create two different classes providing the same services. That cannot be the intention of the legislature to create two separate classes providing the same services and to exclude one class.

this Court that the statutory provision must be so construed, if possible,

18

in paragraph 46 as under:

Bench of this Court observed and held as under:

19

on law of interpretation of a taxing statute, it is required to be 20 considered, whether a “body corporate” was excluded from the service tax net under the Finance Act, 1994.

2005, by Circular/Trade Notice dated 4.7.1997, the definition of “consulting engineer” under the Finance Act, 1994 was specifically explained and as per the said Trade Notice, “consulting engineer” means any professionally qualified engineer or engineering firm who, either directly or indirectly, venders any advice, consultancy or technical assistance in any manner to a client in one or more disciplines of engineering. It also further clarified that “consulting engineer” shall include self-employed professionally qualified engineer who may or may not have employed others to assist him or it could an engineering firm – whether organised as a sole proprietorship – partnership, a private or a Public Ltd. company. From the aforesaid, it can be seen that it was never the intention of the legislation to exclude a “body corporate” from the definition of “consulting engineer” and from the “service tax net”.

1994 regime and prior to amendment 2005, the definition of “consulting engineer” applicable under the Finance Act, 1994 fell for consideration

21

respective High Courts had an occasion to consider in detail the

that it was not liable to either recover or deposit any tax as it was not providing a taxable service within the meaning of Section 65(41) of Chapter V of the Finance Act, as amended from time to time. It was contended that service provided by a consulting engineer in relation to advice, consultancy or technical assistance in any discipline of engineering was taxable only if such services were provided by a consulting engineer as defined in Section 65(31) of the Finance Act. According to the TCS, service provided by a company even when it may have engaged qualified engineers to carry on or promote its business would not tantamount to a taxable service within the meaning of the Finance Act so as to justify any demand on the basis thereof. After analysing the entire scheme of the service tax liability imposed by the Finance Act, 1994, it is observed and held in paragraphs 6 to 11 as under: “6. It is evident from a conspectus of the provisions referred to above that the taxable event is the providing of service with the levy falling on the provider. It is also evident that the liability to pay is not confined to only individuals. The levy falls on ‘every person’ providing the service. The expression ‘every person’ in turn is wide enough to include a Company incorporated under the Companies Act. Suffice it to say that the Scheme of the Act envisages a tax on such services as have for 22 purposes of the levy been described as taxable. It is for purposes of levy and collection of the tax immaterial whether the provider of the service is an individual or a juristic person like an incorporated Company. Thus far there is no difficulty. What according to the petitioner makes the all important difference is the definition of the expressions “consulting engineer” and “taxable service” as provided by Section 65(13) and Section 65(48) of the Act. The same may at this stage be extracted for ready reference. “Section 65(13): “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.” “Section 65(48): “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.” 7. The argument is that a service provided by a technically qualified person in regard to advice, consultancy or technical assistance in one or more disciplines of engineering is taxable only if the same is provided either by an individual, who is a professionally qualified engineer or by an engineering firm. Any service provided by a Company even when based on the advice of professionally qualified engineers is not a taxable service so as to attract the levy under the Act. Since the petitioner-Company is neither an individual nor a partnership concern, any service provided by it even when the same may relate to any discipline of engineering and be based on the opinion of qualified engineers engaged by it cannot be regarded as a taxable service. The argument is no doubt attractive though not equally sound. The reasons are not far to seek. The question in essence is whether the Scheme of the Act makes any distinction between services rendered or provided by individuals and partnership concerns on the one hand and incorporated companies on the other. The answer has to be in the negative. As noticed earlier, the Act aims at levying a tax on the services declared taxable regardless whether the same are provided by a natural or a juristic person. There is no distinction under the Act between the provider of a service, who is an individual, a partnership concern or an incorporated company. The liability to pay tax on the service provided falls uniformly on all the three, provided the service is of a kind that has been declared taxable under Section 65(48) of the Act. Viewed thus, what is taxed by the Act in the case of service provided by consultant engineers is the service provided directly or indirectly in the nature of advice, consultancy or technical assistance in any manner and relating to any disciplines of engineering. The fact that the service is provided by an individual or a partnership or by a Company is wholly inconsequential. It is true that inclusion of in the definition of the expression “consulting engineer” could include a Company to set the entire controversy at rest, but the very fact that a Company providing a technical assistance in any engineering discipline 23

24 Shreepathirao (AIR 1958 SC 658), where the Court declared that even a definition clause in an enactment must derive its meaning from the context or subject. 10. In Motipur Zamindari Company Limited v. State of Bihar and Another (AIR 1953 SC 320) , the Court held that there was no justification to differentiate between a company and an individual and that there was nothing in the statute being interpreted Court in that case, which would prevent the inclusion of the Company. The Court was in that case interpreting the term “proprietor” as defined by Section 2(O) of Bihar Land Reforms Act. It held that in view of the object of the Bihar Land Reforms Act, there was no reason to differentiate between an individual proprietor and a company which owns estates or tenures. 11. The position is no different in the instant case. There is, in my opinion, nothing repugnant in the subject or context of the Act, which should prevent the inclusion of a Company for purposes of levy of service tax on any advice, consultancy or technical assistance provided by it to its clients in regard to one or more disciplines of engineering. Indeed, if the argument advanced on behalf of the petitioner is accepted, it would remove all companies providing technical services, advice or consultancy to their clients from the tax net while any such services rendered by an individual or a partnership concern would continue to remain taxable. The Act does not, in my opinion, envisages any such classification let alone create and perpetuate anomalies that would flow from the same. The view taken by the Additional Commissioner of Central Excise that the petitioner-Company was liable to pay service tax cannot therefore be found fault with.”

was also considering the service tax law under the Finance Act, 1994 regime. The question before the Calcutta High Court was as to whether the expression “engineering firm” used in the definition of “consulting 25 engineer” in Section 65(31) of the Finance Act, 1994, Chapter V, relating to service tax includes a company.

Court after considering the entire scheme of the service tax and the object of the Act including the taxable even etc. and ultimately held against the petitioner and it was held that the petitioner in that case being a “company” was subjected to service tax law under the Finance Act, 1994. The relevant discussion, observations and the findings recorded by the High Court in paragraphs 8 to 30 are as under: “Consulting engineer: Whether includes a company: 8. The definition of “consulting engineer” admittedly has not used identical expression used in defining the other assessees liable to pay service tax. Apart from the definition of “consulting engineer” in section 65(13), in all other cases, the expression “person” or “concern” or “commercial concern” has been used. Admittedly, a different expression has been used in 7 defining “consulting engineer” . It could not have been contended, and rightly, that the Legislature had made a distinction consciously and by reason of such distinction, it had intended differently. A fiscal statute has to be construed strictly, if something is not subject to levy of tax clearly expressed in the statute, the same cannot be brought within the tax net by way of interpretation as was held in A.V. Fernandez, [1957] 8 STC 561 (SC). It is a settled proposition that it is the clear words of law and not the intention of the Legislature, which is to be examined to find out what the taxing statute has clearly said. There is no room for intendment. There is no equity about a tax. There is no presumption as to tax. Nothing is to be read in, nothing is to be implied. Only the language used is to be looked at fairly as was laid down in Orissa State Warehousing Corporation, [1999] 237 ITR 589 (SC) quoting from Cape Brandy Syndicate v. IRC, [1921] 1 KB 64 and also in CIT v. Ajax Products Ltd., [1965] 55 ITR 741 (SC). At the same time, as held in C.A. Abraham, [1961] 41 ITR 425 (SC), the court cannot proceed to make good the deficiency, if there be any. The court must interpret 26 the statute as it stands. In the case of doubt, the interpretation favourable to the taxpayer is to be adopted. At the same time, in the case of absurdity the court can make good the deficiency, remove the absurdity and interpret the statute according to its objects and purposes. 9. The word “firm” cannot include a company. The name of a partnership firm is a compendious method of describing the partners in a partnership firm as was laid down in Mrs. Bacha F. Guzdar, [1955] 27 ITR 1 (SC), Dulichand Laxminarayan, [1956] 29 ITR 535 (SC) and Malabar Fisheries Co., [1979] 120 ITR 49 (SC). It is distinct from a company, a juristic person distinct from its shareholders; whereas a partnership firm comprises the partners and has no separate entity or existence without the partners. According to section 4 of the Partnership Act, 1932, a “firm” means persons entering into partnership with another collectively called a firm, a compendious method of describing the partners in a partnership. The partners own absolute interest in the partnership firm and its assets and properties. The partners and the partnership firm are not distinct and separate entities and are identified with each other. Whereas a company is a juristic person, a distinct and separate entity other than its shareholders. The shareholders by reason of their holding of shares do not hold any interest in the assets and properties of the company. The shareholders' interest is confined to the profits and gains of the company; it does not extend beyond the interest to receive dividends or liability to the proportion of his shareholding. A shareholder cannot claim any interest in the property of the company. It was so held in Mrs. Bacha F. Guzdar, [1955] 27 ITR 1 (SC). 10. In Vazir Sultan Tobacco Co Ltd., [1981] 132 ITR 559, the Supreme Court had made a distinction between the company and a firm, which is to be understood in the light of the definition given in section 4 of the Indian Partnership Act. There is no doubt about the legal proposition. But each case has to be considered according to its own merits having, regard to the facts and circumstances of the case. So far as the decision in Vazir Sultan Tobacco Co. Ltd., [1981] 132 ITR 559 (SC) is concerned, it was dealing with the expression “reserve” as defined in the Companies (Profits) Surtax Act, 1964. The provisions contained therein were distinct and different from the provisions with which we are concerned. In the context of the said 1964 Act, the Supreme Court was considering the expression with reference to the Companies Act holding that the expression not defined in the 1964 Act is to be understood by reference to the expression used under the Companies Act, 1956. Therefore, this decision will not help us in order to interpret the expression “firm” used in the definition of “consulting engineer” in the Finance Act, 1994. 27 11. Keeping the above settled principles of law in mind, we may now proceed to find out as to whether the expression “firm” used in section 65(13) is to be understood differently. Section 65: The definitions: Scheme and context: 12. In order to ascertain the Situation/the principles of interpretation have to be followed. The court in order to construe the definition comprehensively may apply the golden rule of interpretation according to the ordinary grammatical meaning having regard to the scheme of the definitions and in the context of the provisions contained in the statute and the object and purpose for which it was enacted. It is apparent that the expressions “person”, “concern” or “commercial concern” have been used to define all other assessees liable to pay service tax except section 65(13) defining “consulting engineer”. The word “person” as defined in section 3(42) of the General Clauses Act includes an individual, a company or an association of persons. A “person” includes a juristic person. A company is a juristic person and there would be no difficulty to include a company when the definition uses the expression “person”. Similarly, a “concern” without any qualification can include any business or professional establishment and the “commercial concern” would include all concerns connected with commerce carrying on trade or profession or any kind of commercial activities and includes a company. 13. In the present case, section 65(13) includes an individual professionally qualified as an engineer. This does not seem to be disputed. The definition also includes an engineering firm. According to Dr. Pal, though qualified by the word “engineering”, a “firm” is to be understood something distinct from the company. According to him, it clearly means a partnership firm. It may be proprietorship firm but in any event it would be an association of qualified engineers without losing its entity or identity of being a qualified engineer either as an individual or as a partner in the partnership firm or as a person in an association of persons without losing its identity other than a compendious mode of describing themselves without resulting into an entity different from the firm as it would be in the case of a company in relation to its shareholders. 14. Therefore, if the definition does not clearly include a company in view of the principles on which the fiscal statute is interpreted, a company cannot be brought within the taxing net and when there is some doubt, the benefit would be available to the assessee, the taxpayer. Admittedly, the court while interpreting the provision cannot make good the deficiency; therefore, it is to be understood as it is. 15. But, it appears that there is a fallacy hidden in the definition under section 65(13). The expression “firm” has not 28 been used independent of its qualification. The engineers are definitely individuals or persons, but are not ordinary individuals or persons. They are qualified engineers. Therefore, an individual qualified engineer may be a person and means a person as well and include a person, who is a qualified engineer. But the expression “person” may include a qualified engineer but the said expression is insufficient to identify a particular class of persons who are qualified engineers. Therefore, the expression “person” could not be used to define a “consulting engineer” when he is an individual or an association of persons or otherwise. 16. The expressions “person”, “concern” or “commercial concern” appear to have been used freely in its common and ordinary meaning apposite to the particular class of assessee subject to service tax. It does not seem to give any particular or specified meaning. These expressions have been used to identify a class of assessee. It does not make any distinction inter se within the particular class. The definition is intended to embrace the class of assessee subject to service tax. In none of the definitions, it appears that any class within the class had ever been intended to be identified. Neither it appears that a class within the class was made liable or was intended to be excluded from the liability to pay service tax The context in which these definitions were given was intended to identify a particular class of assessee liable to pay service tax. 17. Therefore, when in none of the definitions there was any attempt to identify a class within the class in order to make liable or exempt from the liability, that particular class within the class from being subjected to service tax, it cannot be conceived that the Legislature had attempted to make such a distinction in the definition of “consulting engineer” by creating a class within the class for the purpose of exemption from the liability to pay service tax. When in all classes of assessees as defined in section 65, the whole of the particular class falling within the definition have been made liable, it would be wholly against the scheme, object and purpose of the legislation to exempt a particular class coming within the definition of “consulting engineer”. The definitions have been intended to identify a particular class liable to pay service tax. There cannot be any earthly reason to tax all coming within the particular class except one within that class. Nothing seems to appear from the scheme and the context in which the legislation was enacted to make a rational or intelligible differentia to exempt one class within the class. 18. It is inconceivable that a consulting engineer as an individual or constituting a partnership firm or a proprietorship firm would be liable to pay tax under the service tax laws, but the same persons forming a company, a different juristic person, a distinct legal entity apart from the shareholders, would be outside the tax net. We do not find any reason 29

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31 25. In these circumstances, we do not think that there is any deficiency in the definition of “consulting engineer”, which could be presumed to have excluded a company providing taxable service defined under section 65(48)(g) when its counterparts comprising an individual or a proprietorship or partnership firm or an association of person are included. From the scheme of the Act, we have not been able to find out any intelligible differentia or rational classification for excluding a company providing taxable service under section 65(48)(g) when its counterparts being individuals or proprietorship or partnership or association of persons are coming within the taxing net providing the same service. This is further supported from the scheme of the 1994 Act. The Act aims at levying tax on service. It is the taxable service, which makes the provider liable. Thus, the taxable event is the providing of service and the levy falls on the provider. It would be inconceivable that the Legislature had intended that the levy would fall on a provider when an individual or a proprietorship or partnership firm but not when a company. The distinction seems to be unintelligible and without any rationale, thus absurd. Under section 68 the liability is of every person. In support of this proposition, we may gainfully refer to the decision in Motipur Zamindari Co. Ltd. v. State of Bihar , AIR 1953 SC 320, where the court held that there was no justification to differentiate between a company and an individual and that there was nothing in the statute being interpreted by the court in that case, which would prevent the inclusion of the company. The court was in that case interpreting the term “proprietor” as defined by section 2(o) of the Bihar Land Reforms Act. It held that in view of the object of the Bihar Land Reforms Act, there was no reason to differentiate between an individual proprietor and a company, which owns estates or tenures. 26. The object of the Act is of general application, and not intended to confer any special benefit to a company. The definition of all other assessees includes company, then it is not known why the Legislature would intend to exclude a company providing a particular class of taxable service falling within section 65(48)(g). Though eloquently argued by Dr. Pal, the rationale between the differentiation having regard to the expression “firm” imposing liability to the whole class to exempt a class within the class is not intelligible and does not at all make out a case of rational classification to interpret the said definition otherwise than in consonance with the definition given to all other class read together with sections 66 and 68 having regard to the object and purpose of the enactment. When the statute is not a statute aimed at conferring certain special treatment for protecting the interest of a company, such an interpretation is not possible. Therefore, though for different reason, we are in agreement with the decision of the learned single judge since appealed against. 27. To support our view, we may borrow the reasoning from the decision of the Karnataka High Court in Tata Consultancy Services , [2002] 257 ITR 710, relying on the decisions in Tirath Singh v. Bachittar Singh , AIR 1955 SC 830 and CIT v. J.H. Gotla , [1985] 156 ITR 323; (1985) 4 SCC 343 : AIR 1985 SC 1698 to support its view, as quoted hereafter (page 715): 32

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some of the High Courts relied upon on behalf of the respondent are of post amendment 2005. In none of the cases, the respective High Courts had an occasion to consider the actual meaning and definition of “consulting engineer” contained in Finance Act, 1994, which directly fell for consideration before the Karnataka and Calcutta High Courts in the

1994, the Parliament/Legislature has used the word “person” (Sections 68, 69 and 70). At this stage, Section 3(42) of the General Clauses Act, 1897 is also required to be referred to, considered and applied. The word “person” includes any company or association or body of individuals, whether incorporated or not. Therefore, there is no logic and/or reason to exclude a” body corporate” from the definition of “consulting engineer” and to exclude the services of a “consulting engineer” rendered by a “body corporate” to exclude and/or exempt from 34 the service tax net. Such an interpretation would lead to anomaly and absurdity. As observed hereinabove, it will create two different classes providing the same services which could not be the intention of the Parliament/Legislature. Therefore, we are in complete agreement with

taking the view that a “firm” and a” company” can be said to be a “consulting engineer” as defined under the Finance Act, 1994 and liable to pay the service tax as a service provider.

the definition of “consulting engineer”, a “body corporate” is included and/or to be read into so as to bring a “body corporate” being a service provider providing the consultancy engineering services within the service tax net, as such, it is not necessary to consider whether the subsequent amendment amending the definition of “consulting engineer” by way of 2005 amendment adding a “body corporate” within the definition of “consulting engineer” would be retrospective and/or whether it can be said to be a clarificatory in nature or not and the said issue would become academic now.

impugned judgment and order dated 04.12.2015 passed by the CESTAT 35 is unsustainable. It is held that the respondent, being a service provider providing consultancy engineering services, was/is liable to pay the service tax for such services being “consulting engineer” within the definition of Section 65(31) of the Finance Act, 1994 and therefore and thereby liable to pay the service tax under Section 66 r/w Section 68 of the Finance Act, 1994. The impugned judgment and order dated 04.12.2015 passed by the CESTAT in Appeal No. ST/136/2007 is hereby quashed and set aside. However, from the impugned judgment and order passed by the CESTAT, it appears that the CESTAT has considered only one issue namely whether for the period pre 01.05.2006 – the Finance Bill, 2006 whether “body corporate” was covered within the definition of “consulting engineer” under Section 65 (31) of the Finance Act, 1994 and had not considered any other issues/grounds raised in the Memo of Appeal before the CESTAT. Therefore, the matter is remanded to the CESTAT to examine and decide the appeal on other grounds, if any, raised in the Appeal Memo before it afresh in accordance with law and on its own merits and in light of the observations made hereinabove and the law laid down by this Court in the present judgment and order. The aforesaid exercise shall be completed by the learned CESTAT within a period of three months from the date of receipt of the present order, which shall be produced by the Revenue before the learned CESTAT within a period of four weeks from today without fail. 36

However, in the facts and circumstances of the case, there shall be no order as to costs.

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