HYDERABAD, JAN 24, 2013: THE respondent M/s. National Ship Design and Research Centre, Visakhapatnam is an autonomous body under the administrative control of Ministry of Surface Transport, Government of India, and is engaged in providing services in the fields of integrated ship design, consultancy, maritime economics, research and development. The services being provided by the respondent include design (tender design to production drawings) of all kinds of floating structures and also providing consultancy in the fields of techno economic evaluation of vessels, model testing etc.   

On a suspicion that the respondent was evading payment of Service Tax under the provisions of the Finance Act, 1994 on "Consulting Engineering Services" provided by it to clients, the Head Quarters Preventive Unit of the Central Excise Commissionerate, Visakhapatnam conducted investigations. The respondent contended that services rendered by them which are in the nature of non-research projects are alone classifiable as "Consulting Engineering Services " for the purpose of levy of Service Tax and that services shown as research projects did not fall under the above category prior to 16.7.2001 and for the period prior to 16.7.2001  the "scientific and technical consultancy services" i.e research projects are not liable to levy of Service tax. The Commissioner (Appeals) as well as the Tribunal endorsed this view of the assessee, but the department filed appeal before the High Court against the order of the Tribunal.

The High Court dismissed the appeal by holding that:

Admittedly, levy of Service Tax on "Consulting Engineering Services" wa s introduced with effect from 7.7.1997 by notification No.23/97 dated 2.7.1997 under the Finance Act, 1994 through the Finance Act, 1997.  It is also not disputed that "Scientific or Technical Consultancy" was brought under Service Tax net with effect from 16.7.2001 only.

The assessee/respondent was not only providing "Consulting Engineering Services" but also "Scientific or Technical Consultancy" i.e. Scientific Research. The activities  of "Scientific Research" and "Consulting Engineering Services" are different.

The Commissioner of Central Excise and Customs (Appeals), in our opinion, rightly allowed the appeal filed by the respondent and the Tribunal rightly confirmed the same on the ground that the nature of activities undertaken by the respondent was not challenged before it. In our view, the issue in the case has to be decided having regard to the nature of activities undertaken by the respondent i.e. which of its activities are "Consulting Engineering Services" and "Scientific or Technical Consultancy". This is a question of fact and in our view has been correctly decided by the Commissioner of Customs and Central Excise (Appeals) and confirmed in further appeal by the Tribunal rightly. 

(See 2013-TIOL-59-HC-AP-ST)