# COMMISSIONER OF CENTRAL EXCISE, RAIPUR v. M/S SEPCO ELECTRIC POWER CONSTRUCTION CORPORATION

- **Citation:** [2022] 17 S.C.R. 1
- **Court:** Supreme Court of India
- **Decided:** 2022-07-11
- **Case number:** Civil Appeal No.4928 of 2018
- **Bench:** M. R. Shah, Sanjiv Khanna
- **Source:** https://unisonlegal.in/judgment/supreme-court-of-india/commissioner-of-central-excise-raipur-v-m-s-sepco-electric-power-construction-35564
- **Pages:** 35

## Headnote

Finance Act, 1994: s.65(31) - Service Tax - Definition of
"consulting engineer" u/s. 65(31) of the Act - Whether 'body
corporate' is covered within its sweep prior to 2005 amendment -
Held: Even before the 2005 amendment, the term 'consulting
engineer' included "body corporate" - Even in s.3(42) of the General
Clauses Act, 1897, 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 the service tax net - Such
an interpretation would lead to anomaly and absurdity - It will create
two different classes providing the same services which could not
be the intention of the Parliament/Legislature - General Clauses
Act, 1897 - s.3(42).
Partly allowing the appeal and remitting the matter to
CESTAT, the Court
HELD : 1.1. Prior to amendment 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. It can be seen
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SUPREME COURT REPORTS
[2022] 17 S.C.R.
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". [Para10][18-A-C]
1.2 In many places under the Finance Act, 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 the service tax net.
Such an interpretation would lead to anomaly and absurdity. It
will create two different classes providing the same services which
could not be the intention of the Parliament/Legislature. [Para
11][33-F-H]
1.3 Under the Finance Act, 1994, in 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.
[Para 12][34-B-D]
1.4 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. 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, 200

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 [2022] 17 S.C.R. 1
1
COMMISSIONER OF CENTRAL EXCISE, RAIPUR
v.
M/S SEPCO ELECTRIC POWER CONSTRUCTION
CORPORATION
(Civil Appeal No.4928 of 2018)
JULY 11, 2022
[M. R. SHAH AND SANJIV KHANNA, JJ.]
Finance Act, 1994: s.65(31) - Service Tax - Definition of
"consulting engineer" u/s. 65(31) of the Act - Whether 'body
corporate' is covered within its sweep prior to 2005 amendment -
Held: Even before the 2005 amendment, the term 'consulting
engineer' included "body corporate" - Even in s.3(42) of the General
Clauses Act, 1897, 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 the service tax net - Such
an interpretation would lead to anomaly and absurdity - It will create
two different classes providing the same services which could not
be the intention of the Parliament/Legislature - General Clauses
Act, 1897 - s.3(42).
Partly allowing the appeal and remitting the matter to
CESTAT, the Court
HELD : 1.1. Prior to amendment 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. It can be seen
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[2022] 17 S.C.R.
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". [Para10][18-A-C]
1.2 In many places under the Finance Act, 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 the service tax net.
Such an interpretation would lead to anomaly and absurdity. It
will create two different classes providing the same services which
could not be the intention of the Parliament/Legislature. [Para
11][33-F-H]
1.3 Under the Finance Act, 1994, in 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.
[Para 12][34-B-D]
1.4 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. 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
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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. [Para 13][34-D-G]
Commissioner of Customs (Import), Mumbai v. Dilip Kumar
& Co., (2018) 9 SCC 1: [2018] 7 SCR 1191 - followed.
Commissioner of Income Tax, Bangalore v. J.H. Gotla,
Yadagiri, (1985) 4 SCC 343 : [1985] 2 Suppl. SCR 711;
K.P. Varghese v. Income Tax Officer, Ernakulam (1981)
4 SCC 173 : [1982] 1 SCR 629 - relied on.
TCS v. Union of India 2016 (44) STR 33 (KAR);
M.N. Dastur Ltd. v. Union of India 2006 (4) STR (3)
CAL - approved.
CCE v. Simplex Infrastructure & Laundry Works 2014
(34) STR 191 (DEL), ST Bangalore v. Turbotech
Precision 2010 (18) STR 545, Commissioner of Service
Tax, Bangalore v. ARACO Corporation, Japan 2010
SCC OnLine KAR 5448, Commissioner, Central Excise
& Customs, Kerala v. Larsen & Toubro Limited, (2016)
1 SCC 170 : [2015] 8 SCR 1046, Motipur Zamindari
Co. Ltd. v. State of Bihar, AIR 1953 SC 320 : [1953]
SCR 720; Vanguard Fire & General Insurance Co. Ltd.,
Madras v. Fraser and Ross, AIR 1960 SC 971: [1960]
SCR 857; Bhag Mal v. Ch. Prabhu Ram, (1985) 1 SCC
61 : [1985] 1 SCR 1099; Pappu Sweets and Biscuits v.
Commissioner of Trade Tax, U.P, Lucknow (1998) 7
SCC 228 : [1998] 2 Suppl. SCR 119; Gem Granites v.
CIT, T.N., (2005) 1 SCC 289 : [2004] 6 Suppl. SCR
332; CIT v. Century Spinning and Manufacturing Co.
Ltd. (1953) 24 ITR 499, Vazir Sultan Tobacco Co. Ltd.
v. CIT, A.P., Hyderabad, (1981) 4 SCC 435 : [1982] 1
SCR 789; CIT v. Vatika Township Private Limited, (2015)
1 SCC 1 : [2014] 12 SCR 1037; Tata Consultancy
Services v. Union of India, 2001 (130) ELT 726; M.N.
Dastur Limited v. Union of India, 2006 (2) STR 532
CAL - referred to.
COMMISSIONER OF CENTRAL EXCISE, RAIPUR v. M/S SEPCO
ELECTRIC POWER CONST. CORP.
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Case law reference
[1982] 1 SCR 629
relied on
Para 8.1
[1985] 2 Suppl. SCR 711
relied on
Para 8.2
[2018] 7 SCR 1191
followed
Para 8.3
[2015] 8 SCR 1046
referred to
Para 3.7
[1953] SCR 720
referred to
Para 3.10
[1960] SCR 857
referred to
Para 3.11
[1985] 1 SCR 1099
referred to
Para 3.12
[1998] 2 Suppl. SCR 119
referred to
Para 4.2
[2004] 6 Suppl. SCR 332
referred to
Para 4.2
[1982] 1 SCR 789
referred to
Para 4.8
[2014] 12 SCR 1037
referred to
Para 4.9
CIVIL APPELLATE JURISDICTION : Civil Appeal No.4928
of 2018.
From the Judgment and Order dated 04.12.2015 in Order No.STA/
53723/2015-CU(DB) of the CESTAT, New Delhi in Appeal No.ST/136/
2007.
Balbir Singh, ASG, Ms. Nisha Bagchi, Shyam Gopal, Amit Sharma,
Adit Khorana, Arvind Kumar Sharma, Mukesh Kumar Maroria, Advs.
for the Appellant.
P. K. Sahu, Kedar Nath Tripathy, Advs. for the Respondent.
The Judgment of the Court was delivered by
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
preferred by the respondent herein and has set aside the demand towards
the service tax by holding that the services rendered by the respondent
- "Consulting Engineer Service" were not subjected to service tax, the
Revenue has preferred the present appeal.
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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.
2.1 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-inOriginal 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
COMMISSIONER OF CENTRAL EXCISE, RAIPUR v. M/S SEPCO
ELECTRIC POWER CONST. CORP. [M. R. SHAH, J.]
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definition of "Consulting Engineer". Solely on the aforesaid ground, the
CESTAT has set aside the demand.
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
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
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(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:
"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, itwasinter alia held that 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
COMMISSIONER OF CENTRAL EXCISE, RAIPUR v. M/S SEPCO
ELECTRIC POWER CONST. CORP. [M. R. SHAH, J.]
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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. 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
ZamindariCo. Ltd. v. State of Bihar, AIR 1953 SC 320, it is
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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.
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.
3.12 It is further submitted that in the case of K.P. Varghese v.
Income Tax Officer, Ernakulam (1981) 4 SCC 173, this Court has
emphasised that the statutory provisions must be so construed, if possible,
that absurdity and mischief may be avoided.It is submitted that following
the aforesaid decision in the case of Bhag Mal v. Ch. Prabhu Ram,
AIR 1985 SC 150 = (1985) 1 SCC 61, it is observed and held by this
Court 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.
3.13 Making the above submissions and relying upon the aforesaid
decisions of the High Courts in the cases of TCS and M.N. Dastur
(supra), it is prayed to allow the present appeal.
4. The present appeal is vehemently opposed by Shri P.K. Sahu,
learned Advocate appearing on behalf of the respondent.
4.1 It is vehemently submitted that considering the provisions which
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 CENTRAL EXCISE, RAIPUR v. M/S SEPCO
ELECTRIC POWER CONST. CORP. [M. R. SHAH, J.]
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4.2 It is submitted that in the cases of Pappu Sweets and Biscuits
v. Commissioner of Trade Tax, U.P, Lucknow (1998) 7 SCC 228
and Gem Granites v. CIT, T.N., (2005) 1 SCC 289, this Court has
held that subsequent legislation may be looked into to fix the proper
interpretation of the statutory provision that stood earlier.
4.3 It is submitted that the amendment to Section 65(31) was
prospective and not by way of clarification/removal of any doubt. It is
submitted that the Government in Part-III of the Explanatory
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.
4.4 Now so far as the reliance placed upon the decisions of the
Karnataka High Court and Calcutta High Court in the cases of TCS &
M.N. Dastur (supra) by the learned ASG is concerned, it is submitted
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.
4.5 It is submitted that the most appropriate meaning of "engineering
firm" can be had by applying the principle of noscitur a sociis. Taking
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".
4.6 It is further submitted that in India, in common parlance as
well as in legal circles, "firm" is understood as partnership firm and not
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as company. Service tax was introduced in 1994, twenty-seven years
back. It is submitted that Black's Law Dictionary, 6th Edition (1990),
defines "firm" as "Business entity or enterprise. An unincorporated
business. Partnership of two or more persons." 8th Edition (2004) of this
dictionary states that traditionally this term has referred to a partnership,
but today it frequently refers to a company.
4.7 It is further submitted that Indian legislatures and courts have
been 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 service tax law (Finance Act, 1994) has considered firm
and company/body corporate as separate entities in several provisions:
65(19b) "business entity" include an association of persons,
body of individuals, company or firm but does not include an
individual.
65(105)(zzzl) ...to a banking company or a financial institution
including a non-banking financial company or ay other body
corporate or a firm, by any person, in relation to recovery of
any sums due to such banking company or financial institution,
including a non-banking financial company, or any other body
corporate or a firm, in any manner
It is submitted that there are other such separate mention of "firm"
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.
4.8 Shri Sahu, learned counsel for the respondent has further
submitted that it is held by this Court in the cases of CIT v. Century
Spinning and Manufacturing Co. Ltd. (1953) 24 ITR 499 and Vazir
Sultan Tobacco Co. Ltd. v. CIT, A.P., Hyderabad, (1981) 4 SCC
435 = (1981) 132 ITR 559 (SC) that where an expression has not
been defined, 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
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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".
4.9 It is further submitted that as observed and held by this Court
in the case of CIT v. Vatika Township Private Limited, (2015) 1 SCC
1 that if the provision is ambiguous and is susceptible to two
interpretations, the interpretation which favours the assessee, as against
the Revenue, has to be preferred.
4.10 Making the above submissions, it is prayed to dismiss the
present appeal.
5. We have heard the learned counsel for the respective parties
at length.
The short question which is posed for the consideration of this
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.
5.1 At this stage, it is required to be noted that post 2005, the
definition 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?
6. While considering the present issue, the relevant statutory
provisions under the Finance Act, 1994 are required to be referred to,
which are as under:
"Section 65. Definitions - In this Chapter, unless the context
otherwise requires: -
xxx
 xxx xxx
 xxx
 xxx
(31)
"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;
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xxx
 xxx xxx
 xxx
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(105) "taxable service" means any service provided {or to be
provided)
xxx
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 xxx
 xxx
(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 including the discipline of
computer hardware engineering but excluding the discipline of
computer software engineering;
xxx
 xxx xxx
 xxx
 xxx
Explanation - For the purposes of this section, taxable service
includes any taxable service provided or to be provided by an
unincorporated association or body of persons to a member
thereof, for cash, deferred payment or any other valuable
consideration.
Charge of service tax.
Section 66.
There shall be levied a tax (hereinafter referred
to as the service tax) at the rate of twelve per cent of the
value of taxable services referred to in sub-clauses ......of
clause (105) of section 65 and collected in such manner as
may be prescribed.
xxx
 xxx xxx
 xxx
 xxx
Payment of service tax
Section 68 (1) Every person providing taxable service to any
person shall pay service tax at the rate specified in section 66
in such manner and within such period as may be prescribed.
(2) Notwithstanding anything contained in sub-section (1), in
respect of any taxable service notified by the Central
Government in the Official Gazette, the service tax thereon
shall be paid by such person and in such manner as may be
prescribed at the rate specified in section 66 and all the
provisions of this Chapter shall apply to such person as if he is
the person liable for paying the service tax in relation to such
service.
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Registration.
Section 69 (1) Every person liable to pay the service tax under
this Chapter or the rules made thereunder shall, within such
time and in such manner and in such form as may be prescribed,
make an application for registration to the Superintendent of
Central Excise.
(2) The Central Government may, by notification in the Official
Gazette, specify such other person or class of persons, who
shall make an application for registration within such time and
in such manner and in such form as may be prescribed.
Furnishing of returns.
Section 70 (1) Every person liable to pay the service tax shall
himself assess the tax due on the services provided by him and
shall furnish to the Superintendent of Central Excise a return
in such form and in such manner and at such frequency and
with such late fee not exceeding two thousand rupees, for
delayed furnishing of return, as may be prescribed.
(2) The person or class of persons notified under sub-section
(2) of section 69, shall furnish to the Superintendent of Central
Excise, a return in such form and in such manner and at such
frequency as may be prescribed."
6.1 Definition of "consulting engineer" under Section 65(31), post
amendment 2005, reads as under:
"Section 65(31)
"consulting engineer" means any
professionally qualified engineer or any body corporate or any
other firm who, either directly or indirectly, renders any service,
consultancy or technical assistance in any manner to a client
in one or more disciplines of engineering"
6.2 Before it is considered, the effect of the amendment
incorporating 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.
7. Under the Finance Act, 1994, the definition of "consulting
engineer" in Section 65(31) covers services provided to a client by a
professionally qualified engineer or an engineering firm consisting of
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professionally qualified engineers. The taxable attribute is that the services
must be rendered in a professional capacity.
7.1 From the relevant provisions under the Finance Act, 1994,
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" 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..."
8. If the submission on behalf of the respondent is accepted, in
that 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.
8.1 In the case of K.P. Varghese (supra), it is observed and held
by this Court that the statutory provision must be so construed, if possible,
that absurdity and mischief may be avoided.
8.2 In the case of Commissioner of Income Tax, Bangalore v.
J.H. Gotla, Yadagiri, (1985) 4 SCC 343, this Court has observed and
held in paragraph 46 as under:
"46. Where the plain literal interpretation of a statutory
provision produces a manifestly unjust result which could never
have been intended by the Legislature, the Court might modify
the language used by the Legislature so as to achieve the
intention of the Legislature and produce a rational construction.
The task of interpretation of a statutory provision is an attempt
to discover the intention of the Legislature from the language
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used. It is necessary to remember that language is at best an
imperfect instrument for the expression of human intention. It
is well to remember the warning administered by Judge Learned
Hand that one should not make a fortress out of dictionary but
remember that statutes always have some purpose or object
to accomplish and sympathetic and imaginative discovery is
the surest guide to their meaning."
8.3 In the case of Dilip Kumar and Company (supra), a
Constitution Bench of this Court observed and held as under:
"i) In interpreting a taxing statute, equitable considerations are
entirely out of place;
ii) a taxing statute cannot be interpreted on any presumption or
assumption;
iii) a taxing statute has to be interpreted in the light of what is
clearly expressed;
iv) it cannot imply anything which is not expressed;
It is further observed and held that:
v) the "plain meaning rule" suggests that when the language in
the statute is plain and unambiguous, the court has to read and
understand the plain language as such, and there is no scope for
any interpretation;
vi) the principle of literal interpretation and the principle of strict
interpretation are sometimes used interchangeably, however, this
principle, may not be sustainable in all contexts and situations;
vii) though all cases of literal interpretation would involve strict
rule of interpretation, but the strict rule may not necessarily involve
the former, especially in the area of taxation;
viii) while interpreting a statutory law, if any doubt arises as to the
meaning to be assigned to a word or a phrase or a clause used in
an enactment and such word, phrase or clause is not specifically
defined, it is legitimate and indeed mandatory to fall back on the
General Clauses Act;
ix) An Act of Parliament/Legislature cannot foresee all types of
situations and all types of consequences. It is for the court to see
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whether a particular case falls within the broad principles of law
enacted by the Legislature;
x) In all the Acts and Regulations, made either by Parliament or
Legislature, the words and phrases as defined in the General
Clauses Act and the principles of interpretation laid down in the
General Clauses Act are to be necessarily kept in view;
xi) the purpose of interpretation is essentially to know the intention
of the Legislature. Whether the Legislature intended to apply the
law in a given case; whether the Legislature intended to exclude
operation of law in a given case; whether the Legislature intended
to give discretion to enforcing authority or to adjudicating agency
to apply the law, are essentially questions to which answers can
be sought only by knowing the intention of the legislation;
xii) a statute must be construed according to the intention of the
Legislature and the courts should act upon the true intention of
the legislation while applying law and while interpreting law. If a
statutory provision is open to more than one meaning, the Court
has to choose the interpretation which represents the intention of
the Legislature;
xiii) if the plain language results in absurdity, the court is entitled
to determine the meaning of the word in the context in which it is
used keeping in view the legislative purpose. Not only that, if the
plain construction leads to anomaly and absurdity, the court having
regard to the hardship and consequences that flow from such a
provision can even explain the true intention of the legislation; and
xiv) the principle that in case of ambiguity, a taxing statute should
be construed in favour of the assessee does not apply to the
construction of an exception or an exempting provision, they have
to be construed strictly. A person invoking an exception or an
exemption provision to relieve him of the tax liability must establish
clearly that he is covered by the said provision. In case of doubt
or ambiguity, benefit of it must go to the State."
9. Applying the law laid down by this Court in the aforesaid
decisions on law of interpretation of a taxing statute, it is required to be
considered, whether a "body corporate" was excluded from the service
tax net under the Finance Act, 1994.
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10. At this stage, it is required to be noted that prior to amendment
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".
10.1 At this stage, it is required to be noted that during the Finance
Act, 1994 regime and prior to amendment 2005, the definition of
"consulting engineer" applicable under the Finance Act, 1994 fell for
consideration before the High Courts of Karnataka and Calcutta in the
cases of TCS (supra) and M.N. Dastur (supra).