TMI Blog2005 (2) TMI 11X X X X Extracts X X X X X X X X Extracts X X X X ..... the expression used in the other definitions. By reason thereof, the Legislature had consistently expressed its intention, to treat consulting engineer differently from the other categories of assessees liable to pay service tax. Unless the Legislature had a different intention to treat consulting engineer differently, it would not have employed a different expression. It could have employed the same expression used in the other definitions substituting the word firm by the word concern or commercial concern , as the case may be. In the absence of definition of the word firm alike the term person either in the service tax laws or in the Central Excise Act, the term person can be construed to mean a person as defined in Section 3(42) of the General Clauses Act, 1897, which includes any company, association, body of individuals whether incorporated or not, whereas the word firm has to be understood according to the general concept of law, which does not include a company. Company and firm being two distinct legal concepts, one cannot mean the other unless so specified under the relevant Act. This is apparent from Section 81 of the Finance Act, 1994, wherein the Explanat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nce on Dulichand Laxminarayan v. CIT [1956] 29 ITR 535 (SC), Dr. Pal contended that a firm name is merely an expression, a compendious mode of designating the persons agreed to carry on business in partnership. This has since been reiterated in Malabar Fisheries Co. v. CIT [1979] 120 ITR 49 (SC) at page 57. Whereas a company defined under Section 3(1) (ii) of the Companies Act is distinct from its shareholders. The shareholders who buy the share do not buy an interest in the property of the company, which is a juristic person distinct from its shareholders. They only buy, an interest in the profits and gains of the company as was held in Mrs. Bacha F. Guzdar [1955] 27 ITR 1 (SC) whereas a firm can only mean a partnership firm. In the absence of any definition, it is to be understood in the light of the Indian Partnership Act, as was laid down in Vazir Sultan Tobacco Co. Ltd. v. CIT [1981] 132 ITR 559 (SC) at page 568. 5. In these circumstances, Circular No. 43/5/1997-TRU, dated July 2, 1997, issued by the Ministry of Finance and the Trade Circular dated July 3, 1997, seeking to include company within the word firm used in the definition of consulting engineer is inconsistent ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on but for properly describing an engineering firm. According to him, the word firm cannot remain confined only to a partnership firm in the absence of any express provision. He further contends that there is no earthly reason to make a distinction that a consulting engineer if he is an individual or a firm other than company would be liable to tax, but when it is a company, it would be exempted. Such a proposition seems to be preposterous. According to him, such an interpretation would lead to absurdity. When an interpretation leads to absurdity, the court can make the deficiency and remove the absurdity and interpret the statute according to its objects and purposes. 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 defining consulting engineer . It could not have been contended, and rightly, that the Legis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... areholders 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l 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 can not 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 e Section 65(13). The expression firm has not 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 includes a person, who is a qualified engineer. But the expression person may include a qualif ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 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. This seems to be little absurd. Sections 66 and 68: The chargeability: The taxable event: 19. Section 66 is the charging section. Under sub-section (3), service tax is levied at the rate of 5 per cent, of the value of the taxable service referred to in sub-clause (g) among others enumerated in Section 65(48) and collected in such manner as prescribed. Section 68 provides that 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. That apart, by reason of sub-section (2) of Section 68, any other taxable service on being notified by the Central Government ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Act, the tax is leviable on the provider of taxable service. The providing of the taxable service is taxable event. Under Section 68, every person providing taxable service is made liable to pay the tax. Thus, it appears that the Legislature had never intended to make any distinction between a firm and a company for the purpose of defining consulting engineer . If for the purpose of penalty, it can be so, then it would also be so in relation to chargeability. 22. Any other interpretation would lead to absurdity, a deficiency sup posed to be made good by the court while interpreting. If two views are possible, and one leads to absurdity, the other possible view is to be accepted. The principle of beneficial interpretation in favour of the assessee cannot come into play on the face of absurdity. The use of the word firm qualified by the word engineering was intended to denote a conglomeration of engineers providing taxable service in its ordinary, common and natural sense. The words engineering firm denote an establishment of engineers providing taxable service defined under Section 65(48) (g). The Legislature had never used nor-intended to use: the word firm in its leg ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... luded. 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 l3ihar, 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing 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 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 is not specifically included in the definition of the expression 'consulting engineer' would not, ipso facto, mean that service rendered by any such company cannot be considered to be taxable. 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. 28. The decision in Dr. V. Shanmughavel 2001 (131) E.L.T.14 (Mad) may not help us much since in that case the distinction was sought to be made as to whether the services rendered by a valuer or by an engineer would come within the definition of consulting engineer or not. Though some other decisions have since been cited by Dr. Pal, but we do ..... X X X X Extracts X X X X X X X X Extracts X X X X
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