TMI Blog2022 (7) TMI 524X X X X Extracts X X X X X X X X Extracts X X X X ..... s, 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. 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. As observed hereinabove, it will create two different classes providing the same services which could not be the intention of the Parliament/Legislature. The view taken by the High Court ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d by the 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n 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 reite ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... neer . 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 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 earli ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dy 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 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d 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: Secti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e, 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 i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lain 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. 10. At this stage, it is required to be noted that prior to amendment 2005, by Circular/Trade Notice d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e 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 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 disc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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. The decision of the Supreme Court in Tirath Singh v. Bachittar Singh (AIR 1955 SC 830), where the Court made the following observations is apposite: - Where the language of a statute, in its ordinary meaning and grammatical construction, leads to a manifest contradiction of the apparent purpose of the enactment, or to some inconvenience or absurdity, hardship or injustice, presumable not intended, a construction may be put upon it which modifies the meaning of the words, and even the structure of the sentence. 8. Reference may also be made to the decision of the Supreme Court in Commissioner of Income Tax, Bangalore v. J.H. Gotla (AIR 1985 SC 1698), wherein their lordships ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oprietor 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (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 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 intere ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ons 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e 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 t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... arter in which service tax in the value of taxable service is received. 21. Admittedly, the word firm has not been defined in the Act. We are to give the ordinary grammatical meaning of the word firm in order to interpret the provisions of section 65(13). While ascertaining the meaning of the word firm intended to be given by the Legislature, we may first look into the word if used elsewhere in the statute in consonance with the taxing event apparent from the scheme and gather the meaning therefrom. In Nagpur Electric Light and Power Co. Ltd. v. K. Shreepathirao, [1958-59] 14 FJR 199; AIR 1958 SC 658, the apex court declared that a definition clause in an enactment must derive its meaning from the context or subject. We find that the word firm has been used in section 81 where it was explained in relation to imposition of penalty. It has been used in rule 6 to make a distinction with regard to the manner of payment. This use of the word firm in the statute and the rules indicates how it is to be interpreted. It is the responsibility of the court to interpret the word in a manner consonance with the scheme and the object and its purpose as well as the different expres ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tax, service tax, etc. To support this proposition, we may derive inspiration from Rao Bahadur Ravulu Subba Rao v. CIT, [1956] 30 ITR 163 (SC) at page 169. Therefore, the natural not the legal or technical meaning of the word firm is to be given. Section 65(13): Firm: Natural meaning: 24. Having read the provisions in the context it is used and the scheme in which it is intended to be used and the object and purpose of enacting the statute and the absence of any intelligible differentia or a rational classification, it has to be interpreted to include all kinds of firm, i.e., a business establishment. This again we must note that the Legislature had used the expression engineering firm . The firm has been qualified by the word engineering . Therefore, the word firm has been used in this particular class of assessee to include all classes of firms dealing with engineering. The word firm was not used for the purpose of indicating the constitution of the firm, namely, a proprietorship or partnership, but in order to identify a class of firm providing taxable service within the meaning of section 65(48)(g). 25. In these circumstances, we do not think that there ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ss 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): There is no distinction under the Ad 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, provid ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... not a case that a tax is being imposed by reason of the said two circulars on the company though not liable through subordinate legislation without being authorised by the parent Act as was held in Gopal Narain, AIR 1964 SC 370. 30. From the discussion above, we are of the view that the word firm used in the definition of consulting engineer interpreted in the context and the scheme of section 65 in consonance with section 66 and section 68 and the meaning conferred to the word firm elsewhere in the statute includes a company as explained in section 81 since there is nothing to support an intelligible differentia or a rational classification between a company and a firm providing taxable service defined under section 65(48)(g) to exclude a company from the tax net when both providing the same taxable service being the taxable event in a statute, which is not meant for providing special provisions for or benefit to a company. 10.4 At this stage, it is required to be noted that all the decisions of 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 th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 dat ..... X X X X Extracts X X X X X X X X Extracts X X X X
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