To understand the scope of the service the terms ‘advice’, ‘consultancy’ and ‘technical assistance’ need to be analysed
4.1
‘Advice’
In terms of Oxford Dictionary, advice means guidance or recommendations offered with regard to future action, 2 a formal notice of a sale or other transaction.
In terms of Black’s dictionary, advice means a guidance offered by one person to another, esp. a lawyer, to another.
In terms of Law Lexicon by Ramanatha Aiyar, advice means counsel given or an opinion expressed as to the wisdom of future conduct.
In terms of Cambridge dictionary, advice means an opinion which someone offers you about what you should do or how you should act in a particular situation
In view of the above definition, it can be said that advice means a communication to a client in the form of a guidance, recommendation, opinion or counsel. An advice is optional in nature. It is upto the client to accept the advice or not.
4.2
‘Consultancy’
In terms of Oxford Dictionary, consultancy means a professional practice giving expert advice in a particular field.
In terms of Black’s Law dictionary, consultation means the act of asking the advice or opinion of someone (such as a lawyer).
In terms of Cambridge dictionary, consultancy means to give specialist advice on a particular subject.
In terms of Law Lexicon, by Ramanatha Aiyar, consultant is an expression apparently meaning that the person consulted is to give to the company the benefit of his knowledge and experience.
In terms of Wikipedia, a consultant is professional who provides expert advice in a particular area of expertise such as accountancy, the environment, technology, the law, human resources, marketing, medicine, finance, public affairs, communication, engineering or waste management.
The main difference between a consultant and a 'normal' expert is that the consultant is not himself employed with his client, but instead is in business for himself or for a consultancy firm, usually with multiple and changing clients. Thus, his clients have access to deeper levels of expertise than would be feasible for them to retain in-house, especially if the speciality is needed comparatively rarely.
4.3
‘Technical assistance’
In terms of Oxford Dictionary and Cambridge dictionary, assistance means help or support.
An assistance is normally for the purpose of achieving a particular aim or result.
Therefore, technical assistance means a help or support given to a client which is technical in nature. Technical help is intangible involving technical expertise of the service provider with an intent to solve a problem.
4.4
In view of the above definitions of advice, consultancy and technical assistance, it transpires that, these are intangibles, which are expressed orally or in writing by the consulting engineer by applying the knowledge of science which has been acquired by him in the course of education imparted by a recognized university and practice in the field of engineering. Further, advice, consultancy and technical assistance are to provide solutions to problems, which benefit the client by increasing his efficiency and productivity.
4.5
If a consulting engineer undertakes a contract of work of erection and commissioning of a project/plant, it can not be considered as a mere advice, consultancy or technical assistance given to the client. Even though, consulting engineer has to use his engineering expertise, he uses that expertise to perform the task, and therefore, such work contract is beyond the ambit of taxable service . Further, a work contract cannot be vivisected and a part of it subjected to tax. Central Board of Excise and Customs (‘the Board’ or ‘CBEC’) has also clarified that charges for erection, installation and commissioning are not covered under the category of consulting engineer services . These are taxed under ‘Erection, Commissioning or Installation Service.
On the other hand, if the erection and commissioning work is done by a third party and consulting engineer is required to supervise the work independently and provide solution to the various problems, he will fall within the ambit of taxable service.
4.6
Royalty payment for use of technology and know-how is neither an advice nor a consultancy or technical assistance to a client. It is understood as a share of product or profit reserved by owner for permitting another the use of his property. Royalty payments are in the nature of license fees for the use of the intellectual property right and could not be treated as value of services under consulting engineering service; therefore these payments are not exigible to service tax under the category of consulting engineer service. These are taxed under “Intellectual Property Services”.
4.7
Certification and Testing vis-à-vis advice, consultancy and assistance
Certificate is an official document recording a particular fact, event, or level of achievement. It is a mere evaluation of the present working without any suggestion as to what manner problems can be solved. Therefore, certification work is not within the ambit of service tax under consulting engineer service. Board has clarified that certificates given under authority of any statute/international protocol/code/convention cannot be considered to be a consultancy job. Since advice is generally understood to be optional in nature and has no statutory force. It is up to the client to accept the advice or not. The activity of certification will, therefore, not fall under the category of advice. With regard to ‘technical assistance’, a certificate given is not of any ‘assistance’ to the person using the certificate. Hence, the survey/inspection done in pursuance thereof for the purpose under an authority of law, will also not amount to consultancy advice or technical assistance . These are taxed under ‘Technical Inspection and Certification Service’.
4.8
Similarly, testing of goods is also a mere evaluation of present strength and weakness of the product, therefore, falls outside the ambit of service tax under consulting engineer service . These are taxed under ‘Technical Testing and Analysis Service’.
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