(Per :
HONOURABLE MS.JUSTICE HARSHA DEVANI) By this petition under Article 226 of the Constitution of India, the petitioner has posed the following question for determination by this Court:
"Whether service as a valuer can be said to be service provided 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, making it a taxable service liable for payment of service tax under the relevant provisions of the Finance Act, 1994 (as amended from time to time)?"
The facts as appearing in the petition are that the petitioner No.1 (hereinafter referred to as "the petitioner") is the Gujarat Chapter of the Institution of Valuers representing the interest of about 200 members. The petitioner No.2 is a government approved valuer and authorized signatory of the petitioner No.1.
"Service tax" was introduced for the first time in the year 1994 by making provisions in Chapter V of the Finance Act, 1994 (hereinafter referred to as "the Act"). By virtue of section 84 of the Finance Act, 1997, sections 65, 66 and 68 of the Act came to be substituted and section 67 of the Act was amended so as to impose and levy a tax on services rendered inter alia by a "consulting engineer" to a client in relation to one or more disciplines of engineering. At the relevant time when the petition came to be filed, service tax was sought to be levied on the enumerated services including that rendered by a "consulting engineer" as stated above at the rate of 5% on the gross amount charged to the client.
Section 64 of the Act provides for extent, commencement and application of the Act and provides that the same shall come into force on such date as the Central Government may, by notification in the Official Gazette, appoint and that it would apply to taxable services provided on or after the commencement of that Chapter. In relation to the service tax on taxable services by a "consulting engineer" which is subject matter of interpretation in this petition, the Central Government issued Notification No.23/97 appointing 7th July, 1997 as the date on which service tax on the said taxable services would come into force.
Section 65 of the Act is the definition clause and at the relevant time, the expression "consulting engineer" was defined under sub-section (31) of section 65 to mean any professionally qualified engineer or any body corporate or any other firm who, either directly or indirectly, renders any advice, consultancy or technical assistance in any manner to any person in one or more disciplines of engineering. Under the existing provisions of the Act, "consulting engineer" is defined under sub-section (31) of section 65 to mean any professionally qualified engineer or any body corporate or any other firm who, either directly or indirectly, renders any advice, consultancy or technical assistance in any manner to any person in one or more disciplines of engineering.
At the relevant time when the petition came to be filed, sub-section (48) of section 65 of the Act defined "taxable services" to mean any of the services enumerated thereunder. The taxable service under clause (9) thereof is any service provided to any person, by a "consulting engineer" in relation to advice, consultancy or technical assistance in any manner in one or more disciplines of engineering.
Under the existing provisions, "taxable services" is defined under sub-section (105) of section 65 of the Act. Taxable service under clause (g) thereof is any service provided to any person, 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. The Explanation thereunder reads thus:
"Explanation
- For the purposes of this sub-clause, it is hereby declared that services provided by a consulting engineer in relation to advice, consultancy or technical assistance in the disciplines of both computer hardware engineering and computer software engineering shall also be classifiable under this sub-clause."
The Office of the Commissioner of Central Excise, Mumbai-I has issued a clarification dated 27.3.1998 addressed to the Institution of Valuers, Maharashtra State Centre, as regards applicability of service tax to valuers clarifying that "valuers" of immovable property (other than agricultural lands, plantations, forests, mines and quarries) plant and machinery do fall within the purview of "consulting engineer" and these services shall attract service tax since engineering knowledge is deployed for valuing the subject assets. It was further stated therein that, as such, services rendered by approved valuers as above will attract service tax, they may kindly instruct their members to get themselves registered by filing ST-1 forms duly filled in.
The respondent No.2 herein initiated proceedings vide notice dated 28.6.2001 issued to the petitioner No.2 seeking imposition of service tax on the service as valuer provided by consulting engineers. It is in this context that the petitioners have filed the present petition posing the aforesaid question of law.
The case of the petitioners, as stated in the petition, is that valuation broadly means assessing the worth of something, which may be a tangible asset like land or something intangible like goodwill. Valuation has an impact on economic activity relating to property comprising of land and building, plant and machinery, movables and also intangible assets like the goodwill of a business. Valuation is necessary for fiscal and non-fiscal purposes. Fiscal purposes are levying taxes like municipal tax, stamp duty, income-tax on capital gains etc., non-fiscal purposes are grant and recovery of grant and advances by banks, insurance, compensation for compulsory acquisition of property and currently also for valuation for disinvestment by government.
For the purpose of valuation, the recognized principles to be applied are principles of supply and demand, competition, substitution and assessment of circumstances having a direct or indirect effect on the degree of utility and productivity of an asset. The assessment of market forces would include assessment of price changes, over time, resulting from specific or general effects of economic and social forces, relative purchasing power of money and technological advancement or changes. The valuer has to further assess the impact on the value of any pending litigations, status of ownership, that is, whether joint ownership, co-ownership, Hindu Undivided Family etc. The important factors for estimating land value as recognized are the location, dimensions and potential of the land, availability of facilities and amenities like water, electricity, drainage, accessibility of land and the area.
According to the petitioner, it appears that there is no legislation in India to regulate the profession of valuation. For the restricted purposes of the Wealth Tax Act, 1957, valuation of assets could be carried out by persons who were registered with the Central Government under section 34AB of the said Act read with Rule 8A of the Rules framed thereunder. Probably on the basis of one of the alternative eligibility criteria prescribed under the Wealth Tax Act for being registered as a valuer by the Central Government (graduate in civil engineering), the respondents are seeking to classify service as a valuer as a service in a discipline of engineering and therefore, exigible to service tax.
According to the petitioner, valuation is not recognized as a discipline of engineering. The service of valuation can be provided by many other qualified persons. Valuation requires knowledge of law, economics, accountancy, town planning, environmental science etc. In support thereof, the petitioner has annexed along with the petition the syllabus of various colleges conducting degree programme in valuation. The admission criterion to the course is that the applicant should be a graduate in any stream, viz., either Science, Commerce, Arts etc. Out of 94 credits prescribed under the programme of studies, majority are for subjects like economics, accounts, valuation, law, real estate management, principles of rating, insurance and loss assessment etc. The Institution of Surveyors conducts examination which is equivalent to a degree and is recognized by the Ministry of Education, Government of India, for recruitment to superior posts and services in the Central Government. Students who pass final examination in valuation discipline are eligible for recruitment as valuers in public sector undertakings. The eligibility prescribed is having passed the 12th Standard Examination in 10 + 2 + 3 system of examination with mathematics, physics and chemistry and that the candidate should possess a degree in either, Arts, Science, Commerce or Law. The subjects included in the examinations conducted by the institutions are as under :
[i] First examination: Building technology, law, elementary surveying, elements of economics, accounting principles, drawing and estimating, mensuration and trigonometry.
[ii] Intermediate:
Building technology, law, valuation, town and country planning, land economics, statistics and computer applications.
[iii] Final:
Building technology, law, valuation, town and country planning, maintenance and repairs of buildings, real estate management, dilapidations, rating, arbitration and awards, essay and reports.
A graduate in town planning of a recognized University can also qualify as a registered valuer under the Wealth Tax Act, 1957. A perusal of the study programme of two recognized institutions offering such courses, being the Centre for Environmental Planning and Technology (CEPT), Ahmedabad and the School of Planning and Architecture, New Delhi, indicates that neither is any subject of engineering included in the course nor does the eligibility criteria prescribe any requirement of an engineering degree.
It is further the case of the petitioner that valuation is universally considered a vocational discipline within economics. Internationally, valuation is not considered a discipline of engineering. According to the petitioner, the service of valuation can, therefore, be rendered by any person not necessarily a consulting engineer. When the service of valuer can be provided by any of the persons qualified as aforesaid, the levy of service tax on consulting engineers alone is clearly arbitrary and discriminatory. According to the petitioner, once it is established that valuation is not a discipline of engineering, the value of such services even if otherwise rendered by a consulting engineer will not be includible in the gross value for the purposes of levy of service tax. It is pointed out that a similar issue had arisen as to whether services rendered by qualified engineers as insurance surveyor and loss assessor and would come under the purview of service tax levied on the service provided by consulting engineers. The Government of India considered the issue and came to the conclusion that such service was not in the nature of services in an engineering discipline for the reason that it was a job which could be performed by an engineer and also by other specified professionals, and that the function to be performed by the surveyor/loss assessor was such as would require knowledge of accounting, mathematics, science etc. It is the case of the petitioner that the ratio of this decision is squarely applicable to the facts of the present case and on the very same grounds relied upon in the said decision, the services of valuation cannot be treated as service in any discipline of engineering.
It is also the case of the petitioner that rendering of such services cannot be said to be advice, consultancy or technical assistance to a client inasmuch as valuation is the assessment of worth of tangible or intangible assets and would not in ordinary or commercial parlance mean advice, consultancy or technical assistance at all. That the service as a valuer provided to a client by a consulting engineer is not in any discipline of engineering and can at the best be stated to be a discipline of economics and levy of service tax on the value of such service is clearly without jurisdiction and authority of law. According to the petitioners, service as a valuer is neither, advice, consultancy nor technical assistance by a consulting engineer to the client and therefore also, the value of such service is not exigible to service tax. It is the case of the petitioner that levy of service tax on the value of service as a valuer when provided to a client by a consulting engineer alone is clearly arbitrary and discriminatory since registered and competent valuers who are otherwise qualified are not subject to levy of such tax though rendering identical service and therefore, constitutes an unreasonable restriction on the fundamental right of the petitioners to carry on their profession and is, therefore, unconstitutional.
It is in the aforesaid background, that the petitioner has filed the present petition praying that the respondents be restrained from levying service tax in respect of service as a valuer provided to a client by the petitioners.
In response to the petition, the respondents have filed an affidavit in-reply wherein it is stated that the Department is of the view that the service rendered by a valuer registered under rule 8A(i) of the Wealth Tax Rules, in regard to valuation of immovable property is classifiable in the category of consulting engineer and therefore, is liable to service tax. According to the respondents the specific subject matter of the petition is the service provided by the registered valuers under the provisions of the Wealth Tax Act and rules made thereunder. It is the case of the respondents that the valuers are registered under section 34AB of the Wealth Tax Act and that the required qualifications for registration are prescribed in rule 8A of the Wealth Tax Rules, 1957. Reference is made to the provisions of rule 8A of the said Rules to submit that the language of rule 8A(2) suggests that a graduate in Civil Engineering can become a "registered valuer" if he fulfills the conditions in rule 8A(2)(ii). It is further averred in the affidavit-in-reply that the qualification prescribed for becoming a registered valuer for immovable property and plant and machinery under rule 8A of the Wealth Tax Act, are suggestive of the fact that the valuer must have an engineering qualification or a post graduate qualification specifically in valuation. Therefore, it can be easily interpreted that the service of valuation of immovable property or plant and machinery by a registered valuer is a highly technical job and is in the field of Engineering only.
Insofar as the eligibility condition for admission to the post graduation course for valuation in Sardar Patel University which is graduate in any stream viz. Science, Commerce, Arts etc., on which reliance has been placed by the petitioner to submit that valuation is not a branch of engineering, it is contended that the prospectus of Sardar Patel University itself states that this course is imparted by the Faculty of Engineering & Technology of the University, which clearly explains that valuation is a branch of Engineering. According to the respondents, the course content is also mostly in the field of engineering with a few papers in economics and statistics etc. It is submitted that economics and statistics as subjects are taught in almost all branches of engineering and merely a teaching of economics does not make the post graduate course in valuation as not related to engineering. In support of the said contention, reliance is placed on the decision of the Madras High Court in the case of V. Shammugam v. Commissioner of Central Excise, Chennai II, (2001) 131 ELT 14 (Mad).
As regards the clarification dated 30.4.2001 issued by the Government on which reliance has been placed by the petitioner, it is submitted that an insurance surveyor and loss assessor is governed by the provisions of the Insurance Act, 1938 as per which any qualified engineer, chartered accountant, cost accountant, actuary or any person holding diploma in insurance from a recognized institute can act as surveyor or loss assessor. Whereas, in the case of registered valuer, the qualification in the field of engineering is a must, there is no such stipulation in the case of insurance surveyor and loss assessor. A licensed insurance surveyor and loss assessor cannot become a registered valuer of immovable property or plant & machinery unless he also satisfies the qualification prescribed in rule 8A of the Wealth Tax Rules. It is further contended that the insurance surveyors and loss assessors are classifiable in the specific category of insurance auxiliary service provider and as held by the Madras High Court, valuation of immovable property and plant & machinery by a registered valuer for the purposes of wealth tax is a service provided by the consulting engineer. According to the respondents, the job of insurance surveyor and loss assessor is also substantially different from the job of a registered valuer. Therefore, clarification issued in regard to services provided by insurance surveyor and loss assessor cannot be extended to the services provided by registered valuers for the purposes of income tax/wealth tax. They are two distinct and separate services.
It is further the case of the respondents that wealth tax liability has to be discharged based on the value of the immovable property or plant and machinery, as the case may be. What a registered valuer does is that he undertakes the valuation of property using valuation techniques and renders advice/consultation regarding the value of property based on which the tax liability is discharged. Similarly, valuation by a registered valuer may be a specified requirement for other purposes; therefore, service rendered by the valuer is nothing but advice/consultancy. It is, accordingly, submitted that the service provided by a registered valuer in relation to valuation of immovable properties and plant & machinery is liable to service tax in the category of consulting engineer and therefore, the action initiated by the Department for recovery of service tax is within the jurisdiction and authority of law.
The petitioner has filed an affidavit-in-rejoinder, denying the contentions advanced in the affidavit in-reply filed by the respondents.
Mr.
Anuj Trivedi, learned advocate appearing on behalf of the petitioner invited attention to the relevant statutory provisions. The attention of the court was drawn to the provisions of section 34AB of the Wealth Tax Act, which makes provision for "Registration of valuers". Referring to the qualifications prescribed under rule 8 of the Rules, it was submitted that under sub-rule (2) thereof, the qualification for registration as valuer, inter alia, includes a graduate in civil engineering and that under sub-rule (8) thereof, the qualification for registration as valuer, inter alia, includes the qualification of graduate in mechanical or electrical engineering. However, it is not mandatory that in every case, the candidate has to be a civil engineer or a mechanical or electrical engineer, as the case may be. People from other disciplines are also eligible for registration as valuer under rule 8 of the said Rules. It was submitted that when identical services as valuer are rendered by persons other than civil engineers or mechanical or electrical engineers, the same are not taxable as services rendered by a consulting engineer. Furthermore, consulting engineer envisages services rendered in any of the disciplines of engineering. The very fact that persons with qualifications other than engineering are also eligible to be registered as valuers is a clear pointer to the fact that valuation is not a discipline of engineering. It was submitted that the moment a service is not a service rendered in any discipline of engineering the same would not fall within the ambit of consulting engineering, and as such, cannot be charged to service tax. According to the learned advocate merely because an engineer renders services as valuer would not change the nature of the services. Hence, the levy of service tax on services rendered as valuer by consulting engineers is clearly without authority of law. Mr. Trivedi further submitted that as per International Valuation Standards, Sixth Edition (2003) (a copy whereof is annexed to the petition), property valuers, asset valuers and appraisers are those who deal with special discipline of economics associated with preparing and reporting valuations. Valuation of land as vacant land or of land and improvements to or on the land is an economic concept. It was pointed out that as per the Valuation Registration Act, 1975 of Australia, a person who carries out a valuation of land, in the course of or incidental to performing services of an architect, engineer, surveyor or quantity surveyor is not a real estate valuer. It was submitted that for the purpose of valuation, a person does not have to be a graduate in any of the disciplines of engineering and that any person with a background of art, commerce or law can also, after taking an appropriate course, be registered as a valuer. The Valuers Act of South Africa requires a Degree of B. Sc. in property economics or land economy for the purpose of being registered as a valuer or associated valuer. A copy of the Valuers Act of South Africa, along with a list of qualifications recognized by the South Africa Council of Valuers has been annexed to the petition.
Inviting attention to the qualifications required by a person for a degree in Valuation under the Valuers Act of Zimbabwe, 1996 as well as the Valuers, Appraisers and Estate Agents Act of Malaysia, the course of land economy offered by the University of Cambridge, the course structure of valuation in real estate taught at Shivaji University, Kolhapur, under the heading "Inter Disciplinary Study" as well as the course of M. Sc. in real estate valuation offered by Annamalai University, it was submitted that the courses so offered by universities and colleges all around the world, as well as in India, recognize the valuation as a separate course altogether and are very different from any fields or discipline of engineering. Valuation as a discipline, whether in plant and machinery or in real estate, is poles apart from mechanical, electrical or civil engineering. Though a valuation course might contain a subject or two having an engineering background, the discipline of valuation predominantly consists of law, economics, finance, town planning, industrial process and insurance. It was, accordingly, submitted that considering the qualifications required for a course in valuation, even a degree in commerce or arts is sufficient. It was submitted that for the purpose of falling within the ambit of "consulting engineer" as defined under clause (65)(31) of the Act, the person has to be a qualified engineer in any one or more disciplines of engineering. However, for the purpose of rendering services as a valuer, the person concerned is not required to be a qualified engineer in any one or more disciplines of engineering. Hence, the services rendered as a valuer even by a "consulting engineer" would not fall within the ambit of "consulting engineer" and as such, the respondents are not justified in levying service tax on the petitioners on the services rendered by them as valuers.
On the other hand, Mr. Gaurang H. Bhatt, learned Standing Counsel appearing on behalf of the respondents submitted that the service rendered by a valuer is a service falling under the discipline of engineering, which is evident from the fact that a graduate in engineering having the requisite experience as prescribed thereunder, is qualified for being registered as a valuer under rule 8 of the Wealth Tax Rules. Reiterating the averments made in the affidavit in-reply, it was submitted that the services rendered by engineers as valuers clearly fall within the purview of "consulting engineer" as the same pertain to engineering disciplines. Strong reliance was placed upon the decision of the Madras High Court in the case of V. Shammugam v. Commissioner of Central Excise, Chennai II, (supra), to submit that an identical controversy was involved in the said case and the court held that considering the qualifications prescribed under rule 8A(a) of the Wealth Tax Rules, it is obvious that those qualifications are not merely holding an engineering degree, but such persons would be required to have a certain standing as an engineer which is of quite "high standard". The court agreed with the contention raised on behalf of the revenue that as far as the case of valuers of plant and machinery is concerned, there has to be advice, consultancy service or technical assistance in the subjects completely connected with the engineering, and held that such "registered valuers" of plant and machinery would fall within the definition of "consulting engineer" and their services of valuation of plant and machinery would be covered as "taxable service" offered by a "consulting engineer". It was further pointed out that in the context of "registered valuer" of immovable property, the court was of the opinion that a "consulting engineer" has to use his experience and knowledge of engineering necessarily to arrive at correct valuation of the immovable property. The court further held that the argument that mere valuation of an immovable property is not an advice in the nature of "engineering advice" is obviously incorrect because where the knowledge in engineering itself is a must and is a basis for giving the valuation for the benefit of the assessee under the Wealth Tax Act, then, it cannot be said that the advice is not in the "engineering discipline". The court held that wherever an advice is given by an engineer on the basis of his engineering knowledge, skill and experience, then such an advice would be in the realm of "engineering advice" or at least pertaining to the "engineering discipline". The court was of the view that such an advice would fall in "civil engineering discipline" and that, even adopting the strict view of a taxing statute, it would have to be held that the advice offered by an engineer on the basis of his engineering knowledge in respect of immovable property valuation would certainly amount to an advice which is integrally connected with the "engineering discipline". Therefore, when an "engineer" becomes a "registered valuer" of immovable property or plant and machinery, he is obviously rendering the services as a "consulting engineer" within the meaning of section 65(48)(g) of the Finance Act.
Referring to the qualifications prescribed for becoming a "registered valuer" for immovable property or for plant and machinery, it was submitted that the same are suggestive of the fact that a valuer must have an engineering qualification or a post graduate qualification specifically in valuation. That the service of valuation of immovable property or plant and machinery by a registered valuer is a highly technical job and is in the field of engineering only. Inviting attention to the prospectus of Sardar Patel University, it was pointed out that the same states that this course is imparted by the Faculty of Engineering & Technology of the University, which clearly explains that valuation is a branch of engineering. It was submitted that the course content also is mostly in the field of engineering with a few papers in economics and statistics etc., which even otherwise are subjects taught in almost all the branches of engineering and that, merely a teaching of economics does not make the post graduate course in valuation as not related to engineering. Hence, the contention of the petitioner that valuation is not a discipline of engineering is not sustainable.
It was, accordingly, submitted that the levy of service tax on "consulting engineers" including the valuers providing service in relation to valuation of immovable properties and plant and machinery, is well within the bounds of the authority of the respondents and as such, the petition being devoid of merits, deserves to be dismissed.
In the backdrop of the aforesaid facts and contentions advanced by the learned advocates for the respective parties, the main question that arises for the consideration is as to whether the service as a valuer can be said to be a service provided 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, making it taxable service liable for payment of service tax under the relevant provisions of the Finance Act, 1994.
For the purpose of falling within the ambit of definition of "consulting engineer" as defined under sub-section (31) of section 65 of the Act, a person has to be a professionally qualified engineer or a body corporate or a firm. Such person should either directly or indirectly render any advice, consultancy or technical assistance in any manner to any person; such advice, consultancy or technical assistance should be in one or more disciplines of engineering. If any service is provided to any person by a "consulting engineer" in relation to advice, consultancy or technical assistance in any one or more disciplines of engineering, including the discipline of computer hardware engineering, such person is liable to pay service tax as contemplated under section 65(105)(g) of the Act. In the present case, the court is required to consider as to whether the services rendered by a valuer would fall within the ambit of services rendered by a "consulting engineer" so as to be liable as service tax as such, under the provisions of the Finance Act, 1995.
It appears to be common ground between the parties that there is no legislation in India to regulate the profession of valuation. For the restricted purposes of the Wealth Tax Act, 1957, valuation of assets can be carried out by persons who are registered by the Central Government under section 34AB of the said Act read with rule 8A of the Wealth Tax Rules 1857. Both the learned advocates for the respective parties have placed reliance upon the provisions of rule 8A of the Wealth Tax Rules in support of their respective submissions.
In this regard, it may be relevant to refer to section 34AB of the Wealth Tax Act, which makes provision for registration of valuers. Sub-section (2) thereof lays down that any person who possesses the qualifications prescribed in this behalf may apply to the Chief Commissioner or Director General in the prescribed form for being registered as a valuer under that section. The qualifications are prescribed by virtue of rule 8A of the Wealth Tax Rules, 1957. Clause (i) of sub-rule (2) of rule 8A of the Rules came to be substituted by the Wealth Tax (First Amendment) Rules, 1995 with effect from 31st January 1995. Prior to its substitution, clause (i) of sub-rule (2) of rule 8A was as follows :
"(i) he must either be a graduate in civil engineering, architecture or town planning of a recognized university, or possess a qualification recognized by the Central Government for recruitment to superior services or posts under the Central Government in the field of civil engineering, architecture or town planning; and"
Rule 8A of the Rules prescribes in its sub-rules (2) to (11), the qualifications for registration as valuers of different classes of assets as detailed therein. On a perusal of the rule 8A, it may be noticed that the qualifications prescribed for each category of valuers are different. Sub-rule (2) which provides for qualification for valuer of immovable property (other than agricultural lands, plantations, forests, mines and quarries) and sub-rule (8) which provides for the qualifications for valuer of machinery and plant, are relevant for the present purpose, and read thus :
"Qualifications of registered valuers.
8A.
(1) For the purposes of sub-section (2) of section 34AB, the qualifications for registration as valuers of different classes of asset shall be as specified in sub-rules (2) to (11).
A valuer of immovable property (other than agricultural lands, plantations, forests, mines and quarries) shall have the following qualifications, namely :
(i) he must (A) be a graduate in civil engineering, architecture or town planning of a recognized university; or (B) be a post-graduate in valuation of real estate from a recognized university; or (C) possess a qualification recognized by the Central Government for recruitment to superior services or posts under the Central Government in the field of civil engineering, architecture or town planning; and
(ii) (A) he must be a person formerly employed
(a) in a post under Government as a gazetted officer; or
(b) in a post under any other employer carrying a remuneration of not less than Rs. 2,000 per month, and, in either case, must have retired or resigned from such employment after having rendered service for not less than ten years as a valuer, architect or town planner, or in the field of construction of buildings, designing of structures, or development of land; or
(c) as a professor, reader or lecturer in a university, college or any other institution preparing students for a degree in civil engineering, architecture or town planning, or for [any qualification] referred to in clause (i), and must have retired or resigned from such employment after having taught for not less than [ten] years any of the subjects of valuation, quantity surveying, building construction, architecture, or town planning;
OR (B) he must have been in practice as a consulting engineer, valuer of real estate, surveyor or architect for a period of not less than ten years and must have acquired experience in any of the following four fields :
(a) valuation of buildings and urban lands; or
(b) quantity surveying in building construction;
OR
(c) architectural or structural designing of buildings or town planning; or
(d) construction of buildings or development of land;
and his gross receipts from such practice should not be less than fifty thousand rupees in any three of the five preceding years :
Provided that in the case of a person possessing a post-graduate degree in valuation of real estate from a recognized university, the provisions of this sub-rule shall have effect as if,
(a) for the words ten years, the words two years had been substituted;
(b) for the words fifty thousand rupees in any three of five preceding years, the words fifty thousand rupees in any one of the two preceding years had been substituted.
xxx xxx xxx xxx xxx A valuer of machinery and plant shall have the following qualifications, namely :
(i) he must (A) be a graduate in mechanical or electrical engineering of a recognized university; or (B) possess post-graduate degree in valuation of machinery and plant from a recognized university; or (C) possess a qualification recognized by the Central Government for recruitment to superior services or posts under the Central Government in the field of mechanical or electrical engineering; and
(ii) (A) he must be a person formerly employed
(a) in a post under Government as a gazetted officer; or
(b) in a post under any other employer carrying a remuneration of not less than Rs.2,000 per month, and, in either case, must have retired or resigned from such employment after having rendered service as a mechanical or electrical engineer or valuer of machinery and plant] for a period of not less than ten years, or
(c) as a professor, reader or lecturer in a university, college or institution preparing students for a degree in mechanical or electrical engineering or for any qualification referred to in clause
(i), and must have retired or resigned from such employment after having taught for a period of not less than ten years; or he must have been in practice as a consulting engineer or valuer of machinery and plant for a period of not less than ten years and must have acquired experience in the valuation of machinery and plant and his gross receipts from such practice should not be less than fifty thousand rupees in any three of the five preceding years:
Provided that in the case of a person, possessing a post-graduate degree in valuation of machinery and plant from a recognized university, the provisions of this sub-rule shall have effect as if,
(a) for the words ten years, the words two years had been substituted;
(b) for the words fifty thousand rupees in any three of five preceding years, the words fifty thousand rupees in any one of the two preceding years had been substituted."
On a perusal of sub-rule (2) of rule 8A of the Rules, it is apparent that for the purpose of registration as a valuer of immovable property (other than agricultural lands, plantations, forests, mines and quarries), a person must (i) be a graduate in civil engineering, architecture or town planning of a recognized university; or (ii) be a post-graduate in valuation of real estate from a recognized university; or (iii) possess a qualification recognized by the Central Government for recruitment to superior services or posts under the Central Government in the field of civil engineering, architecture or town planning; and must satisfy the requisite conditions prescribed under clause (ii) of sub-rule (2). Thus, a valuer of immovable property may be either a graduate in civil engineering or architecture or town planning of a recognized university or a post-graduate in valuation. The provision does not stipulate graduation in civil engineering to be a condition precedent for being eligible to be registered as a valuer of immovable property.
The second qualification prescribed under sub-rule (2) of rule 8A of the Rules is that the person concerned should be a post-graduate in valuation of real estate from a recognized university. In this regard, it may be germane to refer to the regulations of the Sardar Patel University for the Post Graduate Programme for Master of Valuation, a copy whereof has been annexed as Annexure "A" to the petition. The qualification prescribed for admission to the Post Graduate Programme for Master of Valuation is that a candidate must have passed the Bachelor Degree Examination preferably in commerce, science, engineering, architecture, mathematics, statistics, economics and allied subjects of the said University or an examination recognised as equivalent thereto. The syllabus prescribed for the course shows that the subjects are general in nature. For Master of Valuation in Real Estate, the course titles for the first semester are Principles of Economics, Book Keeping and Accountancy, Elementary Surveying, Introduction to Statistics, Principles of Valuation, Introduction to Computer Applications, Town and Regional Planning, Elements of Law and Jurisprudence; for the second semester are Principles of Insurance and Loss Assessment, Group Discussions, Building Technology-I, Building Technology-II, Law-I, Law-II, Real Estate Management, Principles of Rating, Valuation of Real Estate-I, Urban Land Economics; and for the third semester are Environment Impact Assessment, Finance, Business and Management Studies, Seminar, Maintenance & Repairs of Buildings and Dilapidations, Building Technology-III, Valuation in Real Estate, Report Writing and Project Work. On a bare reading of the course prescribed for Master of Valuation in Real Estate, it is evident that the subjects pertaining to civil engineering are limited. In the first semester, except for elementary surveying which there does not appear to be any other subject related to the field of engineering. As regards the second and third semester, there are some subjects related to engineering, however, as rightly contended by the learned advocate for the petitioner, out of total credits of 34 in the second semester and 40 in third semester, the credits related to engineering are only eight in each of the semesters. Similarly, in the case of Programme of Studies leading to the Master of Valuation in Plant and Machinery, the syllabus shows that the subjects related to mechanical or electrical engineering are limited to the extent of 8 credits out of 32 in the first semester; 10 credits out of 36 in the second semester and 7 credits out of 36 in the third semester. Thus, the syllabus makes it amply clear that the course in Master of Valuation does not predominantly pertain to any discipline of engineering.
The Prospectus of the Master of Valuation (Real Estate) Through Distance Mode (2010 - 2011) of the Shivaji University, Kolhapur reveals that the subjects which are taught in the said course are Law, Economics, Town Planning, Insurance, Engineering, Statistics and Environmental Science for Proper Understanding of Valuation. In the said prospectus, it is stated that valuation is an exercise falling within the domain of economics as well as law. Valuation really concerns itself with all species of legal interests arising out of land and building as well as plant and machinery which are exchanged for money and therefore entails the phenomena of exchange, scarcity and choice that characterizes a market in the economic sense of the term. Property is purchased both for use and as investment; but in both cases, the purchaser measures the expected return or benefits to be received from the property against the cost outlay. The valuer's task is to express these benefits in money terms and to interpret the relationship between cost and benefit as a rate of return, thus allowing the investor to make a choice between.
The eligibility for admission to the M.Sc. Real Estate Valuation course of Annamalai University is pass in B.E./B.Tech/B.Arch/AMIE/AMIS/B.Sc. with any of the subjects enumerated thereunder. The course titles for the said degree also show that in the first year, out of eight subjects the only subject related to engineering is Building Construction Practice and in the second year out of eight subjects the only subject related to engineering is Building Repairs and Maintenance. Thus, the syllabi of various Universities for the course of Master of Valuation show that the subjects related to disciplines of engineering are very limited. Further the qualifications prescribed for admission to the said course make it amply clear that it is not mandatory for a person to be a graduate in engineering or to otherwise possess knowledge of civil engineering or a mechanical/electrical engineering, as the case may be, to be eligible for the said course. Thus, it is apparent that a person, who is not an engineer, is also qualified to render services as a valuer and such person would not fall within the purview of "consulting engineer" as defined under sub-section (31) of section 65 of the Act. The question that then arises for consideration is whether when a valuer who is also a "consulting engineer" renders the same services as a valuer who is not a graduate in engineering and not a "consulting engineer", the said services would fall within the ambit of "consulting engineer" so as to attract the provisions of the Finance Act, 1995.
As already noticed hereinabove, for the purpose of falling within the ambit of "consulting engineer", a person should provide advice, consultancy or technical assistance in any one or more disciplines of engineering. From the above discussion, it is apparent that the services rendered by a valuer, whether it be by an engineer or any other person, is not in relation to advice, consultancy or technical assistance in any one or more disciplines of engineering. In the circumstances, the said services would not fall within the ambit of "consulting engineer" as defined under section 65(31)/65(48) of the Finance Act, 1994.
The aforesaid view is buttressed by the Service Tax Circular No.34/2/2001-C.Ex. dated 30.4.2001 (Annexure "F" to the petition) which clarifies the doubts regarding whether services rendered by qualified engineers as insurance surveyor and loss assessor, would come under the purview of service tax levied on the service provided by the "consulting engineer".
The said circular clarifies that a number of professionals other than engineers can also be engaged by the insurer for surveying and loss assessments. The very fact that a number of professionals such as Chartered Accountant, Cost Accountant, Actuary or a person holding diploma in relation to insurance can provide services as surveyors or loss assessor in itself suggests that the service provided by the surveyor or loss assessor is not in the field of engineering. It is a job, which can be performed by an engineer so also by other specified professionals. Adverting to the facts of the present case, the very fact that a number of professionals such as, Architects, Town Planners, Post Graduates in Valuation can provide services as valuers, itself suggests that the services provided by valuers is not in the field of engineering. It is a job which can be performed by an engineer, so also by other specified professionals. The function of the valuer is to prepare valuation of the worth of land, buildings or possessions for a specific purpose. The scope of the work is very wide and extends from residential properties to large estates, factories, offices, shops of every kind which may require basic knowledge of accounting mathematics and science etc. as is apparent from the syllabi of various universities for post graduation course in valuation. The services provided by any qualified engineer in the area of valuation, therefore, not in the nature of services in an engineering discipline. Qualified engineers who act as valuers will to the extent of valuation services rendered by them, not fall within the term ambit of "consulting engineer" as defined in the Service tax Act. Accordingly, service tax levied on services rendered by "consulting engineer" in any discipline of engineering will not cover the valuation services rendered by such qualified engineer.
On behalf of the respondents, strong reliance has been placed upon a decision of the Madras High Court in the case of V. Shanmughavel (Dr.) v. Commissioner of Central Excise, Chennai-II (supra), wherein the court repelled the contention raised by the petitioner therein that such engineers who offered advice in their capacity as "registered valuers" of immovable property or plant and machinery, cannot be brought into tax net under section 65(11) read with section 65(48)(g) of the Finance Act, to submit that the controversy involved in the present case stands concluded by the said decision. A perusal of the above referred judgement of the Madras High Court shows that on behalf of the Department, it had been contended before the court that for being a "registered valuer" of plant and machinery under rule 8A(8) of the Rules, the concerned person must be an engineer as provided under rule 8A(8) and the prescribed qualifications themselves would speak the necessity of such a person having the knowledge of engineering. The court agreed with the contention raised by the Department that if there was no element of "engineering discipline" involved in the advice or consultancy or technical assistance offered by a registered valuer, there would be no necessity of such a person being an engineer and holding a engineering degree. The court, upon considering the qualifications, was of the view that it is obvious that those qualifications are not merely holding an engineering degree but such persons would be required to have a certain standing as an engineer, which is of quite "high standard". The aforesaid finding of the Madras High Court that for being a registered valuer, an engineering degree is a mandatory qualification, appears to be contrary to the provisions of sub-rules (2) to (8) of rule 8A of the Wealth Tax Rules. As noticed hereinabove, under sub-rule (2) of rule 8A of the Rules, which prescribes the qualification for valuer of immovable property (other than agricultural lands, plantations, forests, mines and quarries) civil engineering is not the only qualification for a valuer. There are various other qualifications for a person who desires to be a valuer of immovable property, viz. graduate in architecture or post graduation in valuation and real estate. Thus, apparently, a degree in engineering is not a mandatory requirement for being a registered valuer. Under the circumstances, this court does not find it possible to agree with the view taken by the Madras High Court which has not taken into consideration the other qualifications provided under sub-rules (2) and (8) of rule 8A of the Wealth Tax Rules.
For the foregoing reasons, the petition succeeds and is, accordingly, allowed. The question posed for determination by this court is answered in the negative, that is, in favour of the petitioner and against the respondents. The services rendered by the petitioners as valuers would not fall within the ambit of services rendered by a "consulting engineer" as defined under the Finance Act, 1994. The respondents are, accordingly, restrained from levying service tax in respect of services provided by the petitioners as valuer to a client/any person as taxable service liable for payment of service tax as "consulting engineer". Needless to state that the petitioners would be entitled to consequential reliefs. Rule is made absolute accordingly, with no order as to costs.
[HARSHA DEVANI, J.] [R.M.CHHAYA, J.] parmar* Top