CESTAT Allows Cenvat Credit To Delhi Metro Rail Corporation On Consulting Engineer’s Services

The Delhi Bench of the Customs, Excise and Service Tax Appellate Tribunal (CESTAT) has granted Delhi Metro Rail Corporation a cenvat credit for consulting engineer services.

The bench of Anil Choudhary (Judicial Member) and P.V. Subba Rao (Technical Member) has observed that the input credit on a consulting engineer’s service was 100% allowable under Rule 6(5) read with Rule 2(l) of the Cenvat Credit Rules.

While implementing the Delhi Metro project, the appellant/assessee hired a consulting engineer. While utilizing the consultancy for the Delhi metro rail project, it acquired the knowledge to provide consultancy services for similar projects. The input tax credit was used to pay service tax on the output consulting engineering service.

The Pr. Commissioner has held that the appellant had obtained credit for ineligible input services. The appellant received consulting engineering services tailored to Delhi projects and used them solely for an exempted service (passenger transportation). As a result, the appellant cannot assert that it used input services to provide consulting engineering services to other metro projects.

The appellant submitted that the consulting engineering services received by the appellant have a nexus with the consultancy engineering services rendered by it to other metro projects in other cities that are being executed in a similar manner. Knowledge and experiences gathered from the consulting services received for the Delhi Metro Rail Project are valuable for providing consulting services for other metro rail projects.

The Delhi Metro (Operation and Maintenance) Act, 2002 was passed by Parliament. Subsequently, it was amended to cover the metro in other cities. The Delhi Metro's construction began on October 1, 1998. The first line of the Delhi Metro was inaugurated on December 24, 2002. Even while construction was going on, the appellant had decided to provide consulting services for other metro rail projects. The Annual Director’s Report for 2001-02 states that the appellant had acquired considerable expertise and technical know-how in the planning and execution of metro rail projects through its association with and interaction with general consultants and global contractors. To generate revenue, the appellant decided to provide technical consulting services on a commercial basis in 2001-02.

The tribunal noted that the Pr. Commissioner has ignored the directors’ reports and main objectives of the appellant corporation while holding that there is no evidence that the consulting engineer’s service received for the Delhi metro rail project was used for rendering consultancy service for the other projects. As the directors’ report states, the consultancy service was used by the appellant for the Delhi project and was also used to provide engineering consulting for other metro projects.

Case Title: Delhi Metro Rail Corporation Ltd. versus Principal Commissioner, Service Tax, Delhi-I

Citation: Service Tax Appeal No. 53176 of 2016 (DB)

Date: 15.02.2023

Counsel For Appellant: P.K. Sahu

Counsel For Respondent: Mihir Ranjan

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