News Flash
  • Application of 'own merit' rule for determining seniority of Superintendents in Zones under CBIC. Click here
  • Inviting Nominations for One Day Training Session on Infrastructure Development in CBIC & APAR Writing" for Group A Officers of CBIC on 7th May, 2018 at NACIN Faridabad. Click here
  • Inviting Nominations for Two Days' Training Session on "Free Trade Agreements , Possible Misuse & Redressal Mechanism" for Group A Officers of CBIC on 14th & 15th May 2018 at NACIN Faridabad Click here
  • Weekly newsletter from Chairman, CBEC dated 20/04/2018. Click here
  • Inviting Nominations for Two Days' Training Workshop on Preservation of Heritage Buildings for Group A Officers of CBIC on 21 and 22 May, 2018 Click here
  • CGST Rules, 2017 as amended upto 18.04.2018 have been uploaded. Click here
  • Details of Vendors providing E-seals as per Circular 36/2017-Customs & 37/2017-Customs Click here
  • Training on "Expenditure Management & Budget Planning" on 23.04.2018(Monday)by EMC, DGHRD at NACIN, Faridabad.Click here
  • Weekly newsletter from Chairman, CBEC dated 13/04/2018 Click here
  • "Circulars clarifying the procedure for interception of conveyances for inspection of goods in movement, and detention, release and confiscation; recovery of arrears under the existing law and reversal of inadmissible input tax credit issued; and clarification of issues in refund to UIN." Click here
  • " Seeking views/ suggestions and data for review of All Industry Rates (AIRs) of Duty Drawback for the year 2018- letter to Export Promotion Councils/ Commodity Boards/ Trade and Industry Associations/ Chambers of Commerce."Click here
  • Inviting Nominations for One day Training Session on “Expenditure Management” at NACIN Faridabad for the Officers of the rank of Joint/Addl Commissioners/Commissioners/Pr. Commissioners of CBIC on 23rd April, 2018. Click here
  • "Clarification on issues related to furnishing of Bond / LUT for exports has been issued." Click here
  • Two Days’ Training on Establishment and Administration" at NACIN Faridabad for the Officers of the rank of Asstt. Commissioner to Addl. Commissioners of CBIC on 19th & 20th April, 2018 .Click here
  • Ban on Import of Oxytocin; stepping up vigilance mechanism in check smuggling of Oxytocin - Click here
  • Smooth roll out of e-Way Bill system from 01st April, 2018 - Click here
  • FAQs on e-way bill Click here
  • Appointment of Nodal Officer for PQs in Customs Zones Click here
  • Appointment of Nodal Officer for PQs in CGST Zones Click here
  • TOP Most priority to PQ repliesClick here
  • Circular clarifying export related refund issues issued
  • Advisory on AIO functioning, connectivity issues for GST.-click here, TCS Escalatoin Matrix for GST Zones LAN Implementation, Wipro Handholders, HP Resident Engineers
View all

Section 37B Order No .1/1/2002-ST

F.NO. 177/5/2001 - CX4
Government of India
Ministry of Finance
Department of Revenue
Central Board of Excise and Customs

26th February, 2002

37B Order No .1/1/2002-ST

Sub.: Providing service of third party inspection and certification whether liable to Service Tax - regarding

In exercise of the power conferred under Section 37B of the Central Excise Act, 1944 (as made applicable to Service Tax by Section 83 of the Finance Act,1994), the Central Board of Excise and Custom considers it necessary, for the purpose of uniformity in connection with classification of services, to issue the following instructions.

2.      Doubts have been raised as to whether " third party inspections and certifications" carried out by certifying agencies in respect of marine as well as non-marine equipments, can be considered as a service provided by a "consulting engineer" or not.

3.      This matter was also raised by two service providers before the Mumbai High Court, in Writ Petition No 1436/2000. The petition was disposed of by the Hon'ble Court on 11.9.2001 with directions to the Board to issue a Section 37B Order in the matter for ensuring uniformity.

4.      The two service providers were heard in the matter on 4th January, 2002. Views of the field formations were also procured. Some of the types of inspection and certification work carried out by the said two service providers relate to :-

1. MARINE
(i) New Construction
(ii) Periodical Surveys
(iii) Marine equipment and components
(iv) Type approval
(v) Marine specification
(vi) Confirmation of class
2. NON-MARINE
(i) Plan approval and Inspection
(ii) ASME Inspection Service
(iii) System Integrity and Management

5.      It is observed that as per clause (18) of Section 65 of the Finance Act,1994, "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 disciplines of engineering".

6.      The issue, therefore, is whether the service of 'third party inspection and certification' carried out by a professionally qualified engineer or an engineering firm can fall under the category of advice, consultancy or technical assistance.

7.      The main point raised by some service providers is that where they are carrying out any certification as required by any statute it cannot come under the purview of either consultancy, advice or technical assistance. As for example, some of them have been authorized u/s.9 of the Merchant Shipping Act, 1958, to survey and classify ships and issue necessary certification. [refer S.O.No.769(E) dt.7.11.97 issued under section 9 of the Act ibid].

8.      In the case of 'Management Consultants', the Board had clarified, in Para 11 of the sec.37B Order No. 1/1/2001 - ST dt.27.6.2001, that "..........banks who are required to play only a statutory role under any Act or regulation, such as Takeover Regulations of SEBI, and do not provide any advice or consultancy but merely verify and submit a report to the concerned authorities, in connection with merger and acquisition transaction, are not treated as Management Consultants..........". The definition of "Management Consultant" also uses the words 'consultancy, advice or technical assistance'.

9.      Certificates given under authority of any statute/international protocol/code/convention, cannot be considered to be a consultancy job. It is then to be examined whether this activity can come under the purview of advice or technical assistance. An advice is generally understood to be optional in nature and has no statutory force. It is upto the client to accept the advice or not. The activity of certification will therefore not fall under the category of advice. As regards 'technical assistance', it is observed that an assistance is normally for the purpose of achieving a particular aim or result. A certificate given by, say, the Boiler Inspector under the Factory's Act, 1948, about the safety of a boiler, cannot be considered to be an 'assistance' to the person using the said boiler in his factory. Thus, if a certifying agency issues a 'Cargo ship safety construction certificate' u/s.299A(i) of the Indian Merchant Shipping Act,1958, it cannot be considered to be either an advice or a technical assistance.

10.      To issue certificates under the authority of any statute it will obviously be necessary for the certifying agency to conduct some survey/inspection. Thus the survey/inspection by an agency for the purposes of issuing certificates by the same agency under an authority of law, will also not amount to consultancy, advice or technical assistance. If, however, the shipping company gets the ship surveyed or inspected by another, agency before taking it for certification by an authorized agency, only then can it be said that the first agency is providing some technical assistance or advice.

11.      It will, therefore, be essential to examine each activity of a service provider on the basis of facts, the terms of agreement between the assessee and the clients and the corresponding provisions of Indian or International Statute/Convention/Protocol or Code, to determine whether the certificate being given is under the authority of any such statute, convention, protocol or code. If it is so, the payment received for that service will not be taxable under the head " consulting engineer".

12.      Any other inspection, survey, assessment, technical assistance, consultancy, recommendation, advice, undertaken/provided directly or indirectly, by the assessee would be liable to Service Tax under the head 'Consulting Engineer'.

13.      Suitable Trade Notice may be issued for the information of the trade.

14.      Hindi version will follow.

15.      The receipt of this order may kindly be acknowledged.

Suraksha Katiyar
Under Secretary