By TIOL News Service

NEW DELHI, JAN 04, 2013: THE appellant is a co-operative society promoted by six different banks like Oriental Bank of Commerce, Bank of Baroda, Punjab and Sind Bank etc. They provide training to the employees of these member banks. They also provide training to employees of other banks in the field of banking which enables the employees to efficiently handle the business of the banks of which the trainees are staff. The benefit of the training accrues to the Banks which send their employees for training and pay for the appellant.

The appellant was not paying any service tax on the charges received by them from the banks which were sending the staff for training. Revenue was of the view that the training provided by the appellant is taxable under the category of "Commercial Coaching or Training".

So, a SCN demanding Service Tax for the period 01-04-2005 to 31-03-2010 was issued and an amount of almost a Crore of Rupees was confirmed by the CCE, Noida with penalties and interest. Incidentally, the adjudicating authority granted the benefit of cum-tax value to the co-operative society.

So, there are two appeals, one by the co-operative society and one by Revenue unhappy that the cum-tax benefit was extended and which probably resulted in the ST demand falling below the One crore mark.

Before the CESTAT, the appellant submitted thus -

+ the training provided by them is not of a commercial nature; the persons attending the classes are not attending the classes on their own volition; participants do not pay for the classes but it is the banks which pay for the services; the training is in the nature of continued education and is intended for imparting professional knowledge to employees.

+ the legislature did not want to tax education per se because if it was so there was no need to use the word "commercial" in the definitions at section 65 (26) and 65 (27). Reliance is also placed on the contents of paragraph 2.2 tilted ‘Vocational training and coaching centers' appearing in the Board Circular No. 9/8/2003-ST dated 20-06-03.

+ The following case laws are also adverted to -

++ Ahmedabad Management Association (2009-TIOL-214-CESTAT-AHM)

++ Institute of Chartered Financial Analysis of India (2008-TIOL-2036-CESTAT-BANG)

++ Centre for Development of Advanced Computing (2008 TIOL-2011 -CESTAT-BANG)

++ Administrative Staff College of India (2008-TIOL-2007-CESTAT-BANG)

+ in view of the Tribunal decisions holding that the type of training provided by the appellant cannot be considered as "Commercial Coaching or Training" SCN is substantially time barred.

The Revenue representative submitted that section 65 (105) (zzc) has been amended by Finance Act, 2010 to add an explanation with retrospective effect from 01-07-2003 and pursuant to which the arguments advanced by the appellant fails:

'Explanation. - For the removal of doubts, it is hereby declared that the expression "commercial training or coaching centre" occurring in this sub-clause and in clauses (26), (27) and (90a) shall include any centre or institute, by whatever name called, where training or coaching is imparted for consideration, whether or not such centre or institute is registered as a trust or a society or similar other organisation under any law for the time being in force and carrying on its activity with or without profit motive and the expression "commercial training or coaching" shall be construed accordingly;'

The Bench after considering the arguments advanced and the Explanation added with retrospective effect by the Finance Act, 2010 observed -

“11. The matter has been under dispute in very many cases. The retrospective amendment made by Finance Act 2010 which added explanation under 65 (105) (zzc) (highlighted above) makes it clear that the issue is not to be decided with reference to the legal constitution of the institute, whether it is a charitable society, whether it is a co-operative society with no profit motive etc. But this explanation does not add any clarity as to what would be the import of the word "commercial" used in these definitions. It prima facie does not mean that the training should be in respect of commerce because coaching for entrance examinations subjected to tax under this head is not in relation to commerce. So it appears that the word has to be understood to be qualifying the purpose behind the training, the manner in which it is organized or the persons who can avail of the service.

12. The explanation added by Finance act 2010 appears to explain that the issue should not be decided with reference to the profit motive of the legal person owning the Institute. This amendment appears to seek parity between institutes providing the same type of coaching and training but with different legal status like a private limited company, a trust, co-operative society etc. But this amendment does not appear to make all trainings on the same footing and to make the purpose of the training, the manner in which it is organized and the persons who can avail of the service itself irrelevant leading to a situation where the word "commercial" used in the above definitions become superfluous.

13. Further the decisions of the Tribunal in the cases cited by the Counsel for appellant were not given for the only reason that the legal person owning the institute did not have profit motives. The Tribunal was of the view that a professional training cannot be considered as "commercial training". Para 12 in the decision of Administrative Staff College Of India (Supra) and para of 4.10 of the decision of Ahmedabad Management Association (supra) are particularly relevant.

x x x

15. Having considered all the aspects above we are of the prima facie view that the word "commercial" in definitions at section 65 (26) and 65 (27) and 65 (105) (zzzc) cannot be considered to be superfluous and the explanation added by Finance Act, 2010 may not be a sufficient reason to take a view that the impugned training to be a "commercial training".

16. We also note that substantial part of the demand is confirmed invoking extended period of five years and such extended period may not be available while demanding short paid taxes on account of such interpretational issues.”

Saying so, the bench waived the requirement of pre-deposit and granted a Stay in the matter.

In passing: Training is everything. The peach was once a bitter almond; cauliflower is nothing but a cabbage with a college education - Mark Twain.

(See 2013-TIOL-22-CESTAT-DEL)