By TIOL News Service

NEW DELHI, OCT 08, 2013: A Division Bench of the Tribunal has referred for consideration of a Larger Bench, the issue pertaining to interpretation of "Commercial Training or Coaching", taxable service specified in Section 65(105) ( zzc ) of the Finance Act, 1994 (the Act). Section 65(26) defines the expression "Commercial Training or Coaching"; and Section 65 (27), the expression "Commercial Training or Coaching Centre". By Finance Act, 2010 an "Explanation" was appended to Section 65(105) ( zzc ), with effect from 1.7.2003.

The Division Bench prima facie doubted the vitality of reasons recorded in the decision in Magnus Society vs. C.C. & C.E., Hyderabad - (2008-TIOL-1812-CESTAT-BANG), which tried to mark a distinction between activities of an institution imparting a particular skill such as in computers, computer operations, spoken English or accountancy on the one hand and a proper format of education imparted by institutions imparting "higher learning" such as MBA , management, computer science and such other disciplines; and concluded that institutions imparting higher learning like MBA etc. cannot be characterized as commercial training or coaching centres; that institutions preparing students for entrance examination to various universities could be called commercial training or coaching centre; but not so institutions recognized by law.

RELEVANT PROVISIONS:

(a) Section 65 (26): "Commercial training or coaching" means any training or coaching provided by a commercial training or coaching centre;

(b) Section 65(27): "Commercial training or coaching centre" means any institute or establishment providing commercial training or coaching for imparting skill or knowledge or lessons on any subject or field other than the sports, with or without issuance of a certificate and includes coaching or tutorial classes but does not include pre-school coaching and training centre or any institute or establishment which issues any certificate or diploma or degree or any educational qualification recognized by law for the time being in force.

(c) Section 65 (105)( zzc ): specifies taxable service to mean any service provided or to be provided to any person, by a commercial training or coaching centre in relation to commercial training or coaching;

(d) The "Explanation" appended to Section 65 (105) ( zzc ), by the Finance Act, 2010, with effect from 1.7.2003 reads:

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;

Counsel for some of the appellants, referred to lexicographic and textual authorities to persuade that there is a fundamental distinction between  education" on the one hand and "training or coaching" on the other. The authorities presented on this aspect endeavour to nuance distinctions between "education" and "training"; between "teaching" and "coaching"; and "training" and "coaching". According to these authorities, training and education constitute different facets of learning and there are major differences between the two. Their purpose, history and methodology are distinct. Training is undertaken for gaining specific skill. Education in contradistinction is undertaken for furthering individual knowledge and development of intellect and education is not only about obtaining employment, the methodology is also different. Training is through specialized courses and textbooks; while independent thinking at a micro level is encouraged, out of the box innovation is usually frowned upon. The methodology of education is pursued through textbooks; the learner is encouraged to think and write about what he is reading; to discuss and reflect. Education could be either formal or informal. Other source indicate that education means teaching or training a person in general learning while coaching or training is for business or profession. Training means the process of teaching or learning skills, discipline etc. and could also mean systematic instruction.

Tribunal Larger Bench observed,

"The provisions of the Act enact a specific regime of taxation, under a distinct field of legislation authorised to Parliament. In the absence of authorization under the provisions of the Act, to refer to provisions in any other enactment to identify the scope and contours of expressions used in the Act, identifying etymological nuances, distinctions or searching for explication of meaning of expressions used in the Act, by recourse to definitions or meaning of similar or analogous expressions in other legislation, is inappropriate. The various pedagogic, lexicographic or textual authorities cited at the Bar to explain the distinction between the concepts of "education", "training" or "coaching" also do not offer appropriate or coherent guidance to aid comprehension of the scope of the relevant expressions defined in the Act. In our considered view, what "commercial training or coaching" means must be ascertained exclusively from the relevant provisions of the Act and applying the appropriate interpretative principles in case of grammatical, syntactic or contextual ambiguity ."

The Larger Bench explained the concept as:

Section 65(26) defines "commercial training or coaching" to mean any training or coaching provided by a commercial training or coaching centre. Section (27), defines "commercial training or coaching centre" to mean any institute or establishment providing commercial training or coaching.

As initially defined (above) it was possible to infer that training or coaching provided by a training or coaching centre which has no commercial or profit motive underlying its activity would be outside the scope of the definition. This dialectic was the basis of the judgements of this Tribunal in GLIM, Magnus Society, Centre for Development of Advanced Computing and Administrative Staff College of India , which reasoned that absence of commercial, business or a profit motive in the activity of an establishment or institution would remove such entity from the ambit of "commercial training or coaching centre".

Parliament however intervened by Finance Act 2010 and introduced the "Explanation" to Section 65(105) ( zzc ), with retrospective effect from 1.7.2003, clarifying that profit motive is not an essential ingredient for bringing a centre or institute within the fold of 'commercial training or coaching centre'; and where training or coaching is imparted for consideration, whether or not such centre or institute is registered as a trust, society or similar other organization under any law for the time being in force, it would be a commercial training or coaching centre, nevertheless. The "Explanation" also redefined the scope of the expression "commercial training or coaching", in Section 65(26), accordingly. As a consequence of the retrospective legislative dynamics, a commercial element or profit motive is an irrelevant ingredient, to bring an institute/establishment/ centre within the fold of 'commercial training or coaching centre' nor is an organizational architecture, of registration of the body/entity as a trust or a society, a statutory necessitus .

The other facet of the definition, of 'commercial training or coaching centre' in Section 65(27) defines the expression with reference to the nature and objectives of the activity pursued by a commercial training or coaching centre. In this definitional regime, training or coaching for imparting skill, knowledge or lessons on any subject or field constitutes commercial training or coaching. Though complexly drafted, this part of the definition seeks to define the contours of 'training or coaching' in the very provision and an identical expression employed in Section 65(27) as well. From the legislated definition, training or coaching therefore means imparting skill, knowledge or lessons on any subject or field. Parliament has not restricted the scope of 'training or coaching' as is defined, by superadding any conditions such as in terms of pedagogic methodlogy , course or training content, syllabus, duration, periodicity, tenure/duration or like conditions. Where legislature cuts with a wide blade, absent a constitutional basis, we discern no scope for introducing restrictions by employing an inappropriate, unwarranted and therefore a counter - majoritarian device, of restrictive interpretation. Where a legislatively mandated definition is available, it is impermissible to look to extra - textual guidance.

The Larger Bench concluded,

If as mandated by Section 65(27), "training or coaching" means imparting of skills, knowledge or lessons on any subject or field, a further enquiry as to whether imparting skills, knowledge or lessons could be classified between higher and lower degrees of skills/ knowledge/lessons; between different degrees of intensity in imparting of skills/knowledge/lessons; or between a regular or hyphenated regime of imparting skills/ knowledge/ lessons, is uncalled for. A good faith interpretation of Section 65(27) requires that wherever skills/knowledge/lessons are imparted on any subject or field, the activity must be considered to be "training or coaching.

When Parliament enacts a generic and unambiguous definition mandating, that imparting skills/knowledge/lessons on any subject or field shall amount to "training or coaching", we are required to give effect to the generic definition, legislatively ordained, without demur. Drawing guidance from the Supreme Court observations, in the context of classification doctrine though, we are of the view that dissecting the expression "training or coaching", as defined in Section 65 (27) of the Act to identify distinctions on the basis of contemporaneous or potential advancements in educational methodologies, hierarchies or pedagogy would result in subversion of the legislative purposes underlying enactment of the definition of the provision - Section 65(27). Where legislature has signalled a generic description, the judicial branch may not resort to mini-classification. Section 65 (27) invites neither a scalpel nor a palette.

On the preceding analyses, any institute or establishment imparting skills/ knowledge/lessons on any subject or field would be providing commercial training or coaching. The definition itself excludes certain entities/institutes/ establishments. In terms of the exclusionary clause, a pre-school - training and coaching centre or any institute or establishment which issues a certificate, diploma, degree or any other educational qualification recognized by extant law, is excluded from the definition, of 'commercial training or coaching centre'. Consequently, commercial training or coaching provided by such entities are outside the fold of the defined service. Commercial training or coaching on any subject or field of sports is also specifically excluded.

The Larger Bench answered the reference as follows:

The taxable service of "commercial training or coaching" occurs when any institute or establishment is engaged in the activity of imparting skill, knowledge or lessons on any subject or field (excluding sports), irrespective of whether such imparting of skill, knowledge or lessons is in respect of particular discipline or a broad spectrum of disciplines/ academic areas; irrespective of the nomenclature or description of the institute or establishment, as a coaching or training centre or an educational institution; regardless of whether an institute or establishment is incorporated by or registered under any law; and irrespective of distinctions on the basis of curriculum, course content, teaching methodology, course duration or otherwise. Activities of imparting skills, knowledge, lessons on any subject or field or when provided by any entity, institution or establishment which is excluded by a specific and legislated exclusionary clause would alone be outside the fold of the taxable activity.

(See 2013-TIOL-1480-CESTAT-DEL-LB)