By TIOL News Service

NEW DELHI, MAR 13, 2014: THE appellant is an undertaking of the State Government of Madhya Pradesh, Public Financial Institutions and lead banks of the State and was set up with the sole objective of up-lifting socio economic conditions of the people below poverty line and weaker sections of the society by the way of imparting to them skill development as well as entrepreneurship so that they can earn their livelihood on their own through meaningful employment and for this purpose, the appellant institution conducts various livelihood development and training programmes. According to them, they undertake various training programmes under the welfare scheme of the Central Government and State Government like Prime Minister Rozgar Yojana (PMRY), Prime Minister Employment Generation Programme (PMEGP), Mass Employment Generation through Science & Technology (MEGSET), Entrepreneurship Awareness Camps (EACs), Entrepreneurship Development Orientation Programmes (EDOPs), Swayam Siddha project for upliftment and development of women in the rural areas, Rani Durgawati Swarozgar Yojana (RDSY), Management Development Programmes/Development Orientation Programmes (MDPs/DOPs), CM Gharelu Kamkaji Mahila Yojana (CMGKMY), National Health Rural Mission (NRHM) etc.

In addition to the above activities, they are also associated with -

(a) Computer training through franchisee network,

(b) Employment generation through manpower supply to various organizations,

(c) Data digitization for various Government Departments,

(d) Providing education in collaboration with a University; and

(e) Renting a certain portion of premises owned by them.

It is the view of the department that various training programmes conducted by appellant are "Commercial Coaching and Training service" and taxable and accordingly the grants received from the Government by the appellant institution would have to be treated as the gross amount charged by the appellant institution for this service.

A service tax demand of Rs.4,15,52,918/- has been issued on this basis.

Besides this, according to the department, the appellant institution has provided -

(a) Business support service by data digitization for various government departments, and

(b) Renting of immovable property service by renting certain portion of the premises owned by them and also the service of management or business consultant service and business franchisee service.

And on this, the service tax demand raised is of Rs.10,34,026/-.

The demand raised is for the period July 2003 to March 2008.

The CCE, Bhopal confirmed the demand along with interest and penalty and also appropriated the amount of Rs.34.05 lakhs paid by the appellant.

Before the CESTAT, the appellant inter alia submitted as below -

+ In the case of Apitco Ltd. vs. CST, Hyderabad - (2010-TIOL-1564-CESTAT-BANG)  it is held that no taxable services are rendered by implementing Government schemes, as implementing agency, by utilizing the grants in aid received from the Government.

+ That the appellant has paid the service tax in respect of the franchisee service as well as on renting of immovable property, that in any case, the appellant being an institution run by the State Government/financial institutions and lead bank of the States, there is no question evasion of service tax by resorting to fraud, wilful misstatement, suppression of facts, etc. and, hence, bulk of the duty demand is time barred and penalty under Section 78 would not be imposable and that in view of the above, the amount of Rs.34,05,492/- already paid by the appellant is sufficient for hearing of the matter.

The Revenue representative reiterated the findings of the adjudicating authority and submitted that the amount already deposited by the appellant is not sufficient to safeguard the interests of the Revenue.

The Bench inter alia observed -

++ It is not denied that the appellant institution is also conducting courses in collaboration with Bhoj University which result in award of degrees/diploma, like Diploma in Computer Application (DCA), Bachelor of Computer Application (BCA) and Post Graduate Diploma in Computer Application (PGDCA) which are recognized under the law.

++ Since the appellant institute provides courses which result in the award of diplomas or degrees, as mentioned above, which are recognized under the law, the appellant institute would not be covered by the definition of "commercial training or coaching centre" and, therefore, we are of the prima facie view that any training programmes conducted or organized by the appellant would not attract service tax under Section 65 (105) (zzc) read with Section 65 (27) ibid. Therefore, the service tax demand in respect of the appellant's alleged activities as commercial coaching or training centres is not sustainable.

++ As regards the business support services, this is alleged to have been provided by the appellant to various Government Departments by data digitization. The impugned order does not discuss at all as to how the data digitization or any other activities of the appellant are covered by the definition of infrastructure support services. In our prima facie view, the activity of data digitization for various Government departments would not be covered by the definition of support services of business or commerce as the data digitization service for various Government departments cannot be treated as the service in relation to business or commerce.

++ It would be absurd to allege that an institution run by the State Government and which is associated in implementation of various welfare schemes of the centre and State Government by organizing various training programmes to improve the skills of poorer sections of the society, of having evaded service tax by taking recourse to fraud, wilful misstatement, suppression of facts etc. On this point, the approach of the department is absurd and, therefore, neither longer limitation period would be invokable not penalty under Section 78 would be attracted. Therefore, in any case, bulk of the service tax demand would be time barred.

Holding that the amount already paid by the appellant is sufficient for hearing of the matter, further pre-deposit was waived and stay was granted.

(See 2014-TIOL-394-CESTAT-DEL)