By TIOL News Service

MUMBAI, SEPT 29, 2014: AGAINST the appellant, a Service Tax demand of Rs.6.59 crores was confirmed by CCE, Pune-III by classifying the services rendered by them during the period 01/07/2003 to 31/03/2006under ‘commercial training or coaching services'.

Before the CESTAT the appellant inter alia submitted that pursuant to the investigation and recording of statements of the President of the appellant society they applied for service tax registration with effect from 05.05.2006 and deposited an amount of Rs.8,76,42,162/- towards their tax liability upto December, 2006 which included an amount of Rs.5,27,37,740/- towards the tax liability for the period 01/07/2003 to 31/03/2006, under protest.

It is also submitted that the activity undertaken by the appellant is education and is not covered under the taxable service of 'commercial coaching or training';that they are providing education as per their own curriculum and testing them based on examination conducted as well as assessed by them; that they are registered as a charitable society and are non-commercial; the income earned is exempt from income tax under Section 10(23C) of the Income Tax Act, 1961 and, therefore, the nature of the activity undertaken by the appellant are not commercial and hence they are not covered under the category of ‘commercial training or coaching centre'.

The AR submitted that by retrospective amendment (with effect from 01/07/2003) to section 65(105)(zzc) of the Finance Act, 1994 by the FA, 2010, issues relating to institutes registered as trust or society, whether for profit or not, has been resolved. Therefore, all institutes, whether or not they are charitable in nature, come within the scope of commercial training or coaching centre if the courses are not recognized by law and a consideration is charged for the services rendered. Therefore, the appellant's plea that they are not liable to tax, as they are a registered charitable trust, is not tenable in law. It is also submitted that the appellant had collected service tax from the students but had not deposited with the department till the investigation was conducted.

The Bench observed that in view of the Larger Bench decision in Great Lakes Institute of Management vs. CST, Chennai - 2013-TIOL-1480-CESTAT-DEL-LB the services rendered by the appellant through its 5 institutes clearly fell within the scope of ‘commercial training or coaching' service and in view of the retrospective amendment made in the law by way of explanation to Section 65(105)(zzc), even if the appellant is a charitable trust or society, the appellant would be liable to pay service tax; that during the period of demand, neither the courses were recognized by law nor the institutes/establishments conducting the courses were approved.

As regards the claim that the courses conducted were vocational in nature and, therefore, they were entitled to exemption from tax under notification No. 9/2003-ST and 24/2004-ST, the Bench noted that an identical issue was examined in Sadhana Educational & People Dev. Service Ltd. - 2013-TIOL-1830-CESTAT-MUM and it was held that postgraduate courses in management will not come under vocational training and that the said ratio squarely applies to the facts on hand and the contention raised is rejected.

In the matter of ‘limitation', the Bench adverted to the decisions in ICFAI - 2012-TIOL-2028-CESTAT-BANG & M/s. Mehta & Co - 2011-TIOL-17-SC-CX and concluded that invocation of extended period of time cannot be faulted at all as there has been no undue delay on the part of the department either in completing the investigation or in issue of show cause notice. The plea of bonafide belief in not obtaining registration & paying ST was also rejected by noting that no material had been placed before the Bench, either by way of expert opinion or otherwise, as to the basis for entertaining such belief.

The appellant's claim that there were errors in the computation of service tax by inclusion of receipts towards sale of prospectus, receipt of fine, uniform for students and LG cup sponsorship and that these were excludible from the value of taxable services was held correct in law and abatement of the said receipts was allowed.

The Bench concluded thus -

(1) The service rendered by the appellant merits classification under the taxable service category of "commercial training or coaching" as defined in law;

(2) We uphold the confirmation of service tax demand along with interest thereon invoking the extended period of time, except for certain receipts which are not considerations for the services rendered as discussed in paragraph 5.11 above. Appellant shall be entitled for the abatements from the taxable value in respect of such receipts.

(3) We set aside the penalty imposed on the appellant under section 78 of the Finance Act, 1994, as the matter relates to a classification dispute.

(See 2014-TIOL-1873-CESTAT-MUM)