By TIOL News Service

MUMBAI, APR 22, 2015: THE appellant is a franchisee of M/s. Aptech Ltd. and are engaged in imparting training in computer-based multimedia animation under the brand name "Arena Multimedia" in terms of an agreement entered into with M/s. Aptech Ltd.

On perusal of the said agreement, it was revealed that the course fee was required to be collected by the appellant and deposited in an account maintained by M/s. Aptech Ltd. Appellant received 80% of the fees collected by them and were discharging appropriate service tax liability on the said amount under the head "Commercial Coaching or Training Service".

The jurisdictional CE authorities entertained a view that the appellant is required to discharge service tax liability on the full amount of the fees received.

The lower authorities confirmed the demand along with imposition of penalty and interest and, therefore, the appellant is before the CESTAT.

It is submitted that demand is incorrect inasmuch as the amount on which the tax is demanded is not an amount received by the appellant as consideration for the training imparted by them; that the amount received by the appellant is 80% of the fees collected and on the same appellant had discharged the tax liability.

The AR submitted that since the appellant had collected entire fees from the prospective students that amount has to be considered as the gross amount received for the services rendered to the students under the category of 'Commercial Coaching or Training Centre'.

The Bench noted that the issue is whether appellant is required to discharge service tax liability on an amount which represents 20% of the gross amount charged as fees from the students and which amount is retained by M/s. Aptech Ltd.

The CESTAT further observed -

+ Undisputedly, the appellants are discharging service tax liability on the amount which is parted to them by M/s. Aptech Ltd. It is also undisputed that the appellant is the service provider and the students are the service recipient.

+ There is no dispute as to the fact that the students issue the cheques for the payment of fees in the name of M/s. Aptech Ltd. It is on record that appellant is not receiving any amount from the students directly.

+ The provisions of Section 67 of the Finance Act, 1994 envisage for considering the gross value for discharge of service tax liability. The said section specifically provides that the gross value which is charged for the services has to be considered for payment of service tax liability.

+ In the case in hand, the amount received by the appellant for the provision of services under the category of 'Commercial Coaching or Training Services' is the 80% of the amount paid by the students, as students make 100% of the payment directly in the name of M/s. Aptech Ltd.

+ If that be so, appellant has correctly discharged the service tax liability on an amount received by him for the services rendered under the category of 'Commercial Coaching or Training Services'.

Holding that the orders of the lower authority are unsustainable, the same were set aside and the appeals were allowed with consequential relief.

(See 2015-TIOL-723-CESTAT-MUM)