By TIOL News Service

MUMBAI, MAY 06, 2017: IN the matter of Union Budget 2010-2011, the D.O.F. No. 334/1/2010-TRU, dated 26th February 2010 under the head "3. ALTERATION OR EXPANSION IN THE SCOPE OF EXISTING SERVICES" mentions -

"An Explanation is being added in the definition of the taxable service 'Commercial Training or Coaching Service' [section 65 (105) (zzc)] to clarify that the term 'commercial' appearing in the relevant definitions, only means that such training or coaching is being provided for a consideration, whether or not such training or coaching is conducted with a profit motive . This change is being given retrospective effect from 01.07.2003."

The Finance Act, 2010 provision effecting the change is as below –

(b) in sub-clause (zzc), the following Explanation shall be inserted and shall be deemed to have been inserted with effect from the 1st day of July, 2003, namely:-

'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 petitioner seeks an order to declare that the explanation added to section 65(105)(zzc) by the Finance Act 14 of 2010 dated 8th May, 2010 with retrospective effect from 1st July, 2003 is unconstitutional and ultra vires Article 14 of the Constitution of India.

After considering the elaborate submissions made by both sides, the High Court extracted the definitions of 'Commercial Training or Coaching' & 'Commercial training or coaching centre' appearing in section 65(26) and 65(27) of the FA, 1994, contents of clause 65(105)(zzc) and observed -

+ That the tax can be imposed by introducing such a provision or the general power to amend the statute with retrospective effect has not been questioned.

+ Once the statute itself clarifies that the retrospective effect is from 1st July, 2003, then, we do not see any basis for the argument …. Now, the essential feature or the intent, namely, to make profit or otherwise is wholly irrelevant.

+ Educational coaching is covered by the expression "coaching centre" as defined in section 65(26) and (27). That it is not on commercial basis or predominantly for profit is the only argument canvassed throughout. On some occasions in the past, it was accepted but after the insertion of the explanation even that is unavailable. Now, irrespective of profit motive and so long as such service is rendered for consideration, it falls within the purview of the tax. [Commercial Tax Officer and Ors. vs. M/s. Bishwanath Jhunjhunwala and Anr. AIR 1997 SC 357 relied upon.]

+ An explanation may be added to include something within or exclude something from the ambit of the main enactment or the connotation of some word occurring in it. … It is too well settled to require any reiteration that in matter of taxation the legislature enjoys greater freedom and latitude and it is allowed to pick and choose districts, objects, persons, methods and even rates of taxes if it does so reasonably. In this case, the legislature has indeed acted reasonably and taxed the service provided by training and coaching centre and classes . [Justice G. P. Singh in the Principles of Statutory Interpretation, Seventh Edition page 172-173, refers.]

+ Such clarificatory provision can operate with retrospective effect. That has been given retrospective effect in terms of the powers conferred on the legislature is apparent. In these circumstances, this is not an exercise of overruling any binding judgment of a competent court. This is altering the basis or foundation of the law on which the judgment is delivered .

+ Equally, once there is a power to make retrospective amendment and of the above nature, then, one cannot pick one or two words from the explanation and read them in isolation. The explanation would have to be read as a whole. So read, it clarifies the definition of the term "commercial training centre" or "coaching". Once commercial training or coaching centre is defined and which definition is clarified by this explanation, then, the earlier views of the Benches of CESTAT would not hold the field.

+ There is no scope for any apprehension that the petitioner would be taxed by going backward for a decade or more. …The effect may be from 1st July 2003, but to recover the tax from that date, there should be a power and there should be no fetter on that power. If there is any fetter or restriction on that power, then, that would operate. The show cause notice would have to be adjudicated in accordance with law. At such adjudication, the petitioner would be provided all opportunities to defend itself and a adverse adjudication order can be challenged in appeal as provided by the statute. In these circumstances, when there are inbuilt safeguards and checks on the power to recover the tax, then, all the more we do not see any reason to entertain this writ petition.

The Writ Petition is dismissed.

(See 2017-TIOL-855-HC-MUM-ST)