2013 (10) TMI 1323 - HC - Service Tax

Waiver of pre deposit - Commercial Training and Coaching Centre Services - whether service tax is payable on consideration received for training provided to employees of concerns/companies who had purchased the software developed and sold by the appellant - Held that - There is no dispute w.e.f. 16-5-2008 and, the appellant herein, is paying service tax under the entry relating to information technology software service - in terms of the order passed by the Tribunal, the appellant will also have to deposit ₹ 53,25,568/- towards penalty. It is pointed out that the interest is payable @18% - quantum involved and the fact that penalty is equal to the amount of tax, we are inclined to modify the order passed by the Tribunal and direct complete waiver of payment of interest and penalty. The directions to deposit the entire principal tax amount is partly modified with a direction to the appellant to deposit ₹ 40,00,000/- within a period of four weeks. We refrain from giving detailed reasons, but record that the issues raised do merit consideration. The plea of the appellant is that they had supplied and were paid consideration for the software sold. The appellant it is stated was not a commercial training or coaching institute but had developed and had sold software and as a term also trained the employees. - Decided partly in favour of assessee.

Summary

Issues Involved:
1. Whether the Customs Excise and Service Tax Appellate Tribunal was correct in directing the appellant to deposit a specific amount as a precondition for hearing the appeal on merits.

Analysis:

Issue 1: Tribunal's Direction to Deposit Amount
The appellant, registered with the Service Tax Commissionerate, was providing various services including online information, database access, software services, and consultancy services. The dispute centered around whether service tax was applicable on training provided to employees of companies that purchased software from the appellant during 2004-2008. The revenue contended that the training fell under "commercial training or coaching" as defined in the Finance Act, 1994. The Tribunal held that the appellant lacked a prima facie case and that the training activities were covered under "Commercial Training and Coaching Centre Services," denying the waiver of pre-deposit. However, the appellant cited precedents to support their position, emphasizing that the training provided was not akin to commercial training or coaching services. The Tribunal's order required the appellant to deposit a substantial amount, including penalty and interest. The High Court, considering the nature of the dispute and penalty amount, modified the order, directing the appellant to deposit a reduced sum within a specified period and granting a complete waiver of interest and penalty. The Court acknowledged the merits of the appellant's arguments, noting that the appellant primarily sold software and provided training as a part of the software sale, not as a commercial training center.

Conclusion:
The High Court addressed the substantial question of law regarding the Tribunal's directive on the deposit amount, ultimately modifying the order in favor of the appellant. The appeal was disposed of with no costs awarded, highlighting the nuanced interpretation of service tax laws and the specific circumstances of the case.