2011 (8) TMI 283 - AT - Service Tax

Demand - commercial training and coaching services - Since, the period involved in the present appeal is the initial period of introduction of coaching services to the service tax and created a lot of confusion - Even in respect of the fee collected prior to the introduction of the services, the Board s circular was issued only on 5.11.2003 laying down that service tax has to be calculated on pro rata basis - there was also audit on 2004 and a lot of correspondence was exchanged between the appellant and the Revenue, in spite of that, Show Cause Notice was issued only on 20.7.2006 - Therefpor, agree with the finding of the authorities that the demand is barred by limitation - Decided in favour of assessee.

Summary

Issues:
1. Dispute over service tax demand on fees collected for coaching services.
2. Interpretation of law regarding the levy of service tax on coaching services.
3. Limitation period for demanding service tax.

Analysis:

Issue 1: Dispute over service tax demand on fees collected for coaching services
The dispute in this case revolves around the service tax demand of Rs.24,560 imposed on fees collected from students for coaching services during April, May, and June 2003. The original adjudicating authority upheld the demand, stating it was for services to be provided after 1.7.2003 when service tax was applicable. However, the Commissioner (Appeals) accepted the respondent's argument that the fees were for a course ending on 27th June 2003, before the service tax levy came into effect on 1.7.2003. The Commissioner found no evidence that the fees were for services post-1.7.2003, leading to the dismissal of the service tax demand.

Issue 2: Interpretation of law regarding the levy of service tax on coaching services
The Revenue challenged the Commissioner's decision, citing a Tribunal's ruling that coaching fees collected before 1.7.2003 for courses extending beyond that date are subject to service tax on a pro-rata basis. However, the Tribunal noted that the Revenue did not effectively challenge the Commissioner's finding that the fees in question were for a course ending before the service tax levy date. The Tribunal emphasized that the Tribunal's previous decision might not fully apply to the current case, as it concerned fees for courses extending beyond 1.7.2003.

Issue 3: Limitation period for demanding service tax
Regarding the limitation period for demanding service tax, the Revenue argued that the longer period should apply due to the appellant's failure to file ST-3 returns or disclose fee collections. However, the Tribunal disagreed, pointing out that the confusion surrounding the introduction of coaching services to the service tax regime, coupled with the absence of clear guidelines until a Board's circular in November 2003, justified the conclusion that the demand was barred by limitation. The Tribunal rejected the Revenue's appeal based on the limitation ground and set aside penalties, considering the matter as an interpretation of law rather than willful non-compliance.

In conclusion, the Tribunal upheld the Commissioner's decision, emphasizing the lack of evidence supporting the Revenue's claims and the confusion surrounding the introduction of service tax on coaching services. The judgment highlights the importance of clarity in tax regulations and the need for specific evidence to justify tax demands.