2011 (12) TMI 395 - AT - Service Tax

Commercial Training or Coaching Services - vocational training institute - appellants claimed benefit of Notification No.24/04-ST, dated. 10.09.04 - Held that - The courses offered by appellant do not impart skills to engage themselves in self-employment directly after the training or coaching. These courses may provide opportunities of employment only - the tuition fee received for these courses are not exempted from service tax under the notification - the demand stands confirmed as the appellants have entered into a franchisee agreement with a UK based commercial institute for imparting degrees and are liable to pay service tax on reverse charge basis - direct the appellants to deposit an amount of Rs.75 lakhs within a period 10 weeks from date of Order

Summary

Issues Involved:
1. Confirmation of service tax demand on the appellant for Commercial Training or Coaching Services.
2. Interpretation of Notification No.24/04-ST regarding exemption for vocational training institutes.
3. Liability for service tax on reverse charge basis due to a franchisee agreement with a UK-based institute.
4. Inclusion of reimbursement of expenses in the value of franchisee services.

Issue 1: Confirmation of service tax demand for Commercial Training or Coaching Services
The judgment confirms a service tax demand of Rs.8,66,06,610 against the appellant, primarily for providing services falling under "Commercial Training or Coaching Services." The demand includes penalties under various sections of the Central Excise Act, 1944. The appellant claimed exemption under Notification No.24/04-ST, which exempts taxable services related to Commercial Training or Coaching by a vocational training institute. The Commissioner observed that the courses offered by the appellant did not enable trainees to seek self-employment, leading to the denial of exemption. However, the Tribunal noted that the explanation in the notification uses "or" and not "and" between "seek employment" and "undertake self-employment," indicating separate possibilities. The Tribunal prima facie held that the appellant qualifies for the exemption as the training provides an opportunity for employment, not necessitating self-employment skills.

Issue 2: Interpretation of Notification No.24/04-ST
The Tribunal analyzed the definition of a vocational training institute under the notification, emphasizing the requirement for imparting skills enabling trainees to seek employment or self-employment directly after training. The Commissioner's interpretation implied that both employment and self-employment opportunities must be provided by the courses to qualify for the exemption. However, the Tribunal disagreed, stating that the disjunctive "or" in the explanation allows for either seeking employment or undertaking self-employment. The Tribunal considered the Commissioner's interpretation as impermissible legislative substitution, as the training offering employment opportunities alone could suffice for the exemption.

Issue 3: Liability for service tax on reverse charge basis
A portion of the demand was confirmed due to a franchisee agreement with a UK-based institute, Edexcel International, for imparting degrees. The Tribunal deemed this issue contentious and not determinable at the interim stage. The appellant was directed to make a part pre-deposit of Rs.75 lakhs, with the balance waived pending appeal. The liability for service tax on a reverse charge basis was considered arguable, requiring further examination during the appeal process.

Issue 4: Inclusion of reimbursement of expenses in franchisee services value
Another part of the demand was confirmed based on including reimbursement of expenses in the value of franchisee services. The Tribunal found this issue debatable and deferred a final decision, directing the appellant to make a part pre-deposit. The recovery of the balance service tax and penalties was stayed pending appeal, indicating the need for a detailed assessment of the expenses reimbursement aspect during the appeal proceedings.