2013 (10) TMI 433 - AT - Service Tax

Commercial training or coaching - scope of the term Commercial - retrospective amendment - Section 65(105)(zzc) - Whether Commercial coaching or Training as defined in Sections 65(26), 65(27) and 65(105)(zzc) of the Act accommodates a distinction between imparting of a specific skill by an institution on the one hand and a broader format of education imparted by an institution of higher learning - Held that - The other facet of the definition, of commercial training or coaching centre in Section 65(27) defines the expression with reference to the nature and objectives of the activity pursued by a commercial training or coaching centre. In this definitional regime, training or coaching for imparting skill, knowledge or lessons on any subject or field constitutes commercial training or coaching. Though complexly drafted, this part of the definition seeks to define the contours of training or coaching in the very provision and an identical expression employed in Section 65(27) as well. Any institute or establishment imparting skills/ knowledge/lessons on any subject or field would be providing commercial training or coaching. The definition itself excludes certain entities/institutes/ establishments. In terms of the exclusionary clause, a pre-school - training and coaching centre or any institute or establishment which issues a certificate, diploma, degree or any other educational qualification recognized by extant law, is excluded from the definition, of commercial training or coaching centre . Consequently, commercial training or coaching provided by such entities are outside the fold of the defined service. Commercial training or coaching on any subject or field of sports is also specifically excluded. The taxable service of commercial training or coaching occurs when any institute or establishment is engaged in the activity of imparting skill, knowledge or lessons on any subject or field (excluding sports), irrespective of whether such imparting of skill, knowledge or lessons is in respect of particular discipline or a broad spectrum of disciplines/ academic areas; irrespective of the nomenclature or description of the institute or establishment, as a coaching or training centre or an educational institution; regardless of whether an institute or establishment is incorporated by or registered under any law; and irrespective of distinctions on the basis of curriculum, course content, teaching methodology, course duration or otherwise. Activities of imparting skills, knowledge, lessons on any subject or field or when provided by any entity, institution or establishment which is excluded by a specific and legislated exclusionary clause would alone be outside the fold of the taxable activity.

Issues Involved:
1. Interpretation of "Commercial Training or Coaching" as per Section 65(105)(zzc) of the Finance Act, 1994.
2. Scope and reach of the taxable service under Section 65(105)(zzc).
3. Analysis of precedents regarding commercial training or coaching.
4. Distinction between education and commercial training or coaching.
5. Impact of amendments and legislative changes on the definition and scope of commercial training or coaching.

Issue-wise Detailed Analysis:

1. Interpretation of "Commercial Training or Coaching":
The judgment primarily revolves around the interpretation of "Commercial Training or Coaching" as specified in Section 65(105)(zzc) of the Finance Act, 1994. The term is defined in Section 65(26) and Section 65(27) of the Act. The definition includes any training or coaching provided by a commercial training or coaching center, excluding pre-school coaching and training centers or any institute issuing certificates, diplomas, degrees, or educational qualifications recognized by law. An "Explanation" added by the Finance Act, 2010, clarified that profit motive is not essential for an entity to be considered a commercial training or coaching center.

2. Scope and Reach of the Taxable Service:
The scope of the taxable service under Section 65(105)(zzc) includes any service provided by a commercial training or coaching center in relation to commercial training or coaching. The "Explanation" appended to this section states that any center or institute, irrespective of its nomenclature or profit motive, where training or coaching is imparted for consideration, falls under the definition of a commercial training or coaching center. This broadens the scope to include various entities providing training or coaching, regardless of their organizational structure or profit motive.

3. Analysis of Precedents:
Several precedents were analyzed to understand the interpretation of commercial training or coaching. Key cases included:
- Great Lakes Institute of Management Ltd. (GLIM) vs. C.S.T. Chennai: Initially, GLIM was exempted from service tax due to its charitable status and lack of profit motive. However, the Supreme Court remitted the matter for reconsideration post the 2010 amendment.
- Malappuram Distt. - parallel College Assn. vs. Union of India: The Kerala High Court upheld the constitutionality of taxing education, rejecting the argument that parallel colleges should be exempt as they do not issue recognized certificates.
- Administrative Staff College of India vs. CC & CE, Hyderabad: The Tribunal exempted the institution from service tax, considering its non-commercial nature and charitable status.
- Magnus Society vs. CC & CE, Hyderabad: The Tribunal distinguished between institutions imparting specific skills and those providing higher education, exempting the latter from service tax.
- Institute of Chartered Fin. Analysts of India vs. CC & CE, Hyderabad-II: The Tribunal exempted the institution based on its recognition by law and charitable status.
- Indian Institute of Aircraft Engineering vs. Union of India: The Delhi High Court exempted the institution, recognizing the statutory value of qualifications conferred by it.

4. Distinction Between Education and Commercial Training or Coaching:
The judgment explores the distinction between education and commercial training or coaching. Various lexicographic and textual authorities were cited to differentiate between the two. Education is seen as a broader concept involving systematic instruction and development of intellect, whereas training or coaching focuses on imparting specific skills or knowledge.

5. Impact of Amendments and Legislative Changes:
The Finance Act, 2010, introduced an "Explanation" to Section 65(105)(zzc), clarifying that profit motive is not necessary for an entity to be considered a commercial training or coaching center. This significantly impacted the interpretation and scope of the term. Further, the Finance Act, 2011, amended Section 65(27), removing the exclusion of pre-school coaching and training centers and institutes issuing recognized certificates, thus broadening the taxable base.

Conclusion:
The judgment concludes that any institute or establishment imparting skills, knowledge, or lessons on any subject or field (excluding sports) is considered a commercial training or coaching center, subject to service tax, unless specifically excluded by legislation. The reference was answered accordingly, and the appeals were remitted to the appropriate Bench for adjudication based on these principles.

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