2014 (4) TMI 919 - AT - Service Tax

Demand of service tax - commercial coaching or training center service - development of personality and any personal skills - Penalty under Sections 76, 77 and 78 - Held that - activity of the appellant is liable to tax under the provisions of the Finance Act, 1994 as section 65 (27) of the Act provides imparting of coaching or training in any skill or knowledge or lessons on any subject or field other than sports. Thus, the activity of the appellant is squarely covered under the category of commercial coaching or training and liable to Service Tax. Waiver of penalty u/s 80 - Appellant is not engaged in providing commercial coaching as ordinarily understood i.e. coaching for particular exams or training in the subject like Engineering or Management etc. Further, the appellant being a non-profit organization established under Section 25 of the Companies Act, had reasonable belief that they are not a commercial institute or training centre, which issue was clarified by the Finance Act, 2010 by insertion of explanation with retrospective effect. It is also relevant that several decisions were rendered in favour of the assessees under similar facts and circumstances of being non-profit or charitable in nature. Such cases were challenged before the Apex Court. The Apex Court, during the pendency of the appeals in view of the amendment by the Finance Act, 2010 remanded the appeals for fresh adjudication in view of the amendment. Thus, it is found that there is no contumacious conduct or active disregard of the provisions of law in complying with the provisions of the Act or Rules. Thus, penalties imposed under Sections 76, 77 and 78 are set aside, there being reasoned cause for non-compliance and non-payment of tax as provided under Section 80 of the Act. Penalty waived while confirming the demand of service tax - Decided partly in favour of assessee.

Summary

Issues Involved:
1. Liability of the appellant to Service Tax.
2. Eligibility for cum-tax benefit.
3. Imposition of penalties under Sections 76, 77, and 78 of the Finance Act, 1994.

Detailed Analysis:

1. Liability of the appellant to Service Tax:
The appellant, engaged in conducting personality development courses, was assessed by the Revenue as providing 'commercial training and coaching services' under Section 65(27) of the Finance Act, 1994. The appellant contested this classification, arguing that they are a non-profit organization offering educational activities not aimed at profit and that their courses are short-term and not structured like traditional coaching programs. The adjudicating authority, however, confirmed the demand for Service Tax, finding that the appellant's activities fit the definition of commercial training or coaching services, as they impart skills and knowledge in a structured manner. This decision was upheld by the Tribunal, which concluded that the appellant's activities fell squarely under the taxable category of 'commercial coaching or training.'

2. Eligibility for cum-tax benefit:
The appellant argued that the fees collected should be considered as inclusive of Service Tax, citing precedents and trade notices. The adjudicating authority initially rejected this claim, stating that the gross amount charged did not indicate inclusion of Service Tax. However, the Tribunal found merit in the appellant's contention, referencing the case of I2IT Pvt. Ltd., and ruled that since the appellant did not collect Service Tax from participants, the entire consideration should be treated as cum-tax. Thus, the Tribunal allowed the benefit of cum-tax calculation for determining the Service Tax liability.

3. Imposition of penalties under Sections 76, 77, and 78 of the Finance Act, 1994:
The adjudicating authority imposed penalties on the appellant for non-compliance with Service Tax provisions. The appellant argued that their non-payment was due to a bona fide belief that they were not liable, supported by several Tribunal decisions favoring non-profit organizations. The Tribunal noted that the issue involved interpretation of newly imposed statutory provisions and that the appellant, being a non-profit entity, had a reasonable belief of non-liability. Additionally, the Finance Act, 2010 provided retrospective clarification on the matter. Consequently, the Tribunal found no contumacious conduct or active disregard of the law by the appellant and set aside the penalties under Sections 76, 77, and 78, invoking Section 80 of the Act.

Conclusion:
(i) The appellant is liable to Service Tax.
(ii) Cum-tax benefit will be allowed for the calculation of Service Tax liability.
(iii) Penalties levied under Sections 76, 77, and 78 are set aside.

The appeals were partly allowed as indicated above.