2014 (9) TMI 345 - AT - Service Tax

Commercial Training or Coaching - principle of judicial discipline - retrospective amendment was made Vide Section 76 of the Finance Act, 2010 - graduate or post graduate courses - assessee contended that education has never been intended to be taxed. Education is different from training or coaching and is not covered by the levy. - Held that - From the retrospective amendment cited above, it is clear that any centre or institute, by whatever name called, where training or coaching is imparted for a consideration is liable to service tax. There is no dispute in the present case that the appellant herein is charging for the so called under graduate or post graduate courses conducted by them and they are operating their business in a commercial manner. It is also an accepted fact that the courses conducted by the appellant are not recognized by law. In view of the decision of the Tribunal in ICFAI case 2013 (6) TMI 446 - CESTAT BANGALORE , we are bound to follow the same as a matter of judicial discipline. - the activities undertaken by the appellant would merit classification under commercial training or coaching as defined in the Finance Act, 1994. - Decided against the assessee. Extended period of limitation - Held that - Mere failure to register with the department and pay service tax, by itself can not amount to suppression unless the same was with an intent to evade payment of tax. There is no evidence led by the Revenue to that effect either in the show cause notice or in the Impugned order. Therefore, the demand is sustainable only for the normal period of limitation. - Decided in favor of assessee. Valuation - inclusion of mess charges, hostel charges and payment for the laptops supplied to the students - Held that - Mess charges and hostel fees are for providing boarding and lodging to the students and cannot be attributed to the training or coaching rendered. Similarly, the amount recovered for the supply of laptops also cannot be attributed to the services rendered (it relates to supply of goods) and therefore, these amounts collected towards mess charges, hostel charges and laptops are excludible from the taxable value of the service rendered - Decided in favor of assessee. Levy of penalty - Since we have held that there is no suppression on the part of the appellant, penalty under Section 78 of the Finance Act, 1994 also does not sustain - penalty dropped - Decided partly in favor of assessee.

Issues Involved:
1. Classification of the appellant's activities under "Commercial Training or Coaching."
2. Applicability of service tax on the appellant's activities.
3. Invocation of the extended period for demand.
4. Inclusion of mess charges, hostel fees, and laptop costs in the taxable value.
5. Penalty under Section 78 of the Finance Act, 1994.

Issue-wise Detailed Analysis:

1. Classification of the Appellant's Activities under "Commercial Training or Coaching":

The appellant, M/s. I2IT, a Private Limited Company engaged in education, was found to conduct courses not recognized by the University Grants Commission or any national professional councils. The courses offered included specialized programs in Information Technology, Automotive Engineering, and MBA programs. The department classified these activities under "Commercial Training or Coaching" as defined under Sections 65(26) and 65(27) of the Finance Act, 1994. The Tribunal upheld this classification by referencing the retrospective amendment in Section 65(105)(zzc) which clarified that any institute imparting training or coaching for consideration is liable to service tax, regardless of profit motive or registration status.

2. Applicability of Service Tax on the Appellant's Activities:

The Tribunal confirmed that the appellant's activities fall under "Commercial Training or Coaching" and are subject to service tax. The decision was based on the fact that the courses offered by the appellant were not recognized by law, and the institution charged fees for these courses. The Tribunal cited previous cases, such as ICFAI and ISB, where similar institutions were held liable for service tax. The Tribunal emphasized that education resulting in skill enhancement and training is taxable under the amended definitions.

3. Invocation of the Extended Period for Demand:

The show-cause notice was issued in March 2007 for the period May 2005 to December 2006, invoking the extended period under Section 73(1) of the Finance Act, 1994. The appellant argued that they had a bona fide belief that they were not liable to pay service tax. The Tribunal acknowledged that the general perception was that only institutions preparing students for competitive exams were taxable. Therefore, the Tribunal held that the extended period could not be invoked due to the lack of intent to evade tax. The demand was restricted to the normal period of limitation.

4. Inclusion of Mess Charges, Hostel Fees, and Laptop Costs in the Taxable Value:

The appellant contended that the costs of laptops, mess charges, and hostel fees should not be included in the taxable value. The Tribunal agreed, stating that these charges are not considerations for the service of commercial coaching or training. Mess charges and hostel fees relate to boarding and lodging, while the cost of laptops pertains to the supply of goods. Thus, these amounts were excluded from the taxable value.

5. Penalty under Section 78 of the Finance Act, 1994:

Given the Tribunal's finding that there was no suppression of information with intent to evade tax, the penalty under Section 78 was deemed unsustainable. The Tribunal set aside the penalty, reinforcing that mere failure to register and pay tax does not constitute suppression unless it is deliberate.

Conclusion:

The Tribunal concluded that the appellant's services fall under "commercial coaching or training" and are liable for service tax within the normal period of limitation. The value for tax calculation should exclude mess charges, hostel fees, and laptop costs, and the consideration received should be treated as cum-tax. The appellant is liable for interest on the re-determined service tax amount but not for the penalty under Section 78. The appeal was disposed of accordingly.

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