2015 (9) TMI 476 - AT - Service Tax

Commercial training or coaching service - The appellant is a R&D organization under the Ministry of Commerce & Industry with a mandate to undertake and promote research and other scientific work connected with cement and building materials and also to impart training to skilled and unskilled labour in construction field - Held that - no doubt that with the retrospective amendment to the definition of the service tax category, the liability would arise against the assessees. However such liability would be in accordance with the provisions of limitation. Both the authorities below have held that there was no mala fide suppression on the part of the assessee, the invocation of longer period of limitation cannot be held justifiable inasmuch as the criteria for invocation of longer period is also mala fide misstatement or suppression of facts. As such, we find no justification for invocation of the longer period of limitation. - Decision in the case of Morarji Goculdas B&W Co. Ltd. 1995 (1) TMI 94 - SUPREME COURT OF INDIA followed - Decided in favor of assessee.

Issues:
1. Liability for service tax on educational and vocational training services provided by a non-profit organization.
2. Imposition of penalties under Sections 76, 77, and 78 of the Finance Act, 1994.
3. Application of the longer period of limitation for demand of service tax.

Analysis:

Issue 1: Liability for service tax on educational and vocational training services
The appellant, a non-profit R&D organization under the Ministry of Commerce & Industry, was initially not paying service tax as it believed it was not liable due to operating on a no-profit; no-loss basis. However, with a retrospective amendment in 2010, every institution providing educational or vocational training was obligated to pay service tax. The appellant registered under this category from 01/04/2010 after claiming exemptions. The original adjudicating authority demanded Rs. 21.03 lakhs for the period 2005-06 to 2009-10, but did not impose penalties citing the appellant's doubt and non-profit motive. The Commissioner(Appeals) confirmed the demand but did not impose penalties, considering the absence of malafide intent to evade tax and the appellant's regular tax payments post-amendment.

Issue 2: Imposition of penalties under Sections 76, 77, and 78
The original adjudicating authority refrained from imposing penalties, invoking Section 80 of the Finance Act, 1994, due to the retrospective nature of the amendment and the appellant's non-profit status. The Commissioner(Appeals) also withheld penalties, citing the absence of malafide intent and extending the benefit under Section 80. Both authorities relied on judicial pronouncements and the decision in M/s. Star India Pvt. Ltd. case to support their decisions.

Issue 3: Application of the longer period of limitation
The appellant challenged the demand on the basis of limitation, arguing that there was no suppression of facts as the Revenue was aware of the situation, and that retrospective amendments do not warrant an extended limitation period. The appellate tribunal agreed, citing the Morarji Goculdas case, which held that demands post-retrospective amendments must be made within 6 months of the amendment, rendering the extended 5-year limitation inapplicable. As there was no mala fide suppression by the appellant, the tribunal found no justification for invoking the longer period of limitation and remanded the matter to the original adjudicating authority for further examination.

In conclusion, the tribunal set aside the impugned order, emphasizing the importance of adherence to limitation provisions and the absence of malafide intent in the appellant's actions.

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