2019 (4) TMI 1962 - AT - Service Tax

Levy of service tax - Commercial Training and Coaching Service - appellant is an educational institution, engaged in imparting training/coaching to students for various competitive examinations, by charging fees thereon - appellant s institute is a public charitable trust, established with the objective of not earning any profits - exempt or not form payment of service tax - period October 2005 to March 2011 - HELD THAT - The phrase Commercial Training or Coaching has been defined in Section 65 (26) ibid, to mean any training or coaching provided by a commercial training or coaching centre. The taxable entry under such category of service has been defined in Section 65(105) (zzc) ibid to mean service provided or to be provided to any person, by a commercial training or coaching centre in relation to commercial training or coaching. Usage of the word commercial in the above definition clause created confusion on the issue, whether noncommercial institutions having no motive to earn profit should also fall under the taxable entry or not. To bring about clarity in the definition of commercial training or coaching centre, an explanation was inserted by Finance Act, 2010 (14 of 2010) dated 08.05.2010 in the definition of the taxable service. The period of dispute involved in this case is from 01.10.2005 to 31.03.2011. On perusal of the explanation clause appended to the definition of taxable service under the category of Commercial Training or Coaching in Section 65 (105)(zzc) ibid and the clarification furnished vide Circular dated 26.02.2010, it transpires that owing to the reason of use of the phrase commercial in the definition of taxable service, there were lot of confusions with regard to payment of service tax under such category of service and even the tax payers also resisted in paying service tax on such ground. Thus, the scope and ambit of the definition was clarified by the Central Government by way of insertion of the explanation clause in Section 65 (105)(zzc) ibid. For the period May 2010 to March 2011, the appellant had collected the service tax from the service recipients, but did not deposit such amount into the Central Government account. The assessee is not empowered under the service tax statute to retain the service tax amount collected from the service receivers. Hence, the service tax amount collected by the appellant during the said period is liable for recovery along with interest, which has been appropriately demanded in the impugned order. The impugned order sustains, insofar as it has confirmed the adjudged demands within the normal period provided under Section 73(1) ibid. The extended period of limitation as per the proviso appended thereto cannot be invoked and accordingly, the adjudged demands confirmed beyond the normal period is not sustainable and to such extent, the appeal is allowed in favour of the appellant. The penalty imposed under Section 78 ibid is also set aside - Appeal disposed off.

Summary

Issues:
1. Whether the educational institution providing training/coaching services is liable to pay service tax under the category of 'Commercial Training and Coaching Service'?
2. Whether the proceedings initiated against the appellant are barred by limitation of time?
3. Whether the penalty imposed on the appellant under Section 78 of the Finance Act, 1994 is justified?

Issue 1: Liability to Pay Service Tax
The case involved an educational institution providing training/coaching services to students for competitive exams. The service tax department conducted an inquiry and concluded that the services fell under the taxable category of 'Commercial Training and Coaching Service'. The appellant argued that as a public charitable trust, their activities were outside the taxable entry. However, the explanation clause inserted in the Finance Act, 2010 clarified that any institution providing training for consideration, regardless of profit motive, would be considered a commercial entity for service tax purposes. The Tribunal upheld the department's decision, stating that the appellant received consideration for training/coaching services, making them liable for service tax under the defined category.

Issue 2: Limitation of Time
The appellant contended that the proceedings initiated by the department were time-barred. The department had invoked the proviso to Section 73(1) of the Finance Act, 1994 for recovery beyond the normal period. The Tribunal held that since there was no fraud, collusion, or wilful misstatement by the appellant, the proceedings should have been initiated within the normal one-year period. Therefore, the show cause notice issued beyond the normal period was deemed barred by limitation of time.

Issue 3: Imposition of Penalty
Regarding the penalty imposed under Section 78 of the Finance Act, 1994, the Tribunal found that the department failed to provide tangible evidence of fraudulent activities by the appellant. The penalty provisions could not be invoked in the absence of wilful suppression of facts. Citing a judgment, the Tribunal set aside the penalty imposed under Section 78, emphasizing the necessity of proving fraudulent intent for penalty imposition. Consequently, the penalty was deemed unjustified and set aside.

In conclusion, the Tribunal upheld the service tax liability of the appellant under the 'Commercial Training and Coaching Service' category. The proceedings initiated beyond the normal limitation period were deemed time-barred, and the penalty imposed under Section 78 was set aside due to lack of evidence of fraudulent activities. The appeal was allowed in favor of the appellant to the extent that demands confirmed beyond the normal period were not sustainable.