2008 (4) TMI 88 - AT - Service Tax

Coaching services became taxable w.e.f. 1.7.2003 collection of fees from students in advance prior to 1.7.03 for the services to be rendered subsequently assessee can t be expected to anticipate imposition of tax & collect the service tax in anticipation; thus when they collected their service charges in advance i.e. even before introduction of ST they were not to think of a cum-tax amount or ex-tax amount - treat the amount collected prior to 1.7.2003 will be treated as cum tax amount

Summary

Issues:
- Liability to service tax for amounts collected in advance before the imposition of service tax
- Benefit of cum-tax in relation to amounts collected prior to the introduction of service tax
- Reduction in interest and penalty amounts by the Commissioner (Appeals)

Analysis:
1. Liability to service tax for amounts collected in advance before the imposition of service tax:
The case involved the enrollment of students for coaching services from April 2003 to February 2004, with service tax being imposed from 1.7.2003. The issue arose when it was discovered that certain amounts were collected in advance before the imposition of service tax for services to be provided later. The original authority confirmed the demand for service tax, interest, and penalty. However, the Commissioner (Appeals) reduced the interest and penalty amounts after considering the circumstances.

2. Benefit of cum-tax in relation to amounts collected prior to the introduction of service tax:
The Commissioner (Appeals) granted the benefit of cum-tax to the assessee for amounts realized before 1.7.2003, resulting in a reduction of interest liability. The Tribunal upheld this decision, stating that the assessee could not have anticipated the imposition of tax when collecting service charges in advance. The Tribunal found the Commissioner's decision to treat the amount collected before 1.7.2003 as cum tax amount reasonable, as there was no evidence that the assessee collected additional amounts from students post-service tax payment.

3. Reduction in interest and penalty amounts by the Commissioner (Appeals):
The Tribunal examined the reduction in interest and penalty amounts by the Commissioner (Appeals) and found it justified. The reduction in interest was a consequence of the reduced duty amount confirmed by the Commissioner. Regarding the penalty reduction from Rs. 31,156 to Rs. 27,300, the Tribunal deemed it unnecessary to delve into further details. Ultimately, the Tribunal rejected the Department's appeal based on the considerations discussed above.

In conclusion, the Tribunal upheld the Commissioner's decision to grant the benefit of cum-tax for amounts collected before the introduction of service tax, resulting in reductions in interest and penalty amounts. The Tribunal found the Commissioner's reasoning sound and rejected the Department's appeal accordingly.