2009 (1) TMI 65 - AT - Service Tax

Appellants are coaching centres (centres) and conduct distance education programmes under an agreement with the University since assessee had charged for services and collected fees directly from students, such Commercial training or Coaching centers were not eligible for exemption under Notification No. 10/03 ST assessee plea that use of logo of University by Centers did not disentitle them to benefit of Notification No. 6/2005-ST, was not dealt by Comm.(A) matter remanded on this aspect

Issues Involved:
1. Classification of services rendered by the appellants.
2. Eligibility for exemption under Notification No. 10/03-ST.
3. Eligibility for exemption under Notification No. 6/05-ST.
4. Discrimination and violation of Article 14 of the Constitution.
5. Imposition of penalties.

Detailed Analysis:

1. Classification of Services Rendered by the Appellants:
The appellants, coaching centres, conducted distance education programs under an agreement with Alagappa University. Service tax was demanded for services classified under "Commercial Training or Coaching" for the period 2002-03. The centres provided coaching to students for university examinations, and students paid fees directly to the centres.

2. Eligibility for Exemption under Notification No. 10/03-ST:
The impugned orders demanded service tax on the fees collected by the centres, classifying their services under "Commercial Training or Coaching." Notification No. 10/03-ST exempted such services if the service charges were not received directly from the students. Since the appellants collected fees directly, the exemption was denied. The lower appellate authority affirmed the denial of this exemption, noting that the centres did not meet the conditions of the notification.

3. Eligibility for Exemption under Notification No. 6/05-ST:
The appellants were also denied exemption under Notification No. 6/05-ST, which exempted service providers from service tax up to an aggregate value of Rs. four lakhs, provided the services were not under a brand name or trade name of another person. The appellants used the name and logo of the University, thus the exemption was denied. The lower appellate authority did not address this issue comprehensively, leading to the remand of the case for reassessment of the centres' entitlement to this exemption.

4. Discrimination and Violation of Article 14 of the Constitution:
The appellants cited the case of regular colleges that similarly collected fees but were not subjected to service tax. They relied on the judgment of the Kerala High Court in Malappuram District Parallel College Association v. Union of India, which found taxing parallel colleges while exempting regular colleges discriminatory and violative of Article 14. The Tribunal acknowledged the similarity between the services rendered by the appellants and regular colleges, noting that taxing the centres was discriminatory if regular colleges were exempted. However, the Tribunal clarified that the Kerala High Court's judgment was specific to the facts of that case and was not a precedent for other cases.

5. Imposition of Penalties:
The appellants claimed a bona fide belief for not discharging the tax due. The authorities noted that the centres did not pay tax even after registering as service providers. The Tribunal found that the Kerala High Court's view against the liability of parallel colleges supported the appellants' claim of bona fide belief. The Commissioner (Appeals) was instructed to consider this aspect during the remand proceedings and to provide the centres with an adequate opportunity to present their case.

Conclusion:
The appeals were allowed by way of remand, with instructions to reassess the centres' entitlement to exemptions under Notification No. 6/05-ST and to reconsider the imposition of penalties, taking into account the bona fide belief held by the centres. The Tribunal emphasized the need for a fair reassessment, considering the specific circumstances and legal precedents.

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