2008 (10) TMI 148 - AT - Service Tax

Appellant is doing RESEARCH IN ADVANCED COMPUTING. They are also engaged in doing research on super computers and very advanced computation. Therefore, while this sort of institute which is mainly doing research activity in advance computing, incidentally can impart training in certain aspects of advanced computing for a consideration. That does not mean that it is a coaching or training institute - Moreover, the appellants are registered society and they are also a scientific society recognized by the GOI - Income Tax Department has also given registration as a charitable society - In view of all these, it is very clear that the appellant is not a commercial training or coaching institute established with an aim to derive profit

Issues Involved:
1. Classification of the appellant as a 'Commercial Training or Coaching Centre.'
2. Applicability of service tax on the appellant's activities.
3. Invocation of the extended period for demand.
4. Applicability of exemption notifications.
5. Consideration of profit motive in classification.

Issue-wise Detailed Analysis:

1. Classification of the appellant as a 'Commercial Training or Coaching Centre':
The appellant, Centre for Development of Advanced Computing (C-DAC), argued that it should not be classified as a 'Commercial Training or Coaching Centre' under Section 65(26) and (27) of the Finance Act. They emphasized that their primary objective is research and development in advanced computing, not commercial training. The Tribunal agreed, noting that the appellant's activities, including imparting high-level training and education, are incidental to their main research objectives. The Tribunal also highlighted that the appellant is recognized as a scientific society and a charitable trust, reinforcing the non-commercial nature of their activities.

2. Applicability of service tax on the appellant's activities:
The Revenue issued a show cause notice alleging that the appellant provided services of commercial training or coaching, which are liable to service tax. The appellant contended that their services do not fall under this category, as they are not primarily engaged in commercial activities. The Tribunal supported this view, stating that the appellant's training activities are part of their broader research and development goals and do not constitute commercial training or coaching.

3. Invocation of the extended period for demand:
The Revenue invoked the extended period for demand, alleging that the appellant had not paid service tax for the period from 1-7-2004 to 31-3-2005. The appellant argued that the extended period should not apply, as they had a bona fide belief that their services were not taxable. The Tribunal agreed, noting that the appellant's activities were primarily research-oriented and under the administrative control of the Ministry of Science and Technology. Thus, the extended period could not be invoked.

4. Applicability of exemption notifications:
The appellant claimed that their services were exempt under Notification No. 24/2004-S.T., dated 10-9-2004, which exempts vocational training institutes. They argued that their training activities qualify as vocational training, helping trainees seek employment or start self-employment. The Tribunal found it unnecessary to examine the applicability of the exemption notification, as they had already concluded that the appellant's activities do not fall under 'commercial training or coaching.'

5. Consideration of profit motive in classification:
The appellant emphasized that they are a non-profit organization, registered under the Societies of Registration Act and exempt from income tax. They argued that the profit motive is a crucial factor in classifying an institution as a 'commercial training or coaching centre.' The Tribunal concurred, stating that the profit motive is significant in such classifications. They noted that the appellant's activities, including charging fees for certain advanced courses, do not indicate a profit motive but are part of their broader educational and research objectives.

Conclusion:
The Tribunal concluded that the appellant, C-DAC, cannot be classified as a 'Commercial Training or Coaching Centre' and is not liable to pay service tax on their training activities. The impugned order of the Commissioner (Appeals) was set aside, and the appeal was allowed with consequential relief. The Tribunal emphasized that the appellant's activities are of a high intellectual order, focusing on advanced research and development, which distinguishes them from commercial coaching or training centers.

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