2017 (3) TMI 1027 - AT - Service Tax

Liability of tax - consideration received from participants for imparting training classified under commercial training or coaching services - exemption under N/N. 24/2004-ST - Held that - the ability to seek employment after the completion of a training course in terms of the explanation provided in the said Notification itself is sufficient for claiming the exemption - In the present case, we find that the courses offered by the appellant - assessee are covered by the scope of N/N. 24/04-ST and the exemption provided therein cannot be denied. Franchisee service - payment made to Edexcel, U.K., on whose name a certificate of Diploma is issued - Held that - Basically, Edexcel provides for an international recognition of the courses offered by the appellant-assessee, for which certain standards are to be met. On completion of the training course, the Diploma Certificate is issued to the participant by Edexcel. The appellant assessee is paying certain consideration for the recognition of their institute and for award of Diploma Certificate by Edexcel. There is no representational right in the scheme of things, as laid down in the agreement - demand set aside. Valuation - inclusion of various reimbursable expenses in the tax value under the category of franchisee services - Held that - the agreement entered into by the appellant-assessee with various franchisees clearly provides for re-imbursement of various expenses, on actual basis, by the franchisee to the appellant assessee. A perusal of the contract reveals such arrangement - demand set aside. Appeal allowed - decided in favor of appellsnt-assessee.

Summary

Issues Involved:
1. Liability to pay service tax under "commercial training or coaching services."
2. Liability to pay service tax on payments made to Edexcel, U.K., under "franchisee service."
3. Inclusion of reimbursable expenses in the tax value under franchisee services.

Detailed Analysis:

1. Liability to Pay Service Tax under "Commercial Training or Coaching Services":

The appellant-assessee is engaged in providing specialized training courses in aviation, hospitality, and travel management. The original authority held that the courses did not impart skills for self-employment, thus denying the exemption under Notification No. 24/2004-ST. However, the Tribunal found this reasoning legally baseless and fallacious. The Notification provides exemption to vocational training institutes that impart skills enabling trainees to seek employment or self-employment. The Tribunal concluded that the ability to seek employment alone suffices for claiming the exemption. The courses offered by the appellant-assessee were deemed to provide such skills, making them eligible for the exemption.

2. Liability to Pay Service Tax on Payments Made to Edexcel, U.K., under "Franchisee Service":

The original authority categorized the payments to Edexcel, U.K., as "franchisee service," asserting that the appellant-assessee had been granted representational rights. However, upon reviewing the agreement, the Tribunal noted that Edexcel is an accrediting body providing international recognition for courses and does not grant representational rights. The agreement's clauses were focused on maintaining training standards and issuing diplomas, not on conferring any representational rights. Therefore, the Tribunal concluded that the payments to Edexcel do not fall under "franchisee service."

3. Inclusion of Reimbursable Expenses in the Tax Value under Franchisee Services:

The original authority included various reimbursable expenses in the taxable value under franchisee services, relying on Rule 5 (1) of the Service Tax Valuation Rules, 2006. However, the Tribunal noted that this rule had been declared ultra vires by the Delhi High Court in the case of Intercontinental Consultants and Technocrats Pvt. Ltd. The agreement between the appellant-assessee and its franchisees clearly provided for the reimbursement of expenses on an actual basis. Therefore, the Tribunal held that such reimbursable expenses should not be included in the taxable value.

Conclusion:

The Tribunal found that the appellant-assessee was eligible for exemption under Notification No. 24/2004-ST for commercial coaching and training services. The payments made to Edexcel, U.K., were not liable to be taxed under "franchisee service," and reimbursable expenses should not be included in the taxable value. Thus, the appeals filed by the assessee-appellant were allowed, and the appeals filed by the Revenue were rejected. The liability under management and business consultant service, as confirmed by the original authority, was affirmed.