2009 (5) TMI 70 - AT - Service Tax

Abacus training - for recreational training institute and vocational training institute commercial training or coaching service exemption - appellants conduct mental arithmetic programme for children between 5 to 12 years. The programme used the ancient tool abacus so as to bring interest in children in solving addition, subtraction, multiplication and division problems in arithmetic. - benefit of Notification No. 9/2003-ST dated 20.6.2003 held that - abacus training programme imparted by the appellant is mainly to create interest in children for mathematics and also to enhance their thinking capacity - The entire thing is done by employing methods of play so as to make the whole thing interesting. By no means, this activity can be compared with the activities undertaken by commercial coaching or training centre - Abacus training as an activity of a recreational training institute exemption allowed.

Summary

Issues: Classification of services for Service Tax liability under "Commercial Training and Coaching" category, applicability of Notification No. 9/2003-ST, interpretation of activities as recreational training, justification of penalty and interest imposition.

Analysis:
1. Classification of Services: The appellant, a franchisee conducting a mental arithmetic program for children, was issued a show cause notice for Service Tax under "Commercial Training and Coaching." The appellant argued that their activities were related to education, not taxable under the said category. They contended that even if considered coaching/training, they were exempt under Notification No. 9/2003-ST. The appellant emphasized their program's focus on improving arithmetic capabilities and other skills. The Circular dated 20.6.2003 clarified that vocational coaching and training services by institutions like hobby classes are exempt from Service Tax. The Tribunal noted the appellant's belief that their activity was not taxable and set aside the lower authority's decision.

2. Applicability of Notification No. 9/2003-ST: The Tribunal examined whether the appellant's abacus training program qualified as recreational training under Notification No. 9/2003-ST. They found that the program aimed to create interest in mathematics and enhance thinking capacity through enjoyable methods. The Tribunal differentiated the program from commercial coaching/training centers, concluding that it aligned more with recreational training. They highlighted the broad definition of recreation, emphasizing that activities need not be limited to games or entertainment. By making arithmetic learning enjoyable, the appellant's program was deemed suitable for classification as recreational training, thus exempt under the Notification.

3. Interpretation of Activities as Recreational Training: The Tribunal's analysis focused on the nature of the appellant's activities, emphasizing the use of play and enjoyable methods to teach arithmetic skills. They highlighted the variety of recreational activities beyond traditional definitions, asserting that the program's approach aligned with recreational training principles. By considering the abacus training as recreational, the Tribunal concluded that it fell under the exemption provided for recreational training institutes. This interpretation led to setting aside the impugned order and granting relief to the appellant.

4. Justification of Penalty and Interest Imposition: The Tribunal addressed the imposition of penalty and interest, concluding that in the appellant's bona fide belief regarding the non-taxable nature of their activities, the invocation of a longer period and the quantification of amounts were unjustified. They noted errors in the quantification process and emphasized that even if taxable, the amount should be treated as cum tax. Ultimately, the Tribunal found no merit in imposing penalties and interest, leading to a favorable decision for the appellant.

In conclusion, the Appellate Tribunal CESTAT, Bangalore ruled in favor of the appellant, classifying their abacus training program as recreational training exempt from Service Tax under Notification No. 9/2003-ST. The Tribunal emphasized the program's focus on making arithmetic learning enjoyable and enhancing children's thinking capacity, leading to the decision to set aside the lower authority's order and provide consequential relief to the appellant.