2017 (10) TMI 710 - AT - Service Tax

Classification of services - Commercial Coaching or Training services - scope of term commercial - whether Educational Institution other than colleges/institutes not recognised under the law would otherwise be within the ambit of the taxable service of Commercial Training or Coaching Service? - Section 65 (27) of the Finance Act, 1994. Held that - the commercial training or coaching for imparting skill or knowledge or lessons on any subject or field are covered under commercial training or coaching centre. The exclusion is provided from the ambit of this service with regard to sports activity and preschool coaching and training centre or any institute or establishment which issued any certificate, diploma, degree of any educational qualification recognized by law for the time being in force. As per the facts of the present cases, the service of both the appellants are squarely covered in the first limb of definition. Since imparting of skill knowledge or lessons is not on the sports and the education is not related to preschool coaching and training also the establishment does not issue certificate, diploma, degree or any educational qualification which was recognized by law, the training or coaching provided by the appellants do not fall under the exclusion category of the definition therefore squarely covered under the definition of commercial training or coaching centre. Identical issue decided in the case of M/s GREAT LAKES INSTITUTE OF MANAGEMENT LTD & OTHS Versus CST, CHENNAI & OTHS 2013 (10) TMI 433 - CESTAT NEW DELHI - LB , where it was held that except training or coaching falling in the exclusion category of all training or coaching falls under the definition of commercial training or coaching service, hence the same is taxable - the demand confirmed by the lower authority on merit is sustained. Extended period of limitation - Held that - the appellants have suppressed the fact as well as contravened the provisions of this Chapter of the Act or of the Rules made under with intent to evade payment of service tax therefore the extended period was rightly invoked. Quantification of demand - various deductions such as certain amount was not received during the impugned period, certain fees, such as postal s, mess/sale of goods etc. - includibility - Held that - once the appellant made a claim in their defence for deduction of taxable value. It is incumbent on the Commissioner to consider it, non-consideration of the same is violation of the principles of natural justice - the submission of the appellant challenging the quantification should have been properly dealt with by the adjudicating authority. CENVAT credit - input service - Held that - matter remanded as regard quantification of demand in the case of MIT Institute of Design to the adjudicating authority for re-quantification on verification of all the documents/information/to be produced by the appellant - matter on remand. Penalty u/s 76,77 & 78 - Held that - the appellants have neither taken the registration nor filed the ST-3 return. It is also observed from the finding in Para 23 of the order-in-original as reproduced above, the appellants have contravened the provisions of Chapter of Finance Act, 1994 and Rules made there under with intent to evade payment of service tax. They could not make out a case of reasonable cause was not discharging the service tax - penalty rightly imposed. Part matter on remand and partly decided against appellant.

Issues Involved:

1. Classification of services provided by the appellants as "Commercial Training or Coaching Services."
2. Eligibility for exemption under Notification No. 9/2003-S.T. and Notification No. 24/2004-ST.
3. Invocation of the extended period of limitation.
4. Correctness of the quantification of demand.
5. Applicability of penalties under Sections 76, 77, and 78 of the Finance Act, 1994.

Detailed Analysis:

1. Classification of Services:

The primary issue was whether the services provided by the appellants, NICMAR and MIT Institute of Design, fall under the category of "Commercial Training or Coaching Services" as defined under Section 65(27) of the Finance Act, 1994. The Tribunal noted that both appellants were engaged in imparting various educational programs and were charging fees for these services. The definition of "Commercial Training or Coaching Centre" includes any institute providing training or coaching for imparting skill or knowledge, excluding sports and preschool coaching, and those issuing certificates, diplomas, degrees, or educational qualifications recognized by law. The Tribunal referred to the Larger Bench decision in Great Lakes Institute of Management Ltd. Vs. CST, which clarified that all training or coaching services, except those falling under specific exclusions, are taxable. Therefore, the services provided by the appellants were classified as "Commercial Training or Coaching Services."

2. Eligibility for Exemption:

NICMAR claimed exemption under Notification No. 9/2003-S.T., arguing that they were a vocational training institute. However, the Tribunal found that NICMAR did not fall under the definition of a vocational training institute as per the CBEC circulars and relevant notifications. Similarly, MIT Institute of Design claimed exemption under Notification No. 24/2004-ST, stating that they provided vocational training. The Tribunal rejected this claim, citing CBEC circulars and previous Tribunal decisions, and held that the services provided by MIT did not qualify for exemption.

3. Invocation of Extended Period of Limitation:

Both appellants argued against the invocation of the extended period of limitation, claiming no suppression of facts. The Tribunal, however, found that both appellants had not declared their income from commercial training or coaching services in their ST-3 returns and had not sought any clarification from the department. This constituted suppression of facts with intent to evade payment of service tax. The Tribunal upheld the invocation of the extended period, referencing detailed findings in the adjudication orders which established suppression of facts and intent to evade duty.

4. Correctness of Quantification of Demand:

MIT Institute of Design challenged the quantification of demand, arguing for deductions on various grounds such as non-receipt of certain amounts during the impugned period and exclusion of certain fees from the taxable value. The Tribunal noted that the adjudicating authority had rejected these claims due to lack of supporting documents. The Tribunal remanded the matter for re-quantification, instructing the adjudicating authority to verify the documents and information provided by the appellant.

5. Applicability of Penalties:

The Tribunal upheld the penalties imposed under Sections 76, 77, and 78 of the Finance Act, 1994, noting that the appellants had neither taken registration nor filed ST-3 returns and had contravened the provisions of the Finance Act with intent to evade payment of service tax. The Tribunal found no reasonable cause for non-discharge of service tax and maintained the penalties.

Conclusion:

(i) The appeal of NICMAR was dismissed, confirming the service tax demand and penalties.
(ii) The appeal of MIT Institute of Design was remanded for re-quantification of demand and corresponding penalties, with instructions to the adjudicating authority to verify the documents and information provided by the appellant.

(Pronounced in court on 12/10/2017)

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