2018 (2) TMI 841 - AT - Service Tax

Commercial Training or Coaching Service - Franchise Services - appellants are not paying service tax on the consideration received for sale of books and materials to the franchise - exemption under N/N. 12/2003 ST dated 20.06.2003 - whether or not the appellants are right in their claim for exemption under Notification No.12/2003? - Held that - The said Notification provides for exemption of Service Tax for so much of the value of all taxable services, as it is equal to the value of goods and materials sold by the service provider to the recipient of service from the Service Tax leviable therein under Section 66 of the Act, subject to the condition that there is documentary proof specifically indicating the value of said goods and materials. In the present case, one of the grounds for denial of exemption is lack of documentary evidence as required for the Notification - the claim of the appellant that they have sold the books and study materials as per the commercial invoices stands established. However, the total quantum of such sale can be verified with all the supporting evidence to determine the correct quantum of exemption available to the appellant. This can be done by the jurisdictional assessing authority. Similar dispute with reference to applicability of N/N. 12/2003 ST came-up before the Tribunal in the case of M/s Cerebral Learning Solutions Pvt Ltd 2013 (4) TMI 527 - CESTAT NEW DELHI , where it was held that the exemption Notification is clear and it admits no restrictive clauses - In the present case, on perusal of the contractual arrangement as well as sale invoices, it can be held that the claim of the appellant for exemption under N/N. 12/2003 cannot be denied. Appeal allowed - decided in favor of appellant.

Summary

Issues:
Claim for exemption under Notification No.12/2003 - Documentary evidence requirement.

Analysis:

The case involved an appeal against the order of the Commissioner of Service Tax regarding the appellant, a Public Limited Company engaged in Information Technology Training. The dispute revolved around the appellant's claim for exemption under Notification No.12/2003 ST for the sale of books and materials to their franchisees. The Revenue contended that the exemption was not applicable due to lack of documentary evidence supporting the sale of goods. They imposed a substantial Service Tax liability on the appellant, along with penalties.

The appellant argued that the sale of study material to franchisees was a commercial transaction of goods, not a service, making them eligible for the exemption. They relied on previous Tribunal decisions to support their claim. On the other hand, the Revenue emphasized the importance of documentary evidence and cited a previous case to assert that a mere claim without supporting proof was insufficient for the exemption.

After hearing both sides, the Tribunal focused on the requirement of documentary proof under Notification No.12/2003 for claiming the exemption. They examined sample invoices provided by the appellant, which clearly indicated the sale of books and materials. The Tribunal acknowledged that the appellant had indeed sold the study materials as per the commercial invoices. However, they suggested that the correct quantum of exemption needed to be verified by the assessing authority based on all supporting evidence.

The Tribunal also noted the agreement clause specifying that certain materials were to be provided by the franchiser at the franchisee's cost. They referred to a previous Tribunal case to emphasize that the exemption notification did not contain any restrictive clauses. Ultimately, the Tribunal concluded that the appellant's claim for exemption under Notification 12/2003 could not be denied based on the contractual arrangement and sale invoices provided. They set aside the impugned order and allowed the appeal, directing the jurisdictional authorities to verify the exemption quantification with proper documentary evidence.

In summary, the judgment delved into the intricacies of claiming exemption under Notification No.12/2003, highlighting the significance of documentary evidence and contractual agreements in determining the applicability of such exemptions in service tax matters.