2018 (5) TMI 606 - AT - Service Tax

Commercial Training or Coaching Services - amount received from grants-in-aid - liability of service tax - Held that - It has been consistently held by higher appellate forums that there can be no liability to service tax in respect of training programmes conducted on the basis of grants-in-aid received by the institutions set up by the Government for specific objectives - The Tribunal in the case of Apitco Ltd. Vs CST Hyderabad 2010 (7) TMI 176 - CESTAT, BANGALORE has set aside the demand of service tax holding that service tax is not leviable on the grants-in-aid received by the assessee from the Central and State Governments given as project implementing agency of the Government - Appellants should be given suitable opportunities to present their case in a personal hearing and should also be permitted to submit additional submissions or evidence, if any, in support of their case. Penalties - Held that - there is no gainsaying that the entire issue has arisen due to bonafide belief of the appellants that being a national institute set up by the Government their activities would not be exigible to service tax - no malafide or devious intent can be ascribed to the appellant for failure to discharge tax liability in respect of the above services to the extent applicable - penalties set aside. Appeal disposed off.

Issues Involved:
1. Taxability of services provided by NIMSME under "Commercial Training or Coaching Services."
2. Taxability of services under "Management Consultancy Services."
3. Taxability of services under "Mandap Keeper Services."
4. Taxability of services under "Renting of Immovable Property Services."
5. Applicability of penalties under the Finance Act, 1994.

Detailed Analysis:

1. Taxability under "Commercial Training or Coaching Services":
The Department contended that NIMSME's training and coaching programs, which charged fees and issued certificates for Post Graduate Diplomas, fell under "Commercial Training or Coaching Services," making them liable for service tax. NIMSME argued that grants-in-aid received from the government for these programs were not taxable. The Tribunal found merit in NIMSME's argument, referencing the Apitco Ltd. case, which established that grants-in-aid for government-implemented welfare schemes are not taxable. Consequently, the Tribunal remanded the matter for re-determination, emphasizing that only fees collected from participants (excluding grants) should be considered for tax liability.

2. Taxability under "Management Consultancy Services":
NIMSME undertook consultancy and research projects during 2006-07, which the Department categorized under "Management Consultancy Services." NIMSME conceded their tax liability for these services, agreeing to pay the demanded tax and interest. The Tribunal upheld the tax liability and dismissed the appeal concerning this issue as not pressed.

3. Taxability under "Mandap Keeper Services":
NIMSME operated various venues for social meetings and gatherings, which the Department classified under "Mandap Keeper Services." NIMSME acknowledged their tax liability for these services and agreed to pay the required tax. The Tribunal sustained the tax liability and dismissed the appeal on this issue as not pressed.

4. Taxability under "Renting of Immovable Property Services":
The Department argued that NIMSME's rental of outdoor locations and an amphitheater fell under "Renting of Immovable Property Services." NIMSME conceded their tax liability for these services, agreeing to pay the demanded tax and interest. The Tribunal upheld the tax liability and dismissed the appeal concerning this issue as not pressed.

5. Applicability of Penalties:
NIMSME contended that no penalties should be imposed as their non-payment of service tax was based on a bona fide belief that their activities, being part of a national institute set up by the government, were not taxable. The Tribunal agreed, finding no malafide intent on NIMSME's part. It held that the imposition of penalties would be harsh and unjustified, thus setting aside all penalties under the Finance Act, 1994.

Conclusion:
The Tribunal remanded the matter for re-determination of tax liability under "Commercial Training or Coaching Services," excluding grants-in-aid. It upheld the tax liabilities under "Management Consultancy Services," "Mandap Keeper Services," and "Renting of Immovable Property Services," dismissing the appeals on these issues. The Tribunal set aside all penalties, recognizing the bona fide belief of NIMSME regarding their tax obligations. The appeals were disposed of accordingly.

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