2018 (6) TMI 666 - AT - Service Tax

Valuation - Commercial Coaching or Training Service - Students make 100% payment to M/s Aptech Ltd. - Assessee gets only 80% of such fees and discharge service tax on 80% - Whether appellant is required to discharge service tax liability on an amount which represents 20% as retained by M/s. Aptech Ltd - Rule 9 (1) of the CCR. Held that - In respect of the controversy on the 20% - 80% formula between M/s. Aptech and the appellant, we find that identical issue has been addressed by the Tribunal in Kunal IT Services Pvt. Ltd. 2015 (4) TMI 1005 - CESTAT MUMBAI , where it was held that the amount received by the appellant for the provision of services under the category of Commercial Coaching or Training Services is the 80% of the amount paid by the students, as students make 100% of the payment directly in the name of M/s. Aptech Ltd. If that be so, appellant has correctly discharged the service tax liability on an amount received by him for the services rendered under the category of Commercial Coaching or Training Services . Appeal allowed - decided in favor of appellant.

Summary

Issues:
Service tax liability on education franchise fees.

Analysis:
The case involved M/s. Saravana Enterprises, providing education franchisees for M/s. Aptech Technologies, facing a service tax demand of ?11,31,413. The Commissioner (Appeals) remanded the matter for fresh adjudication, which resulted in upholding the original authority's decision. The appellants challenged this in the second round of litigation.

During the hearing, the appellant's advocate argued that they collected fees via cheques for M/s. Aptech, transferring 20% to M/s. Aptech along with service tax, and paid service tax on the remaining 80% based on the gross income. They provided accounts and a declaration from M/s. Aptech to support their stance. The Revenue contended that the appellants failed to prove compliance with Rule 9(1) of the CCR.

The Tribunal referred to a similar case, Kunal IT Services Pvt. Ltd., where it was held that service tax liability should be based on the amount received for services rendered. Following this precedent, the Tribunal found in favor of the appellant. Another case, Y.K. Information Systems Pvt. Ltd. Vs. CCE, New Delhi, supported this decision, emphasizing the contractual arrangements and the proportion of fees received by the appellant.

The Tribunal concluded that the issue had been consistently decided in favor of the appellant in previous cases. As there were no new reasons to deviate from the established precedent, the impugned order was set aside, and the appeal was allowed with any consequential benefits as per law.