2018 (8) TMI 693 - AT - Service Tax

Extended period of limitation - Commercial Training or Coaching Services - Held that - No case for suppression and/or malafide conduct is made out against the Appellants. Accordingly, the demand for the extended period is not sustainable and also that the Appellant is not liable to pay Service Tax for the period prior to 27.02.2010. Penalty u/s 78 set aside - As far as penalty imposed under Section 76 is concerned, the matter remanded to the adjudicating authority to recalculate the demand for the period after 27.02.2010 and also to recalculate the penalty under Section 76 - the penalty imposed under Section 77 is reduced to ₹ 5,000/-. Appeal allowed in part.

Summary

Issues:
- Classification of service under "Commercial Training or Coaching"
- Liability to pay Service Tax for the period prior to 27.02.2010
- Imposition of penalties under Section 76, 77, and 78 of the Finance Act, 1994

Classification of service under "Commercial Training or Coaching":
The Appellant appealed against the order of the Commissioner (Appeals) confirming duty and penalties for the period 31.08.2007 to 31.03.2011 by classifying their service under "Commercial Training or Coaching." The Revenue contended that the service provided fell under the taxable category of "Commercial Training & Coaching Services" under Section 65(105)(zzc) of the Finance Act, 1994. The Appellants argued that they mainly provided training in speaking English, which was exempt under Notification No. 09.2003-ST. They cited a Tribunal ruling stating that acquiring English language skills improves employment prospects, thus falling under the exemption. They also highlighted an amendment in the exemption scheme post-27.02.2010, indicating latitude to Service Tax. The Tribunal found no malafide conduct on the Appellants' part and held that they were not liable to pay Service Tax for the period pre-27.02.2010.

Liability to pay Service Tax for the period prior to 27.02.2010:
The Appellants contended that they were under a bona fide belief of being exempt from Service Tax for providing English language training, hence did not take steps for payment. The Tribunal, after considering both parties' arguments, concluded that no case for suppression or malafide conduct was established against the Appellants. Consequently, the demand for the extended period was deemed unsustainable, and the Appellants were found not liable to pay Service Tax for the period pre-27.02.2010. The penalty under Section 78 of the Act was set aside, and the penalty under Section 77 was reduced to ?5,000.

Imposition of penalties under Section 76, 77, and 78 of the Finance Act, 1994:
The Tribunal remanded the matter to the adjudicating authority to recalculate the demand and penalty under Section 76 for the period post-27.02.2010. The penalty under Section 77 was reduced to ?5,000. The Appellants' appeal was partly allowed, with the Tribunal finding no grounds for suppression or malafide conduct and ruling in favor of the Appellants regarding the liability to pay Service Tax for the period pre-27.02.2010.