2019 (2) TMI 1568 - AT - Service Tax

Commercial training and coaching service - Vocational training institute - animation coaching - Exemption from payment of service tax - N/N. 24/2004-ST dated 10.9.2004 - whether the animation coaching provided by the appellant should be treated as computer training in terms of the aforesaid notification or otherwise? - time limitation - Held that - The appellant s coaching is not computer animation and not any computer software or hardware. When a student passes out the course he will not become either a computer hardware or a software professional but he becomes professional in using the computer software to produce animation and animation films. This is similar to CAD software or TALLY software used by professionals in their work. In our view, the test to decide whether or not the training in question is a training related to computer hardware or software is what the trainee does at the end of his training - In this case, the trainee will not become specialist in computer software or hardware and he will also not be equipped to develop new computer animation software. All he is trained is in using the software to develop animations. Therefore, the appellant is clearly not covered by the mischief of the proviso and the explanation to the notification 24/2004-ST. The appellant is not liable to pay service tax on the computer animation software training which they have provided as they are entitled to the benefit of exemption notification 24/2004 as amended vide notification 19/2005-ST dated 7.6.2005. Video tape production service - Held that - The appellant produced animation movie and sold it for a consideration. Video tape production services as per Sec. 65(119) of the Finance Act, 1994 is any professional videography or a commercial concern engaged in the business of rendering service related to video production. Video tape production means the process of recording any programme, event or function on a magnetic tape or on any other media or device and includes editing thereof in any manner. The animation film produced by the appellant clearly does not appear to be covered by this definition and therefore, we find appellant is not liable to pay service tax on this service as well. Since, we have decided in favour of the appellant on merits, we do not find it necessary to examine the question on limitation - appeal allowed - decided in favor of appellant.

Issues:
1. Exemption under notification 24/2004-ST for vocational training institute.
2. Taxability of animation training as computer training.
3. Treatment of animation movie production as export of service.
4. Applicability of extended period of limitation.
5. Calculation of service tax on amounts received.

Analysis:
1. The appellant claimed exemption under notification 24/2004-ST for vocational training institutes. The notification exempts taxable services provided by vocational training institutes from service tax. The appellant argued that their animation training courses aimed at making trainees employable, thus falling under the exemption. The Tribunal examined the notification and found that the appellant's coaching was not computer-related but focused on using software for animation. As the trainees did not become computer professionals but animation specialists, the Tribunal held the appellant eligible for exemption under the notification.

2. The issue of whether the animation training provided by the appellant should be considered as computer training under the notification was analyzed. The Tribunal determined that the training did not make trainees computer hardware or software professionals but equipped them to use software for animation production. Drawing a distinction between computer-related work and animation training, the Tribunal concluded that the appellant's services were not covered by the proviso and explanation to the notification. Consequently, the Tribunal ruled in favor of the appellant, stating they were not liable to pay service tax on the animation software training.

3. Regarding the production and sale of an animation movie to a buyer in New Zealand, the Tribunal considered it as a potential export of service. The appellant argued that since they received consideration in foreign exchange, the service should be treated as an export exempt from service tax. The Tribunal noted that the appellant had paid service tax on this service after availing the small-scale service provider exemption. Given the favorable decision on merits, the Tribunal did not delve into the issue of limitation, ultimately setting aside the demand for service tax, interest, and penalties related to the animation movie production.

4. The appellant contended that the extended period of limitation invoked for the demand of service tax was unjustified. They argued that as the issue involved an interpretation of law, specifically the notification, the extended period should not apply. The Tribunal, having decided in favor of the appellant on the merits of the case, did not find it necessary to address the limitation issue, thereby setting aside the demand and penalties.

5. Lastly, the appellant requested the treatment of amounts received as cum-tax values for calculating service tax. The Tribunal did not explicitly address this request in the judgment but ruled in favor of the appellant on the substantive issues, leading to the setting aside of the impugned order and allowing the appeal.

This detailed analysis of the judgment from the Appellate Tribunal CESTAT HYDERABAD highlights the key issues, legal arguments, and the Tribunal's findings, providing a comprehensive understanding of the case.

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