2019 (5) TMI 267 - AT - Service Tax

Taxability - providing flying training to candidate for obtaining commercial pilot license - taxable under the head Commercial Training And Coaching Services or otherwise? - HELD THAT - Such training provided by the appellant has been held non-taxable in the various judgments by Courts/Tribunal. Reliance placed in the case of M/S INDIAN INSTITUTE OF AIRCRAFT ENGINEERING VERSUS UNION OF INDIA ORS 2013 (5) TMI 592 - DELHI HIGH COURT , where it was held that Section 65(27) excluded from the domain of commercial training or coaching centers, training centers or establishments issuing any certificate or diploma or degree or any educational qualification recognized by law. Holding the petitioner to be assessable to Service tax is contrary to section 65(27) and the notification dated 25/04/2011. Service not leviable to Service Tax under the category of Commercial training or coaching services - appeal allowed - decided in favor of appellant.

Summary

Issues Involved:
1. Taxability of flying training services under 'Commercial Training and Coaching Services.'
2. Applicability of exemptions under notification 09/2003-ST.
3. Bona fide belief and time-barred demand.
4. Penalty imposition under section 80 of the Finance Act, 1994.

Detailed Analysis:

1. Taxability of Flying Training Services:
The appellant is engaged in providing flying training for obtaining a commercial pilot license. The department classified this service under 'Commercial Training and Coaching Services' as per sections 65(27), 65(26), and 65(105)(zzc) of the Finance Act, 1994. The appellant argued that their activities are approved by the DGCA and thus should not fall under the taxable category. They cited multiple judgments where similar training services were held non-taxable, including cases like Indian Institute of Aircraft Engineering, Garg Aviation Ltd., and Ahmedabad Aviation & Aeronautics Ltd. The Tribunal agreed, referencing the Delhi High Court's decision that training recognized by law and regulated by the DGCA is exempt from service tax.

2. Applicability of Exemptions Under Notification 09/2003-ST:
The appellant claimed that their training activities qualify as vocational training and are exempt under notification 09/2003-ST. They cited an RTI response from Service Tax authorities in Hyderabad supporting this view. Additionally, they referenced the Income Tax Act, where flying training is categorized as sports for tax exemption purposes. The Tribunal acknowledged these points and noted that similar exemptions were upheld in previous judgments.

3. Bona Fide Belief and Time-Barred Demand:
The appellant contended that they operated under a bona fide belief that their services were exempt from service tax due to their non-commercial nature and specific exemptions. They argued that this belief, coupled with complex legal interpretations, made the demand time-barred. The Tribunal considered this argument valid, indicating that the complexity of the issue and prior legal precedents supported the appellant's stance.

4. Penalty Imposition Under Section 80 of the Finance Act, 1994:
The appellant argued that due to the bona fide belief and the complex nature of the legal issue, penalties should not be imposed. They cited section 80 of the Finance Act, 1994, which provides relief from penalties in cases of reasonable cause. The Tribunal agreed, referencing past judgments where penalties were waived under similar circumstances.

Conclusion:
The Tribunal set aside the impugned order, ruling in favor of the appellant. The appeal was allowed, and the demand for service tax under 'Commercial Training and Coaching Services' was quashed. The Tribunal relied heavily on past judgments and legal interpretations that recognized the appellant's training services as non-taxable due to their regulation by the DGCA and their classification as vocational training. The decision was pronounced in the open court on 02/05/2019.