2019 (10) TMI 412 - AT - Service Tax

Commercial Training or Coaching Service - Impart of training to the newly recruited drivers and conductors of State owned transport undertaking and collecting fees for such training - demand of service tax - Profit motive or not - scope of word 'commercial' - Benefit of N/N. 24/2004-S.T., dated 10-9-2004 - extended period of limitation - HELD THAT - It is not disputed that the appellant has collected fees from the newly recruited drivers and conductors for giving them training. The training imparted was not rendered free of charge. This being the case, as per the Board's Circular No. 59/8/2003-S.T., dated 20-6-2003, the activity of training imparted by the appellant would fail under the category of Commercial Training or Coaching Services . Profit motive or not - scope of word 'commercial' - second contention taken by the Learned Counsel is that the appellant being a Public Sector Undertaking their activity had no profit motive - HELD THAT - The amendment brought forth on 26-2-2010, has introduced an Explanation wherein, it is stated that commercial means any training or coaching that is provided for consideration irrespective of the presence or absence of any profit motive. The said Explanation is applicable retrospectively, which means, it is applicable from 1-7-2003 onwards. Thus, the second argument of the Learned Counsel also fails. Benefit of N/N. 24/2004-S.T., dated 10-9-2004 - third argument put forward by the Learned Counsel is that the training imparted by them is in the nature of vocational training - HELD THAT - Vocational training means the training that imparts skills to the candidates in order to enable the candidate to seek employment or undertake self- employment, directly after such training. In the present case, the training is imparted to employees, who have already been recruited by the appellant as drivers and conductors. Therefore, the definition of Vocational Training will not be applicable for the activity of training rendered by the appellant - Thus, there are no grounds to set aside the demand on merits of the case. Extended period of limitation - HELD THAT - There was some confusion as to the interpretation of the word commercial used in the definition of the said service - Again, the appellant is a State Government Undertaking and there cannot be any mala fide intention on the part of the appellant to evade payment of service tax - there are no ingredients for invoking the extended period. There is, ho positive act of suppression of facts with intention to evade payment of tax established by the department. The issue as to whether a Public Sector Undertaking can be considered to be a commercial concern is also an interpretational one - extended period cannot be invoked. The impugned order to the extent of the demand invoking extended period is set aside - Any demand and interest thereon which falls for the normal period is not interfered - However, the penalties for the normal period are set aside - appeal allowed in part.

Summary

Issues Involved:
1. Classification of Training Services
2. Applicability of Service Tax
3. Bona Fide Belief and Interpretation
4. Invocation of Extended Period and Penalties

Issue-wise Detailed Analysis:

1. Classification of Training Services:
The primary issue was whether the training provided by the appellant, a State Transport Corporation, to its newly recruited drivers and conductors falls under the category of "Commercial Training or Coaching Services." The appellant argued that they are not a Commercial Training or Coaching Centre as defined in Section 65(27) of the Finance Act, 1994, since the training was provided to their own employees and not to third parties. The adjudicating authority and the Commissioner (Appeals) upheld that the activity falls under "Commercial Training or Coaching Services" because fees were collected for the training.

2. Applicability of Service Tax:
The appellant contended that the training was merely a reimbursement of expenses and not a commercial activity. They cited Circular No. 59/8/2003, which clarifies that training provided to employees does not attract service tax unless a commercial coaching centre is engaged. The appellant also referenced case laws (e.g., M/s. IVL India Pvt. Ltd. and M/s. Punjab Communication) supporting their stance. However, the department maintained that since fees were collected, the activity falls under taxable services as per the definitions in Sections 65(26), 65(27), and 65(105)(zzc) of the Finance Act, 1994, and the retrospective amendment introduced in 2010 clarified that training provided for consideration is taxable, regardless of profit motive.

3. Bona Fide Belief and Interpretation:
The appellant argued that being a State Government undertaking, they believed in good faith that they were not liable for service tax as they were not a commercial concern. They cited decisions (e.g., PR. Commr. of Ser. Tax v. M/s. Shree Chanakya Education Society) to support their bona fide belief. The Tribunal acknowledged the confusion regarding the interpretation of "commercial" and the bona fide belief of the appellant, given the retrospective amendment and the nature of their operations.

4. Invocation of Extended Period and Penalties:
The appellant contended that there was no suppression of facts with intent to evade tax, and being a government undertaking, they had no mala fide intention. The Tribunal agreed, referencing cases (e.g., M/s. Tamilnadu Tourism Development Corporation Ltd. and M/s. Karnataka State Tourism Development Corporation Ltd.) which held that public sector undertakings cannot be accused of suppression with intent to evade tax. The Tribunal concluded that the extended period was not invocable, and penalties for the normal period were also set aside.

Conclusion:
The Tribunal set aside the demand for the extended period and penalties, acknowledging the appellant's bona fide belief and the interpretational issues surrounding the term "commercial." Any demand and interest for the normal period were upheld, but penalties for the normal period were removed. The appeal succeeded on the ground of limitation.