2019 (11) TMI 436 - AT - Service Tax

Classification of services - commercial training and coaching services or business auxiliary service? - franchise fees - revenue sharing model - case of appellant is that the agreement between the Appellant and Career Launcher is on a principal to principal basis with no element of agency and the Appellant functions in the capacity of an independent contractor where the Appellant is responsible for providing the cost of the equipments, premises, furniture and allied articles for the recruitment and selection of staff and the faculty - double taxation - Revenue sharing. Whether the taxable service was provided in relation to education? HELD THAT - The word education has a wide meaning and includes the practice of teaching or training in a particular subject. The adjudicating authority, even after noticing that education apart from the process of teaching and learning includes training in a particular subject, erred in observing that education is different from training . In this connection what is important to notice is that the exemption is in relation to education . It cannot be doubted that the activity conducted by the Appellant is in relation to education and, therefore, the Appellant would clearly be entitled to the benefit of the exemption Notification dated 10 September 2004. It would be appropriate to refer to the decision of the Tribunal in SUNBEAM INFOCOMM PVT LTD VERSUS COMMISSIONER OF CENTRAL EXCISE 2014 (8) TMI 783 - CESTAT MUMBAI wherein even though education in Information Technology was conducted through authorized training centers throughout the State of Maharashtra, but the Appellant therein was only an authorized agency for supplying books of various courses, creation of authorized training centers, supervision of authorized training centers, collection of fees for various courses conducted and remitting the same to the authorized training centre. The Tribunal held that the activities were incidental or ancillary to the promotion of Information Technology Education of Maharashtra and, therefore, would be exempted under the Notification - In the present case, apart from imparting some of the aforesaid activities, the Appellant is in fact also providing education to the students and, therefore, the principles enumerated in the aforesaid decision of the Tribunal will apply with greater force in the present case. We express our inability to accept view taken by the adjudicating authority. Career Launcher has paid Service Tax on the entire amount of fees collected from the students. It is on a revenue sharing basis, that part of this fee is remitted to the Appellant by Career Launcher. The Appellant, therefore, cannot be required to again pay Service Tax on this fee. In fact no service is provided by the Appellant to Career Launcher because in terms of the agreement, the revenue is shared between Career Launcher and the Appellant. Reliance can be placed on the decision of the Tribunal in M/S. SAMADHAN SYSTEMS (P) LTD. VERSUS C.C.E., JAIPUR-I 2018 (2) TMI 1049 - CESTAT NEW DELHI where it was held that no Service Tax liability will arise on the business partner of MAAC under commercial coaching and training service. The last alternative contention of the learned counsel for the Appellant, is that the Department cannot be permitted to discriminate between various assesses inasmuch as in the case of certain assesses, relating to same issues, a view was taken that training centres like the Appellant will not be required to pay Service Tax under the category of business auxiliary service , if Service Tax has been paid on the entire amount by the agencies with whom the agreement has been entered into - There is considerable force in the submission advanced by the learned Counsel for the Appellant. Appeal allowed - decided in favor of appellant.

Issues Involved:
1. Whether the appellant provided "business auxiliary service" to Career Launcher.
2. Entitlement to exemption under Notification No. 14/2004 dated 10 September 2004.
3. Double taxation issue.
4. Consistency in departmental treatment of similar cases.

Detailed Analysis:

1. Whether the appellant provided "business auxiliary service" to Career Launcher:
The appellant entered into a license agreement with Career Launcher, allowing the use of the trademark and proprietary system. The revenue was shared in a 75:25 ratio, with the appellant depositing fees collected from students into Career Launcher's bank account. The appellant argued that the agreement was on a principal-to-principal basis, with no service provision involved. However, the adjudicating authority found that the appellant acted as a service provider for Career Launcher, supporting their commercial activities, and thus, the activities fell under "business auxiliary service" as per Section 65(105)(zzb) of the Finance Act, 1994. The Tribunal, however, disagreed, stating that the arrangement was a typical revenue-sharing model, with no service provided by the appellant to Career Launcher. This view was supported by the Tribunal's decision in Mormugao Port Trust, which held that activities undertaken for mutual benefit in a joint venture do not constitute a service rendered by one party to another for consideration.

2. Entitlement to exemption under Notification No. 14/2004 dated 10 September 2004:
The appellant argued that even if the service was considered "business auxiliary service," it was exempt under the Notification, which exempts services provided in relation to education. The adjudicating authority rejected this, distinguishing between "education" and "commercial training or coaching." The Tribunal found this view incorrect, noting that the appellant's activities were indeed in relation to education, as they prepared students for entrance and academic courses. The Tribunal referred to dictionary definitions and previous decisions, concluding that the appellant's services fell within the scope of "education" and were thus exempt under the Notification.

3. Double taxation issue:
The appellant contended that requiring them to pay service tax would result in double taxation, as Career Launcher had already paid tax on the entire amount collected from students. The adjudicating authority rejected this, stating that two separate services existed. The Tribunal disagreed, noting that Career Launcher paid tax on the entire fee collected, and the appellant received a share of this fee. The Tribunal cited the decision in M/s Samadhan Systems Private Limited, which held that if the entire fee has been taxed, the appellant cannot be taxed again for the same amount.

4. Consistency in departmental treatment of similar cases:
The appellant argued that the department had not required other similarly situated assessees to pay service tax under "business auxiliary service" if the main service provider had already paid tax. The Tribunal agreed, noting that the Commissioner (Appeals) had set aside similar demands in other cases, and the department had accepted these decisions. The Tribunal cited the Supreme Court's decision in Damodar J. Malpani, emphasizing the need for uniformity in tax treatment.

Conclusion:
The Tribunal set aside the order dated 28 August 2012 passed by the Commissioner, concluding that the appellant did not provide "business auxiliary service" to Career Launcher, was entitled to exemption under the Notification, and that requiring the appellant to pay service tax would result in double taxation. The Tribunal also highlighted the need for consistent treatment of similar cases by the department. The appeal was allowed.

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