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2020 (2) TMI 864 - AT - Service TaxLevy of service tax - reimbursable expenses received - Management Consultancy Services - period October, 2001 to March, 2006 - vires of Rule 5 of the Service Tax (Determination of Value) Rules,2006 - time limitation - HELD THAT - The demand of Service Tax of ₹ 19,02,103/- on reimbursable expenses is clearly not sustainable for the reason firstly that the Service Tax (Determination of Value) Rules, 2006 came into force w.e.f. 19-04-2006 whereas the period of dispute on this count is from October,2001 to March, 2006. Since, the valuation rules are substantive in character, it cannot be given retrospective effect as held by the Hon ble Supreme Court in the case of UOI Vs. Inter Continental Consultants and Technocrats Pvt. Ltd. 2018 (3) TMI 357 - SUPREME COURT - Secondly, Rule 5 of the Service Tax (Determination of Value) Rules,2006 which seeks to include reimbursable expenses into the gross amount charged is declared ultra vires of Section 67 of the Finance Act,1994 by the Hon ble Supreme Court in the case of UOI Vs. Inter Continental Consultant Technocrats Pvt. Ltd. - demand set aside. Commercial Training or Coaching Services - HELD THAT - The training provided by the Appellant is relating to enhancement of ability, skill development and productivity are vocational training which are not general academic courses and the Appellant is entitled to exemption under Notification No.9/2003-ST Dated 20-06-2003 as amended and Notification No.24/2004-ST Dated 10-04-2004 which exempts vocational training by Commercial Training or Coaching Centre from levy of service tax. As per Explanation to Notification No.9/2003-ST Dated 20-06-2003 vocational training institute means a commercial training or coaching centre which provides vocational coaching or training that import skills to enable the trainee to seek employment or undertake self employment directly after such training or coaching. Further, Notification No.24/2004-ST Dated 10-09-2004 is amended by Notification No.3/2010-ST dated 27-02-2010 by which the Explanation is substituted w.e.f. 27-02-2010 which defines vocational training institute to means an Industrial Training Institute or Industrial Training Centre affiliated to the National Council for vocational training offering courses in designated trades as notified under the Apprentice Act. The said amendment is applicable from 27-02-2010 - The period under dispute in the instant case is prior to 27-02-2010. From the perusal of Para 3 of the show cause notice dated 27-10-2008, it is found that the Appellant have been claiming that they are providing vocational training services which are not commercial training services. The case of the Appellant is directly covered by decision of the Tribunal in the case of CCE Vs. Ashu Exports Pvt. Ltd. 2014 (3) TMI 863 - DELHI HIGH COURT wherein it is held that courses imparted in procedural and practical skill based training in areas such as export-import management, retail management and merchandising would be entitled to exemption under Notification No.9/2003-ST and Notification No.24/2004-ST. Extended period of limitation - Penalties - HELD THAT - No offense and penalties can be created with retrospective effect nor in the facts and circumstances of the case extended period of limitation can be invoked - thus, neither extended period of limitation can be invoked nor the penalties can be sustained. The impugned Order is seta side to the extent of demand prior to March, 2006 and the period beyond the normal demand in Section 73 of the Finance Act, 1994 - appeal disposed off.
Issues Involved:
1. Demand of Service Tax on reimbursable expenses under "Management Consultancy Services." 2. Demand of Service Tax under "Commercial Training or Coaching Services." 3. Applicability of exemptions for vocational training. 4. Retrospective amendment and its impact on the case. 5. Invocation of extended period of limitation and imposition of penalties. Detailed Analysis: 1. Demand of Service Tax on Reimbursable Expenses: The Learned Advocate for the Appellant argued that the demand of ?19,02,103/- on reimbursable expenses for the period October 2001 to March 2006 is not sustainable since the Service Tax (Determination of Value) Rules, 2006, which include reimbursable expenses in the gross amount charged, came into force only from 19-04-2006. The Supreme Court in UOI Vs. Intercontinental Consultant Pvt. Ltd. declared Rule 5 of these rules ultra vires of Section 67 of the Finance Act, 1994, and held that valuation provisions are substantive and cannot be applied retrospectively. The Tribunal agreed, finding the demand unsustainable. 2. Demand of Service Tax under "Commercial Training or Coaching Services": The Appellant contended that they are a non-profit society providing vocational training, recognized by the Government of Odisha and exempted under Section 12A of the Income Tax Act, 1961. They argued that their training is not commercial and should not attract service tax under Section 65(26), Section 65(27), and Section 65(105)(zzc). The Tribunal noted that the Appellant is recognized as a charitable organization and provides vocational training, which is exempt under Notification No.9/2003-ST and Notification No.24/2004-ST. 3. Applicability of Exemptions for Vocational Training: The Tribunal found that the training provided by the Appellant is vocational, enhancing ability and skill development, and thus exempt under the aforementioned notifications. The definition of vocational training institutes in these notifications includes those providing training that enables trainees to seek employment or undertake self-employment. The Tribunal cited similar cases like CCE Vs. Ashu Exports Pvt. Ltd., Canan School of Catering & Hotel Management Vs. CCE, and Franklin Aviation Services P. Ltd. Vs. CST, which supported the Appellant's claim for exemption. 4. Retrospective Amendment and Its Impact: The Appellant argued that despite the retrospective amendment to Section 65(105)(zzc) by the Finance Act, 2010, the actions taken under show cause notices issued before the amendment are not validated. The Tribunal acknowledged the retrospective amendment but found that it does not affect the Appellant's case due to the absence of a validation clause in the Finance Act, 2010. The Tribunal referenced the case of Administrative Staff College of India Vs. CCE, which was not overturned by the Finance Act, 2010. 5. Invocation of Extended Period of Limitation and Imposition of Penalties: The Appellant contended that extended period of limitation and penalties cannot be invoked retrospectively. The Tribunal agreed, citing the Supreme Court judgments in Star India Pvt. Ltd. Vs. CCE and J.K. Spinning and Weaving Mills Ltd. Vs. UOI, which held that offenses and penalties cannot be created retrospectively. Consequently, the Tribunal set aside the demand for the period prior to March 2006 and beyond the normal demand period under Section 73 of the Finance Act, 1994. Conclusion: The Tribunal set aside the impugned orders to the extent of the demand prior to March 2006 and beyond the normal demand period, and the appeals were disposed of accordingly. The order was pronounced in open court on 24.12.2019.
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