2020 (7) TMI 232 - AT - Service Tax

Commercial Training or Coaching Services - appellant is a PSU mainly engaged in the activity of ship building and repair works - period from April 2007 to June 2012 - Department entertained a view that the appellant is liable to pay service tax on the fee income earned from the students under the category of Commercial Training or Coaching Services - pre-negative and post negative list regime - HELD THAT - The lower appellate authority has upheld the demand on the premise that the course offered by the appellant cannot be said to be statutory in nature and hence, cannot be said to have been recognised by law, which in our view is factually incorrect. The lower authority seemed to have lost sight of the factual position that the subject courses have been approved by the Director General of Shipping, Ministry of Surface Transport, Govt. of India, in consonance with the provisions of the Merchant Shipping Act, 1958, a fact which was always available before them - There cannot be any iota of doubt to hold that the courses assumes to be of statutory nature and hence, qualifies as being recognised under the law and consequently, eligible for claiming exclusion from levy of service tax both in the pre-negative list and negative list service taxation regime. The Ld. Advocate for the appellant submitted a list containing detailed break-up of fee earned from courses which have been approved as well as courses which have not been approved by the Directorate General of Shipping. The same is being submitted for the first time before the Tribunal and hence, were not available before the adjudicating authorities below. The justice would be met if the matter is remanded to the original authority for limited purpose of computation of service tax payable on courses not approved by the Directorate General of Shipping, restricted to the period covered under normal period of limitation, since the extended period of limitation is not available in absence of fraud or suppression on the part of the appellant. On the same count, penalty is also not imposable and hence set aside in entirety - appeal allowed by way of remand.

Summary

Issues:
Challenging demand of service tax for training services provided by a shipyard, exclusion from taxability under 'Commercial Training or Coaching Services', interpretation of legal provisions in pre-negative and post-negative list regime, recognition of courses under law, remand for computation of service tax on unapproved courses.

Analysis:
The appeals involved a challenge to the demand of service tax raised by a shipyard for training services provided. The shipyard, engaged in ship building and repair works, also operated a Marine Engineering Training Institute offering courses for engineering students. The dispute centered around whether the institute was liable to pay service tax on the fee income earned from students under 'Commercial Training or Coaching Services'. The appellant argued that the courses were approved by the Director General of Shipping and were mandatory for entry into the Merchant Navy, thus qualifying as exclusion from taxable services. Previous decisions in favor of the appellant on similar issues had attained finality.

The Tribunal examined the relevant legal provisions for levy of service tax in both pre-negative and post-negative list regimes. It was noted that institutes providing education recognized by law were excluded from service tax. Previous decisions in the appellant's favor had established that the courses undertaken were recognized by law, leading to exclusion from service tax levy. The Tribunal agreed that the matter was barred by the principle of res judicata, and the courses qualified for exclusion from taxability during the impugned period.

The lower appellate authority had upheld the demand, arguing that the courses were not statutory and not recognized by law. However, the Tribunal found this reasoning factually incorrect, emphasizing that the courses were approved by the Director General of Shipping in compliance with the Merchant Shipping Act, thus qualifying as recognized under the law. The Tribunal also considered additional information submitted by the appellant during the hearing and decided to remand the matter for computation of service tax on unapproved courses, excluding penalties due to the absence of fraud or suppression.

Ultimately, the Tribunal set aside the demand of service tax on fee from approved courses and disposed of the appeals accordingly, emphasizing the recognition of courses under the law as a crucial factor in determining taxability.

This comprehensive analysis covers the key legal issues, interpretations of relevant provisions, and the Tribunal's decision in the case.