2022 (2) TMI 10 - AT - Service Tax

Valuation of service tax - Commercial Coaching and Training Service - whether the deductions claimed by the Appellant firm towards reimbursement of expenses on account of Hostel Mess Fee and books are admissible deductions or not? - levy of penalty on Appellant firm and the Proprietor - HELD THAT - The Appellant has received the amount from students by way of cheques, bank transfer and also cash. The cash received has been deposited in the bank account. From the total amount deposited in bank account, the expenses towards Books and Hostel mess had been incurred on behalf of the students and on balance amount (the tuition fees) the Service Tax has been duly paid. The Appellant maintains a Student-wise wallet account for boarding, lodging and other expenses that are incurred on behalf of the students. The wallet amount of each student is maintained separately and the payment for Hostel and Mess are paid by the Appellant on behalf of the student. The amount is also utilized by the student for buying Books and the same are without fail paid by the Appellant on behalf of the students. The DGGI has taken the Gross Value based upon the comparison of highest figure as per IT Returns, invoices, Bank Statement and the account statement maintained in the CPU which was seized by the department. This is an arbitrary way of computation of demand and lacks uniformity and legal basis. Thus, it was observed that the data obtained from the CPU is the highest among all the financial documents available except 2013-14 wherein the value of the bank statement was the highest. This arbitrary selection of documents based on the highest figure is principally wrong and legally unsustainable - the Department never checked the veracity of the FIR and never analysed the impact on the valuation. It merely and blindly accepted the values mentioned in the CPU documents and concluded the demand without any investigation to this effect. The amount received on account of Hostel mess and books is not directly related to provision of taxable service. It was purely optional for the students looking into the business model adopted by the Appellant firm. Regarding non-payment of Service Tax on amount collected towards Books, there are force in Appellant firm s contention that the said amount is outside the purview of Service Tax in view of the benefit extended under Notification No. 12/2003-ST dated.20.06.2003. The said amount has been shown in Financial records as expenses made towards Books purchased (Tamil Nādu VAT is exempted) which were further provided to the students. Non-payment of Service Tax on amount collected towards Hostel and Mess - HELD THAT - The Appellant s contention is that the said amount has been paid to the vendors (Hostel Mess service providers) on actual basis on behalf of the students. Such expenses on behalf of the students are reflected in the financial records. The Appellant firm produced the sample copies of invoices raised by the vendors - there are force in the said contention hence the demand on this point is also not sustainable in view of the fact that Hostel and Mess was optional for students. Penalty - HELD THAT - With total disregard to the Principles of Natural Justice, the investigation and the Respondent has accepted and blindly relied the statements of the Proprietor of the Appellant which were immediately retracted vide retraction letters sent to the Investigating Officers. Consequently, no mala fide is established against the Proprietor hence no penalty is sustainable on the Proprietor - The Appellant firm and the Proprietor are not liable to any penalty. Appeal allowed in part.

Summary

Issues Involved:
1. Determination of correct assessable value for Service Tax.
2. Admissibility of deductions claimed towards reimbursement of expenses on account of Hostel & Mess Fee and books.
3. Allegation of willful suppression of facts and imposition of penalties.

Issue-wise Detailed Analysis:

1. Determination of Correct Assessable Value for Service Tax:
The Appellant firm is registered under 'Commercial Coaching Service' and charges tuition fees, hostel & mess fees, and book fees. The Department based its demand on the highest figures from IT Returns, invoices, bank statements, and CPU records, which was deemed arbitrary and unsustainable. The Appellant argued that the CPU data was fraudulently maintained by a previous accountant, against whom an FIR was filed. The Department failed to verify this and relied solely on the CPU data. The Tribunal found this method of computation arbitrary and lacking legal basis, emphasizing that the Department did not consider the already paid Service Tax of ?3,01,994/- in its calculations, which showed bias and carelessness.

2. Admissibility of Deductions for Hostel & Mess Fee and Books:
The Appellant contended that the amounts collected for books and hostel & mess were optional and not directly related to taxable services. The Tribunal agreed, noting that the expenses for books were covered under Notification No. 12/2003-ST, which exempts such expenses from Service Tax. The Tribunal also found that the amounts collected for hostel and mess were paid to vendors on behalf of the students and were optional, making them non-taxable. The Tribunal relied on several case laws, including judgments from CESTAT Bangalore and Allahabad, which supported the exclusion of such charges from taxable services.

3. Allegation of Willful Suppression of Facts and Imposition of Penalties:
The Appellant argued that there was no willful suppression of facts and that the statements obtained from the Proprietor were under duress and were immediately retracted. The Tribunal found no mala fide intent on the part of the Appellant and noted that the Department did not distinguish the case laws cited by the Appellant. The Tribunal held that the reliance on unauthenticated CPU data was wrong and that the principles of natural justice were disregarded. Consequently, the Tribunal found no grounds for imposing penalties on the Appellant firm or the Proprietor.

Conclusion:
The Tribunal modified the demand against the Appellant firm, recognizing the incorrect and arbitrary computation by the Department. The major portion of the demand based on CPU data was found unsustainable. The Tribunal allowed the appeal of the Appellant firm partially, with consequential relief, and fully allowed the appeal of the Proprietor, setting aside the penalties imposed.