2008 (2) TMI 65 - AT - Service Tax

Coaching & educational training - dispute relates to period April 2003 to Sept. 2003 since impugned service has been brought under tax net only w.e.f. 1-7-03 hence tax is not allowed to be calculated on advance fees collected prior to 1-7-03 it cannot be said that ST-3 return filed on 23-10-03 disclosing only the taxable services for relevant months was with any intention to evade duty no suppression demand notice issued after 2 years of issuance of Board clarification is time barred

Summary

Issues:
Confirmation of service tax, interest, and penalties for coaching and educational training services provided prior to the levy of tax; Suppression of information leading to extended period of limitation for issuing demand notice; Interpretation of circulars regarding the taxability of fees collected before and after the levy of tax.

Analysis:
1. The appellant provided coaching and educational training services, and the authorities confirmed service tax, interest, and penalties amounting to Rs. 7,08,791/- for the period April, 2003 to September, 2003. The dispute arose from the collection of advance fees before the services became taxable on 1-7-2003. The Revenue contended that even though the fees were received earlier, since the services were provided after 1-7-2003, tax was applicable on a pro rata basis for the subsequent period.

2. The Commissioner invoked the extended period of limitation for issuing the demand notice based on the appellant's alleged suppression of information. The appellant's ST-3 return filed on 23-10-2003 did not disclose the value of taxable services provided during the relevant months for which fees were collected before 1-7-2003. The Commissioner held that this omission amounted to suppression with an intent to evade duty.

3. The issue of taxability of fees collected before the levy of tax was initially subject to confusion due to conflicting circulars issued by the Board. Initially, a circular stated that such fees collected before 1-7-2003 would not be included in the value of services, but a subsequent circular clarified that such amounts were indeed taxable. Given the confusion and the absence of any intentional act by the appellant to evade duty, it was held that the demand notice issued after a significant period following the clarification was barred by limitation. The appellant's failure to disclose the fees collected before 1-7-2003 in the return was not deemed as suppression, especially since the jurisdictional authorities did not question it earlier. The appeal was allowed, and the impugned order was set aside.