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2022 (9) TMI 800 - AT - Service TaxLevy of Service Tax - commercial training or coaching service - revenue sharing agreement or not - MAAC was rendering franchise service to the appellant, which was an independent transaction - period of dispute involves in the two show cause notices dated 15.04.2011 and 07.10.2011 is from 2009-10 and 2010-11 - HELD THAT - The said issue stands covered in favour of the appellant in the decision of the Tribunal rendered in the case of the appellant itself in M/S. SAMADHAN SYSTEMS (P) LTD. VERSUS C.C.E., JAIPUR-I 2018 (2) TMI 1049 - CESTAT NEW DELHI . The decision relates to an earlier period from 2004-05 to 2008-09, while the dispute in the present appeal is from April 2009 to March 2011 and holds that the appellant is not liable to pay service tax under the category of commercial training or coaching service, particularly when tax on such service had been discharged by MAAC. This apart, a conjoint reading of the Agreement, coupled with the intent of the parties, shows that it was to give effect to an arrangement which is in the nature of co-venture where two parties work for a common purpose, i.e., rendering commercial training/coaching service to the students. Such an agreement has been held to be in the nature of a revenue sharing arrangement by a Division Bench of the Tribunal in SHRI NIRAJ PRASAD VERSUS COMMISSIONER OF CENTRAL EXCISE SERVICE TAX, KANPUR 2019 (11) TMI 436 - CESTAT ALLAHABAD . Service tax could not have been levied upon the appellant - the order passed by the Commissioner (Appeals) cannot be sustained and is set aside - Appeal allowed - decided in favor of appellant.
Issues:
Demand of service tax under 'commercial training or coaching' service for the period from April 2009 to March 2010 and April 2010 to March 2011, based on two show cause notices. Allegation that the appellant was rendering 'commercial training or coaching' service to students and liable to pay service tax on the amount received. Claim that the service tax paid by Maya Academy of Advanced Cinematics (MAAC) does not absolve the appellant from paying service tax. Analysis: The appellant, engaged in providing computer education in Animation and Cinematics, entered into a Business Partner Agreement with MAAC. The agreement outlined responsibilities of both parties, with MAAC providing course material, training, and conducting audits, while the appellant marketed the courses, collected fees, and provided premises and computers. The agreement required the appellant to collect the entire fee from students and deposit it in MAAC's account, with MAAC remitting 80% of the net amount back to the appellant. The appellant operated from premises included in MAAC's Service Tax registration, with MAAC paying service tax on the full amount collected from students. A show cause notice in 2010 proposing service tax demand was dropped as MAAC had already discharged the tax liability. However, subsequent notices in 2011 alleged the appellant provided 'commercial training or coaching' service and was liable for service tax, separate from MAAC's 'franchise' service. The Additional Commissioner confirmed the demand in 2012, upheld by the Commissioner (Appeals) in 2018, leading to the current appeal. The appellant argued that previous Tribunal decisions favored them, emphasizing that MAAC had discharged the service tax liability, absolving the appellant from further tax payment. They highlighted the revenue-sharing nature of the agreement and the absence of consideration received directly from students. The department, however, supported the impugned order, stating no interference was warranted. The Tribunal held in favor of the appellant, citing the previous decision in Samadhan Systems that the appellant was not liable for service tax under 'commercial training or coaching' service, especially when MAAC had already paid the tax. The Tribunal noted the revenue-sharing arrangement between the parties and emphasized that the appellant acted as an instrument in the training program managed by MAAC. Additionally, referencing another case, the Tribunal concluded that service tax could not be levied on the appellant due to the revenue-sharing basis of the arrangement. In conclusion, the Tribunal set aside the Commissioner (Appeals) order, ruling in favor of the appellant based on the previous decisions and the nature of the revenue-sharing agreement between the appellant and MAAC.
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