2023 (4) TMI 261 - AT - Service Tax

Levy of penalty - Classification of services - coaching service - franchise service - business in imparting education and training in general spoken English, business English for corporate communication, professional English (i.e., English for Engineers and MBA, etc.), foreign languages, call centre grooming, voice and accent, presentation skills, interview skills, group discussion, preparation test and entrance exams, etc. - demand alongwith interest and penalty - HELD THAT - Sub-Rule (5) of Rule 4 of the Service Tax Rules (supra) categorically state that if the registration certificate is not granted within a period of 7 days of receipt of application, then the said registration is deemed to have been granted. Once the registration was not granted even after the lapse of 7 days, it is seen that the assessee did not make a single attempt for more than a year to seek clarification. It is evident that the assessee in the meantime was collecting service tax from his students for the services being extended by them. So it is apparent that the assessee was very much aware that service tax was liable to be paid but they did not deposit the said amount so collected to the Government exchequer nor did they file their ST 3 returns. Penalty under section 78 upheld by Commissioner (Appeals) is correct - Appeal dismissed.

Summary

Issues Involved:

1. Inclusion of the value of study material in the taxable value of coaching service.
2. Imposition of penalty under Section 78 of the Finance Act.
3. Invocation of the extended period of limitation.

Summary:

Inclusion of the value of study material in the taxable value of coaching service:

The Commissioner (Appeals) held that the value of study material is not includible in the taxable value of coaching service, relying on the Tribunal's decision in Cerebral Learning Solutions Pvt. Ltd. v. Commissioner of Central Excise, Indore [2013 (32) S.T.R. 379 (Tri.-Del)]. This decision was affirmed by the Supreme Court in Commissioner of Central Excise & Service Tax, Indore v. Cerebral Learning Solutions Pvt. Ltd. [2022 (67) G.S.T.L. 4 (S.C.)]. The Tribunal upheld the Commissioner (Appeals)'s decision, stating the issue is no longer res integra and has been settled by precedent decisions.

Imposition of penalty under Section 78 of the Finance Act:

The assessee argued that the penalty under Section 78 is not imposable as the non-payment of Service tax was not due to fraud or suppression but due to delays in obtaining Service Tax registration. They cited several decisions to support their claim. However, the Tribunal found that the assessee did not follow up on their registration application for over a year and continued to collect Service Tax without depositing it to the government exchequer or filing ST-3 returns. The urgency to seek registration was shown only after the department initiated investigations. The Tribunal upheld the penalty under Section 78, dismissing the assessee's appeal.

Invocation of the extended period of limitation:

The Tribunal did not find merit in the assessee's argument against the invocation of the extended period of limitation, as the assessee was aware of their tax liability but failed to deposit the collected Service Tax or file returns timely. The Tribunal upheld the invocation of the extended period of limitation.

Conclusion:

The Tribunal dismissed both the appeals, upholding the Commissioner (Appeals)'s decision regarding the non-inclusion of study material value in the taxable value and the imposition of penalty under Section 78 of the Finance Act.

(Pronounced in the open court on 03.04.2023)