2009 (5) TMI 289 - AT - Service Tax

Whether the appellant is covered under heading Commercial Training or Coaching Centre - appellant is offering the person an employment with the company - appointment letter given to trainee indicating offer of employment in company - The payment clause of letter would indicate that it is nothing but a kind of a bond taken from the employee. The Revenue contend that appointment letter indicates that they have given training is also misconstrued and misdirected inasmuch as the Paragraph 5 of letter specifically start with the words on joining the company they will be given training . This would mean that the person who is joining the company is being trained on the particular programme. , it is very clear that the activities undertaken by the appellant in the case before us is nothing but training their own employees and hence, cannot get covered under the definition of Commercial Training or Coaching Services - we find that, the impugned order which considers the appellant-company as a Commercial Training or Coaching Centre , is unsustainable and is required to be set aside

Summary

Issues:
1. Whether the appellant's activity of providing induction training programme and collecting amounts as "joining fee" constitutes 'Commercial Training or Coaching Service'.
2. Whether the appellant is liable to pay Service Tax and Education Cess on the services provided.
3. Whether penalties and interest under relevant sections should be imposed on the appellant.

Analysis:

Issue 1:
The appellant provided induction training covering various software-related topics and collected amounts as "joining fee" from recruits. The question was whether this activity falls under 'Commercial Training or Coaching Service'. The appellant argued that they are not a training center but software producers. The Revenue contended that the amounts collected were indeed training fees based on the terms of the agreement. The Tribunal analyzed the definition of 'Commercial Training or Coaching Centre' and previous case law. They found that the appellant's activity of training their own employees did not fit within the definition of 'Commercial Training or Coaching Services'. Thus, the Tribunal held that the appellant was not a training institute.

Issue 2:
The appellant was issued a show cause notice demanding Service Tax and Education Cess along with penalties and interest. The Adjudicating Authority upheld the demand for Service Tax but dropped the proceedings related to 'Intellectual Property Service'. The Tribunal, after considering the arguments and evidence, found that the appellant was not liable to pay Service Tax as their activities did not fall under 'Commercial Training or Coaching Services'. Consequently, the impugned order demanding Service Tax and Education Cess was set aside.

Issue 3:
The Adjudicating Authority had imposed penalties and sought to recover interest from the appellant. However, the Tribunal, after determining that the appellant was not liable to pay Service Tax, set aside the penalties and interest as well. The appeal was allowed with consequential relief.

In conclusion, the Tribunal ruled in favor of the appellant, holding that their activity of training employees did not constitute 'Commercial Training or Coaching Service'. The demand for Service Tax, Education Cess, penalties, and interest was set aside, providing relief to the appellant.