2024 (8) TMI 610 - AT - Service Tax

Valuation of services rendered by the appellant under Section 67 of Finance Act - extended period of limitation - penalty. Leviability of service tax, as per provisions of Section 67 of the Act - HELD THAT - The sub-section 1(i) of Section 67 provides that in case where the provision of service is for a consideration in money, the service tax chargeable on any taxable service with reference to its value, shall be the gross amount charged by the service provider for such service provided or to be provided by him. In view of the provisions of Section 67, it is clear that the appellant is liable to pay service tax on the gross amount of Rs.6,15,495/- collected by the appellant and no deduction on account of royalty of Rs.2,13,200/- paid to SEL is available to them. In this regard, reference made to the decision in the case of SARASWATI SHIKSHA KENDRA VERSUS COMMISSIONER OF CENTRAL EXCISE, LUDHIANA 2008 (2) TMI 142 - CESTAT, NEW DELHI , wherein the Tribunal on the identical facts held that ' the appellant is liable to pay Service tax on the entire amount collected from the students. It was submitted that the money received from the students is deposited in a joint account in the names of M/s. Saraswati Shiksha Kendra i.e the appellant herein and Career Point Infosystems Ltd., but in our view, as the service is provided by the appellant and it is the appellant which is collecting the amount, 100% liability is on the appellant and thus we do not find any error in the adjudication order.' Extended period of limitation - HELD THAT - The submission that the extended period of limitation has wrongly been invoked, is also not sustainable because the period involved in the present case is April 2008 to September 2009 and show cause notice was issued on 23.02.2010, hence, entire demand is within limitation. Penalty - HELD THAT - The appellant had a bona fide belief that they are liable to pay service tax only on the amount retained by them i.e. 80% of the gross receipts and they are not liable to pay service tax on 20% of the total fees collected from the students. Since the appellant have been filing the ST Returns except for the period of half year ending in September, 2008, in view of this, penalty imposed under Section 78 is not justified. The impugned order to the extent of demand of service tax to the tune of Rs.25,720/- along with interest and penalty of Rs.1000/- under Section 77 upheld, but the penalty under Section 78 of the Act is dropped. Appeal disposed off.

Summary

Issues:
1. Confirmation of service tax demand, interest, and penalties by the Commissioner (Appeals).
2. Valuation of services rendered by the appellant under Section 67 of the Act.
3. Imposition of penalties under Sections 77 and 78 of the Act.

Issue 1: Confirmation of service tax demand, interest, and penalties by the Commissioner (Appeals):
The appellant, registered for providing "Commercial Training or Coaching Services," was franchised by another entity. The dispute arose regarding the service tax liability on the gross amount collected by the appellant. The Commissioner (Appeals) confirmed a demand of Rs.25,720 along with interest and imposed penalties under Sections 77 and 78 of the Act. The appellant contested the order, arguing that the demand was excessive and would result in double taxation as the amount had already been remitted to the franchisor. The appellant also claimed eligibility for Cenvat Credit to offset the demand. The Revenue supported the Commissioner's findings based on Section 67 of the Act, emphasizing the liability to pay service tax on the entire gross amount without deduction for royalty paid to the franchisor.

Issue 2: Valuation of services rendered by the appellant under Section 67 of the Act:
The Tribunal analyzed the provisions of Section 67, which mandate service tax calculation based on the gross amount charged by the service provider. Referring to a previous decision, the Tribunal held that the appellant was liable to pay service tax on the full amount collected from students, rejecting the appellant's argument for deduction based on royalty payments. The Tribunal emphasized that the liability rested on the appellant, who collected the fees, regardless of any joint account arrangements. The Tribunal dismissed the appellant's contention regarding the invocation of the extended limitation period, deeming the demand within the statutory limit. Additionally, the Tribunal acknowledged the appellant's belief regarding tax liability on retained amounts but found the penalty under Section 78 unjustified due to the appellant's compliance with filing ST Returns.

Issue 3: Imposition of penalties under Sections 77 and 78 of the Act:
The Tribunal upheld the demand for service tax amounting to Rs.25,720 along with interest and the penalty of Rs.1,000 under Section 77. However, the Tribunal dropped the penalty under Section 78, considering the appellant's genuine belief about tax liability and their consistent filing of ST Returns, except for a specific period. The appeal was disposed of accordingly, with the order pronounced on 09.08.2024.

This detailed analysis of the judgment provides a comprehensive overview of the issues involved, the arguments presented by both parties, and the Tribunal's reasoning leading to the final decision on each issue.