2024 (10) TMI 331 - HC - Service Tax

Levy of service tax - Commercial coaching or training services - claims of the writ petitioner of being exempt from such levy having been negatived by the respondents - HELD THAT - By virtue of Finance Act, 2010 an explanation came to be inserted in Section 65 (105) (zzc) with retrospective effect from 01 July 2003 clarifying that the word commercial would mean training or coaching services being provided for consideration and uninfluenced by whether such training or coaching was conducted with a profit motive. By virtue of a Notification no. 33/2011 dated 25 April 2011 exemptions came to be granted to coaching and training centres and which would have led to the grant of a certificate, diploma, degree or any other educational qualification recognized by law. While a testimonial, degree or diploma which can be said to be recognized in law is a concept by now well settled and could only mean degrees, diplomas or educational qualifications granted or conferred by an authority duly empowered and recognized in law to award such a degree, diploma or grant that educational qualification, the Board by way of abundant caution had duly clarified these aspects in terms of its Circular dated 28 August 2012. The phrase recognized by any law was thus clarified to encompass courses which were approved or recognized by any entity established under a Central or State legislation, including delegated legislation, for the purpose of granting recognition to any educational course. Quite apart from IILM University and under whose aegis the petitioner had asserted to be functioning had been deprived of its character and status, the CESTAT found that the petitioner had never been recognized in law to grant a degree or diploma. The petitioner had also failed to establish or prove that it was either affiliated with a University or a deemed University it had also woefully failed to establish that it was itself enabled by statute to grant the degree or diploma - the CESTAT came to conclude that the appeals preferred by the writ petitioner lack merit while those instituted by the Department were liable to be allowed. Petition dismissed.

Summary

Issues:
Challenge to levy of service tax under Finance Act, 1994; Exemption from tax claimed by the petitioner; Recognition of educational institution by law; Interpretation of statutory provisions defining commercial training or coaching; Benefit of exemption notifications for coaching and training centers; Requirement for educational qualifications to be recognized by law.

Analysis:
The writ petition challenged the levy of service tax under the Finance Act, 1994, claiming exemption based on being a society engaged in education. The petitioner, a registered society, argued that it was exempt from tax as it offered courses under the aegis of a university. However, the Supreme Court had earlier ruled that the university in question had lost its recognition. The petitioner failed to pay taxes for specific periods, leading to Show Cause Notices and demands.

The respondents contended that the petitioner did not qualify for exemption as it did not provide coaching or training recognized by law for educational qualifications. The Customs, Excise and Service Tax Appellate Tribunal (CESTAT) reviewed the statutory definitions related to commercial training or coaching centers and taxable services under the Act.

The CESTAT highlighted the statutory definitions and exemptions related to commercial training or coaching centers. It noted that the petitioner could not benefit from exemptions as the qualifications it offered were not recognized by law. The concept of qualifications recognized by law was clarified through circulars and judicial precedents, emphasizing the importance of degrees conferred by authorized entities.

The CESTAT concluded that the petitioner was not recognized by law to grant degrees or diplomas, lacking affiliation with a recognized university or the statutory authority to grant qualifications. Consequently, the appeals by the petitioner were deemed meritless, and those by the Department were upheld.

Considering the facts and legal interpretations presented, the High Court upheld the CESTAT's decision, dismissing the writ petition as it found no grounds to interfere with the impugned order. The judgment emphasized the necessity for educational qualifications to be recognized by law for exemptions and tax liabilities under the Finance Act, 1994.