2024 (10) TMI 982 - AT - Service Tax

Exemption from payment of service tax or taxable under the category of Commercial Training or Coaching services - training extended by the appellant to unemployed youth of Scheduled Caste and Scheduled Tribe and Minority communities sponsored by Bruhat Bangalore Mahanagar Palike (BBMP) - sovereign function or not - invocation of Extended period of limitation - HELD THAT - The issue on merit is considered by the Hon ble High Court in VASUNDHARA A.G.K.,N.H. MURALIDHAR, AND AMBA PRASAD N.H. VERSUS THE BRUHATH BANGALORE MAHANAGARA PALIKE 2024 (1) TMI 8 - KARNATAKA HIGH COURT and is well settled that appellant is liable to pay service tax. Extended period of limitation - HELD THAT - There is no suppression of any material facts with an intention to evade payment of service tax. It is an admitted fact that the training extended by the appellant to unemployed youth of Scheduled Caste and Scheduled Tribe and Minority communities, and it is sponsored by BBMP. Further, it is found that no service tax amount was included, while fixing the consideration for such training. As held by the Hon ble Supreme Court in the matter of ANAND NISHIKAWA CO. LTD. VERSUS COMMISSIONER OF CENTRAL EXCISE, MEERUT 2005 (9) TMI 331 - SUPREME COURT , mere non-payment of Service Tax cannot be considered as suppression of fact to invoke the extended period of limitation. The appeal is partially allowed by setting aside the demand with interest for the extended period. Further, Penalties under section 76 and 78 of the Finance Act, 1994 imposed by adjudication authority are also set aside. The matter is remanded to the Adjudication Authority for computing the demand for normal period.

Issues:
1. Whether the training provided by the appellant to unemployed youth sponsored by a municipal corporation qualifies as a sovereign function for exemption from service tax or falls under the category of 'Commercial Training or Coaching services'?
2. Whether the demand for service tax and penalties imposed by the adjudication authority are sustainable, especially considering the extended period of limitation?

Analysis:
1. The main issue in the appeal was to determine if the training provided by the appellant to unemployed youth sponsored by a municipal corporation should be exempt from service tax as a sovereign function or be taxable under 'Commercial Training or Coaching services.' The appellant entered into an agreement with the municipal corporation to provide computer training to candidates from backward classes. The respondent demanded service tax under the category of 'Commercial Training or Coaching Service,' leading to a dispute.

2. The appellant argued that the training provided was not commercial but aimed at providing vocational training to weaker sections of society. The appellant also contested the invocation of the extended period of limitation, stating that there was no intentional suppression of facts to evade service tax. The appellant cited legal precedents to support their argument that mere non-payment of service tax does not constitute willful suppression.

3. The appellant highlighted a judgment by the High Court of Karnataka in a related case, where it was held that the services provided were taxable. However, the appellant emphasized that the issue was still pending, and the municipal corporation had not reimbursed the service tax amount. The appellant also argued that the demand should only be confirmed for the normal period, not the extended period.

4. The Tribunal considered all arguments and facts presented. It was noted that there was no evidence to conclude that the appellant had received the entire service tax amount from the municipal corporation. The Tribunal found that the training was sponsored by the municipal corporation, and no service tax amount was included in the consideration for the training, aligning with the Supreme Court's precedent that mere non-payment of service tax does not imply suppression of facts.

5. Consequently, the Tribunal partially allowed the appeal by setting aside the demand with interest for the extended period and also revoked the penalties imposed by the adjudication authority. The matter was remanded to the Adjudication Authority for quantifying the demand for the normal period within a specified timeline. The Tribunal directed that any amount paid by the appellant towards service tax should be considered in determining the duty and interest. If the appellant received the entire service tax from the municipal corporation, they were instructed to pay the amount received after deducting the determined amount for the normal period.

This detailed analysis covers the issues raised in the judgment comprehensively, addressing the legal arguments, precedents cited, and the Tribunal's decision in the matter.

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