2012 (7) TMI 502 - AT - Service Tax

Demand of service tax, interest and penalty - Collection of advance fee from students - services were brought into the Service Tax net w.e.f . 01.07.2003 - appellant has been collecting the advance fees from the students during the period from April 2003 to June 2003 Held that - they are liable to pay Service Tax on the amount collected as advance fees by them from their students prior to the said services came into the Service Tax net. appellant is liable to discharge the Service Tax liability and interest thereof on the amount collected by them and considering the said amount as cum tax value. Regarding penalties under Section 76 & 78 Held that - in the mind of the assessee during the relevant period as to the taxability of the amounts which were collected in advance. Appellant has made out a case for invokation of Section 80 of Finance Act, 1994 and by invoking the provisions of Section 80 of Finance Act, 1994, penalties imposed under Sections 76 & 78 of Finance Act, set aside. lower authorities will calculate the Service Tax amount, interest thereof payable by the appellant, considering the amount collected by the appellant as cum tax amount.

Summary

Issues:
Service tax liability on advance fees collected before services were brought into the Service Tax net, imposition of penalties under Sections 76 & 78 of Finance Act, 1994, consideration of collected amount as cum tax value.

Analysis:
The appeal before the Appellate Tribunal CESTAT, Ahmedabad was against the Order-in-Appeal (OIA) confirming the demand for Service Tax on advance fees collected by the appellant before the services were included in the Service Tax net. The appellant provided coaching and training services to students, and the Revenue contended that the appellant must pay the proportionate Service Tax on the advance fees collected between April 2003 and June 2003. Both lower authorities upheld the demand, imposed interest, and penalties under Sections 76 & 78 of the Finance Act, 1994.

On the merits of the case, the appellant's counsel conceded that they were liable to pay Service Tax on the advance fees collected before the services were taxable. The appellant sought relief from the penalties and requested consideration of the collected amount as cum tax value. The Tribunal noted the judgments of coordinate Benches against the appellant and upheld the Service Tax liability on the advance fees collected. The appellant was directed to pay the Service Tax and interest on the collected amount.

Regarding the penalties imposed under Sections 76 & 78, the Tribunal considered the confusion in the appellant's mind regarding the taxability of advance amounts during the relevant period. Invoking Section 80 of the Finance Act, 1994, the Tribunal set aside the penalties. The appeal was disposed of with instructions for the lower authorities to calculate the Service Tax amount and interest payable by the appellant, treating the collected amount as cum tax value.

In conclusion, the Tribunal dismissed the appeal, upheld the Service Tax liability on advance fees, set aside the penalties under Sections 76 & 78, and directed the calculation of the Service Tax amount and interest based on the collected amount considered as cum tax value.