2012 (7) TMI 669 - AT - Service Tax

Commercial Coaching or Training Services and Management, maintenance and repair services - training in Aircraft Maintenance Engineering - maintenance and repair of air-crafts owned by their members. - held that - What is recognized under the law is the licence issued by the DGCA and not course completion certificate issued by the appellant. With that certificate, the student can not get any employment or engage in self-employment, without clearing the examination conducted by the DGCA. - Decided against the assessee. Charitable institute - Since the appellant is a charitable institution, can they be considered as a commercial training or coaching centre? - held that - Here again the answer is negative. - Merely because the appellant is registered as a Charitable Institution under the Income Tax Act, 1961, that does not entitle the appellant to claim exclusion from the ambit of service tax. - Decided against the assessee. Exemption under notification No.24/2004-ST dated 10-9-2004 - vocational training institute - held that - on completion of the training by the appellant, the trainee can not seek any employment or undertake self-employment directly after such training or coaching. - Therefore, prima facie we are of the view that the appellant is not eligible for the benefit under the aforesaid exemption. Applicability of Ruling of AAR in another issues - held that - the status of AAR is higher than that of this Tribunal and therefore, this Tribunal cannot ignore the ruling by the AAR in a case where the facts are similar/identical and the questions of law are identical. Overhauling work of the aircrafts - held that - prima facie, the activity of overhauling for a consideration comes under the purview of management, maintenance or repair service and is liable to service tax. Part per-deposit ordered.

Issues Involved:
1. Classification of services provided by the appellant.
2. Eligibility for exemption under specific notifications.
3. Time-bar for demand of service tax.
4. Applicability of service tax on maintenance and repair services.
5. Allegation of suppression of facts.
6. Consideration of financial hardship and undue hardship in stay applications.

Issue-wise Detailed Analysis:

1. Classification of Services Provided by the Appellant:
The appellant, M/s The Bombay Flying Club (BFC), engaged in training in Aircraft Maintenance Engineering and maintenance of aircrafts, was classified by the department under "Commercial Coaching or Training Services" and "Management, maintenance and repair services." The appellant argued that their services were statutory functions and not commercial in nature, as they were a charitable institution registered under the Income Tax Act, 1961, and the Companies Act, 1956. However, the Tribunal held that the appellant's activities fell within the purview of "commercial training or coaching" as defined under section 65(27) of the Finance Act, 1994, because the training was provided for a consideration, and the certificates issued by the appellant were not recognized by law for employment purposes without further examination by the DGCA.

2. Eligibility for Exemption under Specific Notifications:
The appellant claimed exemption under notifications Nos. 9/2003-ST and 24/2004-ST, arguing that they were a vocational training institute. The Tribunal examined the definition of "vocational training institute" and concluded that the appellant did not qualify for the exemption because the training provided did not directly enable trainees to seek employment or self-employment without additional certification by the DGCA. Additionally, the appellant did not meet the criteria specified in the amended notification 3/2010-ST, which required affiliation with the National Council for Vocational Training.

3. Time-bar for Demand of Service Tax:
The appellant contended that the demand for service tax for the period from October 2003 to September 2007 was time-barred. The Tribunal noted that three out of four show cause notices were issued within the normal period, and only one notice required invoking the extended period for a portion of the demand. The Tribunal found that the demand within the normal period amounted to approximately Rs. 1.71 crore, which was not time-barred.

4. Applicability of Service Tax on Maintenance and Repair Services:
The appellant argued that their overhauling of aircrafts for members did not fall under "management, maintenance or repair" services due to the absence of a written contract or agreement. The Tribunal rejected this argument, stating that the statute did not require individual written contracts, and the Memorandum and Articles of Association of the appellant's company served as a general agreement. Therefore, the overhauling services were liable to service tax.

5. Allegation of Suppression of Facts:
The Tribunal addressed the issue of suppression of facts, noting that the appellant had not provided sufficient evidence of financial hardship or a bona fide belief to justify non-payment of service tax. The Tribunal found that the appellant had not made a prima facie case for waiver of the pre-deposit of the dues adjudged.

6. Consideration of Financial Hardship and Undue Hardship in Stay Applications:
The Tribunal referred to the principles laid down by the High Court of Andhra Pradesh in SQL Star International Ltd. vs. Commissioner of Customs, Hyderabad, emphasizing that stay applications should consider prima facie case, balance of convenience, and irreparable loss. The Tribunal concluded that the appellant had not established a prima facie case or undue hardship and directed the appellant to make a pre-deposit of Rs. 1.5 crore within eight weeks, with the balance of service tax, interest, and penalties stayed during the pendency of the appeal.

Conclusion:
The Tribunal upheld the classification of services provided by the appellant under taxable categories, denied the claimed exemptions, and found the demand for service tax largely within the normal period. The Tribunal also held that the appellant's overhauling services were taxable and that there was no sufficient evidence of financial hardship to warrant a full waiver of pre-deposit. The appellant was directed to make a substantial pre-deposit to proceed with the appeal.

← Previous Next →