2013 (5) TMI 592 - HC - Service Tax

Commercial coaching or training center u/s 65(27) Notification No.33/2011-ST - Whether Flying Training Institutes providing training for obtaining Commercial Pilot License (CPL) and Aircraft Engineering Institutes for obtaining Basic Aircraft Maintenance Engineering License (BAMEL) come in the category of coaching centers as laid down in Section 65(27) of the Finance Act, 1994 and therefore assessable to service tax or not? - SCN was issued by the respondent / Additional Commissioner of Service Tax to the petitioner. Held that - Section 65(27) excluded from the domain of commercial training or coaching centers, training centers or establishments issuing any certificate or diploma or degree or any educational qualification recognized by law. Even after 30th April, 2011, amendment of section 65(27) though the part of Section 65(27) making such exclusion has been deleted but the Notification No.33/2011-ST issued in exercise of powers u/s 93 of the Finance Act has exempted, coaching or training leading to grant of a certificate or diploma or degree or any educational qualification which is recognized by any law from the whole of Service Tax leviable u/s 66 of the Finance Act. The Act, Rules and CAR distinguish an approved Institute from an unapproved one and a successful candidate from an approved institute would be entitled to enforce the right, conferred on him by the Act, Rules and CAR, to one year relaxation against the DGCA in a Court of law. The inference can only be one, that the Course Completion Certificate/training offered by such Institutes is recognized by law. An educational qualification recognized by law will not cease to be recognized by law merely because for practicing in the field to which the qualification relates, a further examination held by a body regulating that field of practice is to be taken. The recognition accorded by the Act, Rules and CAR supra to the Course Completion Certificate issued by the Institutes as the petitioner cannot be withered away or ignored merely because the same does not automatically allow the holder of such qualification to certify the repair, maintenance or airworthiness of an aircraft and for which authorization a further examination to be conducted by the DGCA has to be passed/cleared. Thus, the Instruction and the SCN are quashed.

Issues Involved:
1. Validity of Instruction No.137/132/2010-ST dated 11.05.2011 by CBEC.
2. Validity of the show cause notice dated 30.03.2012 issued by the Additional Commissioner of Service Tax.
3. Whether the petitioner's Aircraft Maintenance Engineering (AME) Training School is exempt from service tax under Section 65(27) of the Finance Act, 1994.

Detailed Analysis:

1. Validity of Instruction No.137/132/2010-ST dated 11.05.2011 by CBEC:

The petitioner challenged the CBEC Instruction stating that Flying Training Institutes providing training for obtaining Commercial Pilot Licence (CPL) and Aircraft Engineering Institutes for obtaining Basic Aircraft Maintenance Engineering Licence (BAMEL) are categorized as coaching centres under Section 65(27) of the Finance Act, 1994, and thus assessable to service tax. The petitioner argued that their institute is approved by the DGCA, which prescribes the syllabus, number of seats, manner of exams, and issuance of certificates. They contended that the instruction is in contravention of Section 65(105)(zzc) read with Section 65(27) and Notification No.33/2011-ST dated 25.04.2011, which exempts educational qualifications recognized by law from service tax.

The court noted that the CBEC's decision was premeditated, making the hearing before the Assessing Officer a formality. It held that the CBEC Instruction was contrary to the provisions of the Finance Act and the Notification dated 25.04.2011, which exempts coaching or training leading to a recognized certificate or diploma from service tax.

2. Validity of the Show Cause Notice dated 30.03.2012:

The show cause notice issued by the Additional Commissioner of Service Tax was challenged on the grounds that it was based on the impugned CBEC Instruction. The petitioner argued that the notice was issued with premeditation, and thus, a writ petition was maintainable against it.

The court found merit in the petitioner's contention and held that since the CBEC had already taken a decision, the hearing before the Assessing Officer would be a mere formality. The court deemed it expedient to return findings on the merits of exigibility, thereby quashing the show cause notice.

3. Exemption from Service Tax under Section 65(27) of the Finance Act, 1994:

The petitioner claimed exemption from service tax under Section 65(27), which excluded institutes issuing certificates or diplomas recognized by law from being categorized as commercial training or coaching centres. They argued that their Course Completion Certificates, approved by the DGCA, are recognized by law.

The court analyzed the regulatory framework under the Aircraft Act, 1934, and the Aircraft Rules, 1937, noting that the DGCA regulates the petitioner's institute, including its syllabus, training, and certification. The court held that the Course Completion Certificates issued by the petitioner are recognized by law, as they are approved by the DGCA and confer eligibility for appearing in the DGCA examination, which grants the final licence.

The court concluded that the recognition by the DGCA, through the Act, Rules, and CAR, amounts to recognition by law. The court held that the Instruction dated 11.05.2011 and the show cause notices were contrary to Section 65(27) and the Notification dated 25.04.2011, and thus quashed them. The writ petition was disposed of, and the rule was made absolute.

Conclusion:

The court ruled in favor of the petitioner, quashing the CBEC Instruction and the show cause notice, and held that the petitioner's AME Training School is exempt from service tax under the relevant provisions of the Finance Act, 1994.

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