2013 (11) TMI 713 - AT - Service Tax

Valuation - exclusion of cost of goods Board s circular dated 20.06.2003 Notification No. 12/2003-ST - question in this appeal is whether the entire value of the services provided by the appellant herein (including the value of course material supplied) is to be included in the gross value of the service provided by the appellant and also whether the Government has exempted the whole of the value of goods and material sold, from the gross value of taxable service, vide the Notification issued under Section 93(1). - Held that - The exemption notification is clear and admits of no restrictive clauses. Consequently, the assessee is entitled to relief - Following decision of M/s Cerebral Learning Solutions Pvt. Ltd. Versus CCE, Indore 2013 (4) TMI 527 - CESTAT NEW DELHI stay granted.

Summary

Issues:
- Whether the consideration received for the sale of training material should be included in the value of services rendered by the applicant?
- Whether the exemption under Notification 12/03-ST is applicable to the sale of training materials by the applicant?
- Whether the applicant is liable to pay service tax on the materials sold directly to trainees or franchisees?
- Whether the VAT rate on text books is relevant in determining the diversion of value of services to the value of text books?

Analysis:

1. The applicant provided commercial coaching and training services in various fields through their centers and franchisees. They sold text books to trainees and franchisees as part of the training process. The Revenue argued that the consideration received for the sale of training material should be part of the services' value, leading to a show cause notice for recovery of unpaid service tax.

2. The Revenue contended that the exemption under Notification 12/03-ST for goods sold during service provision applied only to standard text books, not custom-made ones. The applicant had not paid service tax on materials sold directly to trainees or franchisees. An amount of Rs. 2,33,49,899/- was confirmed against the applicant after adjudication.

3. The applicant's counsel argued that the exemption under Notification 12/03-ST should apply to all materials sold, not limited to standard text books. They claimed to have sold text books to interested parties beyond service recipients. They cited a similar case for precedent where waiver of dues was granted.

4. The Revenue maintained that the text books sold were specific to the training classes provided by the applicant and franchisees. They argued that the low VAT rate on text books indicated a diversion of service value to the value of books. They referenced legal decisions supporting their position.

5. The Tribunal considered both arguments and noted that previous cases had differing outcomes regarding the sale of study materials by coaching classes. They found merit in adopting the reasoning of a specific case and granted a waiver of pre-deposit of dues pending appeal, staying the collection of the dues during the appeal process.

This comprehensive analysis outlines the key legal issues, arguments presented by both parties, relevant legal provisions, and the Tribunal's decision in the judgment.