2015 (4) TMI 1005 - AT - Service Tax

Valuation - Commercial Coaching or Training Service - Students make 100% payment to M/s Aptech Ltd. - Assessee gets only 80% of such fees and discharge service tax on 80% - Whether appellant is required to discharge service tax liability on an amount which represents 20% as retained by M/s. Aptech Ltd - held that - students issue the cheques for the payment of fees in the name of M/s. Aptech Ltd. It is on record that appellant is not receiving any amount from the students directly. The provisions of Section 67 of the Finance Act, 1994 envisage for considering the gross value for discharge of service tax liability. The said section specifically provides that the gross value which is charged for the services has to be considered for payment of service tax liability. In the case in hand, the amount received by the appellant for the provision of services under the category of Commercial Coaching or Training Services is the 80% of the amount paid by the students, as students make 100% of the payment directly in the name of M/s. Aptech Ltd. If that be so, appellant has correctly discharged the service tax liability on an amount received by him for the services rendered under the category of Commercial Coaching or Training Services . - impugned orders are unsustainable and liable to be set aside - Decided in favour of assessee.

Summary

Issues:
Interpretation of service tax liability on fees collected by a franchise for training services under an agreement with the principal company.

Analysis:
The case involved an appeal against an Order-in-Appeal passed by the Commissioner of Central Excise (Appeals), Pune-III. The appellant, a franchise of a company engaged in providing training in computer-based multimedia animation, was required to collect course fees and deposit them in the principal company's account. The dispute arose regarding the service tax liability on the fees collected by the appellant. The revenue authorities contended that the appellant should pay service tax on the full amount received, while the appellant argued that they should only pay tax on the 80% of the fees they received. The lower authorities upheld the service tax liability on the appellant.

The appellant's consultant argued that the tax demanded was incorrect as it did not represent consideration for the training services provided by the appellant. He emphasized that the appellant had discharged tax liability on the amount they received. On the other hand, the Departmental Representative highlighted that the appellant collected the entire fees from students, making it the gross amount received for services rendered.

The main issue was whether the appellant was liable to pay service tax on the 20% of the fees retained by the principal company. The Tribunal observed that the appellant was discharging tax liability on the amount received from the principal company, which was considered as the gross value for service tax purposes. As per Section 67 of the Finance Act, 1994, the gross value charged for services had to be considered for tax payment. Since the students paid 100% of the fees directly to the principal company, the appellant correctly discharged tax liability on the 80% amount received for services.

Conclusively, the Tribunal found the lower authorities' orders unsustainable and set them aside, allowing the appeal with any consequential relief. The judgment clarified the service tax liability issue concerning the fees collected by the franchise for training services under the agreement with the principal company.