2015 (9) TMI 425 - AT - Service Tax

Vocational training Institute - Running of Commercial Coaching Classes for the students of Chartered Accountant examination and providing coaching for different Chartered Accountant courses - exemption Notification No. 24/2004-ST dated 10.09.2004 - Clubbing of income of other relatives to the taxable turnover of the assessee - appellant strongly relied upon the decision of the Tribunal in the case of Pasha Educational Training Inst. 2008 (12) TMI 80 - CESTAT, BANGALORE - Held that - he appellants institute was recognised by IRDA. In such a situation, the Tribunal held that the training imparted should be considered a vocational training. In the present case, the appellant s institute is not recognised for imparting coaching by the Institute of Chartered Accountants India and therefore, the said case law would not applicable in the facts of this case. So, the appellant is not eligible for the benefit of exemption notification as vocational training institute. - Decided against the assessee. Clubbing of turnover - Held that - There is no material available on record that the Central Excise Officers had made any inquiry of the property shown in the income tax returns and from the Income Tax Department in respect of such Income Tax returns. Hence, we are unable to accept the clubbing of the income of the other relatives of the appellant as fees on the basis of the Income Tax returns. The other aspect of this matter is that while clubbing the income of the relatives with the appellant, no show cause notice was issued to the relatives. The relatives are all independent existence, not disputed by the Department. The Adjudicating authority should not pre-determine the issue, without issuing show cause to the relatives. - Decided in favor of assessee. Determination of taxable turnover - Held that - It is noticed that the taxable value was determined on the basis of three sources (a) Fees collected (as per computer print out Pages taken out at the time of search) (b) Fees collected (as per details provided by the appellant vide Annexure A , B and C (fees receipt ledger) letter dated 04.05.2012 and (c) Fees collected/ income (by clubbing the income shown in the income tax return of the 13 persons/firm). - The highest amount, among all these three sources in each year had taken on year-wise taxable value for determining demand of tax - service tax cannot be levied in such manner, on the basis of pick and choose method of the documents, which is totally inconsistent, misconceived and irrational. - Decided partly in favor of assessee. Extended period of limitation - Held that - appellant had not disclosed to the department tax liability and it is a clear case of suppression of facts with intent to evade payment of tax and extended period of limitation and penal provisions under Finance Act, 1994 would be invoked - Decided against the assessee.

Issues Involved:
1. Applicability of exemption under Notification No. 24/2004-ST for Vocational Training Institutes.
2. Clubbing of income of appellant's relatives for determining service tax liability.
3. Validity of demand based on inconsistent documents.
4. Invocation of extended period of limitation and imposition of penalties.

Issue-Wise Detailed Analysis:

1. Applicability of Exemption under Notification No. 24/2004-ST:
The appellant claimed exemption under Notification No. 24/2004-ST, asserting that their institute qualifies as a "Vocational Training Institute." The Tribunal examined whether the coaching provided by the appellant enabled students to seek employment directly after the training. It concluded that the appellant's coaching for Chartered Accountant exams did not qualify as vocational training since it did not directly lead to employment but only prepared students for further examinations. The Tribunal distinguished this case from the Pasha Educational Training Inst. case, where the institute was recognized by the Insurance Regulatory Development Authority (IRDA) and provided training directly leading to employment. Therefore, the appellant was not eligible for the exemption.

2. Clubbing of Income of Appellant's Relatives:
The Tribunal reviewed the adjudicating authority's decision to club the income of the appellant's relatives with the appellant's income for determining the taxable value. The Tribunal found that the relatives had independent existence and filed separate income tax returns. It was noted that no show cause notices were issued to the relatives, which violated the principle of natural justice. The Tribunal cited several precedents emphasizing the necessity of issuing show cause notices to all concerned parties before clubbing their incomes. Consequently, the Tribunal rejected the clubbing of the relatives' incomes with the appellant's income.

3. Validity of Demand Based on Inconsistent Documents:
The demand was partly based on computer printouts, ledgers, and clubbed incomes of relatives. The Tribunal criticized this approach as inconsistent and irrational, stating that service tax cannot be levied using a "pick and choose" method from multiple sources without a definitive basis. The Tribunal emphasized that a clear and consistent method must be used to determine the taxable value, and the current approach lacked such consistency.

4. Invocation of Extended Period of Limitation and Imposition of Penalties:
The Tribunal acknowledged that the appellant had not disclosed the tax liability, constituting suppression of facts with intent to evade tax. This justified the invocation of the extended period of limitation and the imposition of penalties under Section 78 of the Finance Act, 1994. However, since the appellant voluntarily paid the tax with interest during the investigation, the Tribunal deemed the penalty under Section 78 sufficient. The Tribunal directed the adjudicating authority to quantify the demand after extending the cum-tax benefit and allowed the appellant to pay a reduced penalty of 25% of the tax within 30 days.

Conclusion:
The Tribunal upheld the demand of service tax along with interest and penalties based on the income of the appellant and two students but set aside the demand based on the clubbed income of other relatives. It directed the adjudicating authority to quantify the demand correctly and allowed the appellant to pay a reduced penalty within a specified period. The appeal was disposed of accordingly.

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