2017 (3) TMI 423 - AT - Service Tax

Commercial training or coaching services - fee not realized as per the fee structure and the fee is settled in between the institute and students after allowing incentives - Held that - department has filed to prove that Apex Institute collected ₹ 1,57,83,000/- in the year 2010-11 - the calculation of taxable value and Service Tax liability was on the basis of forms recovered and the standard fee structure informed by the Manager of the institute and it was not on the basis of either fee receipt or books of account or bank statement. Therefore, impugned SCN is presumptive in nature - appeal allowed - decided in favor of assessee.

Summary

Issues:
1. Discrepancy in computation of service tax demand based on fee structure.
2. Failure to establish actual receipt of fees by the institute.
3. Legality of the penalty imposition.
4. Authority to provide option for reduced penalty.

Analysis:

Discrepancy in Computation of Service Tax Demand:
The case involves M/s. Apex Institute providing commercial training services. The department raised a service tax demand of ?13,80,461 based on a computed amount of ?1,57,83,000 collected as fees. However, the institute disputed this computation, arguing that the actual fees received were lower due to incentives and negotiations with students. The appellate tribunal found the show cause notice to be presumptive as it relied on the fee structure and admission forms recovered during a search, rather than actual receipts. Consequently, the tribunal allowed the appeal by M/s. Apex Institute, rejecting the revenue's appeal.

Failure to Establish Actual Receipt of Fees:
The key contention was the department's failure to prove that the institute had received ?1,57,83,000 in fees for the relevant year. The tribunal noted that the calculation of taxable value and service tax liability was based on the fee structure and admission forms, not on actual receipts or financial records. As the department could not substantiate the actual receipt amount, the tribunal deemed the show cause notice as presumptive and not legally tenable. This lack of concrete evidence led to the appeal by M/s. Apex Institute being allowed.

Legality of Penalty Imposition:
The legality of penalty imposition was raised by the revenue, arguing that the option to pay a reduced penalty should have been provided by the original authority, not the Commissioner (Appeals). However, this issue was not central to the tribunal's decision as the primary focus was on the discrepancy in the computation of service tax demand and the failure to establish actual receipt of fees.

Authority to Provide Option for Reduced Penalty:
While the legality of providing an option for reduced penalty was discussed, the tribunal's decision primarily centered on the lack of evidence supporting the service tax demand and the presumptive nature of the show cause notice. The tribunal's ruling favored M/s. Apex Institute due to the department's inability to establish the actual receipt of fees, leading to the appeal being allowed and the revenue's appeal being rejected.

This detailed analysis highlights the core issues of discrepancy in fee computation, failure to prove actual receipt of fees, and the tribunal's decision based on the lack of concrete evidence presented by the department.