2009 (4) TMI 134 - AT - Service Tax

Commercial Training and Coaching - are imparting training to students for appearing in various competitive examinations - rendered training course to Group-I candidates sponsored by Social Welfare Department of Andhra Pradesh Held that Service Tax is applicable from 1.7.2003 Amount collected during May and June 2003 Amendment to Section 67 regarding valuation in 2005 therefore amount collected prior to date of levy of service tax is not chargeable.

Summary

Issues:
1. Liability of service tax on commercial training and coaching services.
2. Treatment of mess charges in relation to service tax.
3. Applicability of retrospective amendments and circulars.
4. Time bar for issuing show-cause notice.
5. Imposition of penalties under sections 76 and 78 simultaneously.

Issue 1: Liability of service tax on commercial training and coaching services:
The appellants provided training for competitive exams and collected fees from students. The dispute arose regarding the levy of service tax on these services. The Original authority demanded service tax, interest, and penalties. The Commissioner (Appeals) upheld the order based on a Board's Circular, stating that service tax should be paid on the value of service attributable to the relevant period. The appellants contested this, citing legal provisions and a Supreme Court judgment. The Tribunal examined the facts and legal arguments. It noted that the services were provided before the introduction of service tax and that the Circular and amendments were not retrospective. The Tribunal held that the demand was not sustainable, and the appeal was allowed.

Issue 2: Treatment of mess charges in relation to service tax:
The dispute included the inclusion of mess charges in the service tax calculation for coaching services. The Commissioner reasoned that service tax should be paid on the gross amount without any provision for abatement. The appellants argued that mess charges were not connected to coaching services. The Tribunal agreed, emphasizing the need for a nexus between the amount collected and services rendered. It concluded that mess charges were not related to commercial training and coaching services and should not be subject to service tax.

Issue 3: Applicability of retrospective amendments and circulars:
The appellants contested the retrospective application of amendments and circulars related to service tax. They argued that the changes introduced after the disputed period should not be applied retrospectively. The Tribunal analyzed the relevant legal provisions and found that the Circular and amendments were not applicable to the period in question. It emphasized that changes introduced post the disputed period cannot be enforced retrospectively, leading to the dismissal of the demand based on these retrospective provisions.

Issue 4: Time bar for issuing show-cause notice:
The appellants raised the issue of time bar for the show-cause notice received, highlighting that the normal period for such notices had lapsed. They argued that the notice was issued based on an audit objection, which should not allow the invocation of an extended period. Citing relevant case laws, the Tribunal agreed that the demand was hit by time bar due to the absence of justification for invoking the longer period, thereby rendering the demand unsustainable.

Issue 5: Imposition of penalties under sections 76 and 78 simultaneously:
The appellants challenged the imposition of penalties under sections 76 and 78 simultaneously, citing legal precedents. They argued that section 78 penalties require evidence of suppression, which was absent in this case. The Tribunal concurred, noting that penalties under both sections cannot be imposed simultaneously. Referring to relevant case law, the Tribunal held that since there was no evidence of suppression, the penalty under section 78 was not sustainable. Additionally, it emphasized that the imposition of two penalties concurrently was impermissible, further supporting the appellants' stance.

In conclusion, the Tribunal set aside the impugned order, ruling in favor of the appellants due to various reasons, including the non-retrospective application of amendments and circulars, lack of nexus for including mess charges in service tax, and the demand being hit by time bar. The Tribunal also invalidated the penalties imposed under sections 76 and 78 simultaneously, providing relief to the appellants.