2018 (8) TMI 899 - AT - Service Tax

Commercial Training Centre - training to persons who aspire to take up employment in fire protection, lift technology and dental technology - non-payment of service tax on the amounts received by them from the persons undertaking training - demand for the period from 1.7.2004 to 9.9.2004 - Held that - If it was the intention of the government to exempt the activity during this period, it would have done so in an express manner, which is not the case - the Notification No. 24/2004-ST dt. 10.09.2004 makes it clear that it is effective from 10.09.2004 and not before. It is trite law that exemption notifications have prospective effect unless it is explicitly provided that it is retrospective and the legislature provides for such retrospective operation - the appellant are liable to pay service tax for the period 1.7.2004 to 9.9.2004 and accordingly uphold the order of the adjudicating authority for demand of service tax and interest on this issue. Study material for vocational courses - Held that - We are unable to agree with the findings of the learned Commissioner that the study material for vocational courses are in the nature of Intellectual property service - the demand of service tax, interest and penalty in relation to this issue of Intellectual Property Service is set aside. Penalty u/s 78 - Held that - The appellant has been filing nil returns regularly and it was within knowledge of the Department that the appellant had not paid service tax for the period when the exemption was not available. Hence, the penalty under Section 78 of the Act Commercial Training or Coaching is not justified and the same is set aside. Appeal allowed in part.

Summary

Issues:
1. Liability of service tax on commercial training services.
2. Exemption applicability for the period from 1.7.2004 to 9.9.2004.
3. Classification of study material provision as Intellectual Property Service (IPS).
4. Imposition of penalties under Section 78.

Issue 1: Liability of service tax on commercial training services:
The appellant, a Commercial Training Centre, was issued a show-cause notice for not paying service tax on training amounts received. The entire demand was confirmed along with penalties. The appellant contested the issue of Commercial Training or Coaching, arguing for exemption during the disputed period from 1.7.2004 to 9.9.2004. However, the Tribunal held that since there was no exemption notification during that period, the liability to pay service tax remains. The judgment cited Notification No. 24/2004-ST, emphasizing the prospective effect of exemption notifications unless explicitly stated otherwise.

Issue 2: Exemption applicability for the period from 1.7.2004 to 9.9.2004:
The appellant sought exemption for commercial training services during the aforementioned period, relying on a Delhi High Court judgment. However, the Tribunal differentiated this case from the precedent, emphasizing that the benefit of exemption was not applicable in the absence of a specific notification during the disputed period. Referring to a tribunal decision, it upheld the demand for service tax and interest for the period in question.

Issue 3: Classification of study material provision as Intellectual Property Service (IPS):
Regarding the provision of study material, the appellant argued that it did not constitute Intellectual Property Service (IPS) as they were not involved in inventing or designing. Citing a tribunal judgment, the appellant contended against the imposition of penalties under Section 78. The Tribunal disagreed with the Revenue's classification, holding that the study material provision did not fall under IPS. Accordingly, the demand for service tax, interest, and penalty related to IPS was set aside.

Issue 4: Imposition of penalties under Section 78:
The Tribunal set aside the penalty under Section 78 for Commercial Training or Coaching Service, considering the appellant's regular filing of nil returns and the Department's awareness of the non-payment during the exemption period. The penalty was deemed unjustified and thus revoked. Similarly, the penalty under Section 78 for Intellectual Property Service was also set aside.

In conclusion, the Tribunal upheld the demand for franchise service, upheld the service tax demand for commercial training services during the disputed period, set aside the demand for Intellectual Property Service, and revoked penalties under Section 78 for both commercial training and Intellectual Property Service. The appeal was disposed of accordingly.