2018 (10) TMI 96 - AT - Service Tax

Commercial Training or Coaching Centre - Liability of Service tax on degree of B.Arch. - case of Revenue is that the degree of B.Arch. is not recognized/approved by AICTE and hence assessee is liable to pay service tax - Board s Circular No. 107/1/2009-ST dated 28.01.2009 - Whether the assessee-Respondents are liable to pay Service Tax under the category of Commercial Training or Coaching Centre in terms of Section 65(27) of the Finance Act, 1994, as amended, and the degree of B.Arch offered by them is recognized by law for the time being in force? Held that - It is not in dispute that the said degree B. Arch. is a recognized degree under UGC Act (University Grants Commission) and also recognized by Rajasthan Technical University, Kota; Council of Architecture; and Yashwantrao Chavan Maharashtra Open University. However, the only case of the Department is that, the said degree is not recognized by AICTE by relying upon the Board Circular dated 28.01.2009. Reliance placed in the case of SHRI PRINCE SHIVAJI MARATHA BOARDING HOUSE S COLLEGE OF ARCHITECTURE, KOLHAPUR & OTHERS VERSUS STATE OF MAH AND OTHERS 2004 (9) TMI 682 - BOMBAY HIGH COURT , wherein the issue was, Whether the All India Council of Technical Education Act, 1987 over rides the provisions of Architects Act, 1972 in the matter of prescribing and regulating norms and standards of architectural institutions? and the Hon ble High Court has held that the provisions of the Architects Act are not impliedly repealed by the enactment of AICTE Act because in so far as the Architecture Institutions are concerned, the final authority for the purposes of fixing the norms and standards would be the Council of Architecture. Impugned order upheld - Service tax on degree of B.Arch. not leviable - appeal dismissed - decided against Revenue.

Summary

Issues Involved:
1. Liability to pay Service Tax under the category of 'Commercial Training or Coaching Centre'.
2. Recognition of the B.Arch degree by law.
3. Applicability of penalties under Sections 77, 78, and 78A of the Finance Act, 1994.

Detailed Analysis:

1. Liability to pay Service Tax under the category of 'Commercial Training or Coaching Centre':

The core issue was whether the assessee-Respondents, running an institute offering a B.Arch degree, were liable to pay Service Tax under the category of 'Commercial Training or Coaching Centre' as defined in Section 65(27) of the Finance Act, 1994. The Department contended that since the B.Arch degree was not recognized by the All India Council of Technical Education (AICTE), the institute fell within the ambit of 'Commercial Training or Coaching Centre' and was liable for Service Tax. This argument was based on Board Circular No. 107/1/2009-ST dated 28.01.2009, which clarified that technical institutions not approved by AICTE could not issue recognized educational qualifications and thus were subject to Service Tax.

2. Recognition of the B.Arch degree by law:

The assessee-Respondents argued that their B.Arch degree was recognized by the University Grants Commission (UGC), Rajasthan Technical University (RTU), and the Council of Architecture (COA). They contended that the COA, established under the Architects Act, 1972, was the competent authority for regulating architectural education, not the AICTE. The Bombay High Court had previously ruled that the AICTE Act did not override the Architects Act, meaning the COA's recognition was sufficient. The Tribunal upheld this view, noting that the B.Arch degree was indeed recognized by law through these bodies, and thus the institute did not fall under the definition of 'Commercial Training or Coaching Centre'.

3. Applicability of penalties under Sections 77, 78, and 78A of the Finance Act, 1994:

The show cause notice also proposed penalties under various sections of the Finance Act, 1994, for non-registration, non-maintenance of records, non-issuance of proper invoices, non-filing of statutory returns, and deliberate suppression of facts. The assessee-Respondents refuted these allegations, asserting their belief that they were not liable for Service Tax due to the recognized status of their degree. The Tribunal found no evidence of deliberate suppression or intent to evade tax, noting the institute's compliance with COA and RTU regulations and its non-profit, charitable status under Section 12AA of the Income Tax Act. Consequently, the penalties were deemed inapplicable.

Conclusion:

The Tribunal concluded that the assessee-Respondents were not liable to pay Service Tax under the category of 'Commercial Training or Coaching Centre' since their B.Arch degree was recognized by law through COA, UGC, and RTU. The Tribunal upheld the Commissioner’s order, dropping the show cause notice and dismissing the Revenue's appeal. The proposed penalties under Sections 77, 78, and 78A were also found to be inapplicable due to the absence of any deliberate suppression or intent to evade tax.