2019 (3) TMI 1440 - HC - Service Tax

Commercial Training or Coaching Service - benefit of Para 2.2.2 and 2.2.3 of the CBEC Circular No.59/8/2003 dated 20.06.2003 - Held that - The assessee herein is also imparting education to obtain recognised degrees/diplomas from Universities and that apart the students are also being provided training to appear for competitive examinations, entrance tests, etc. It is not necessary that the respondent-firm should issue a certificate, diploma or degree. The students given coaching by the appellant are issued with certificates, diplomas and degrees, as issued by the Universities; identical to regular colleges and parallel colleges also. The students are being prepared for courses and are imparted training to appear for competitive examinations as well. The decision of this Court in Malappuram District Parallel College Association 2005 (8) TMI 336 - HIGH COURT OF KERALA would squarely apply to the respondent-firm, since they are imparting coaching for courses leading to recognised certificates, diplomas and degrees issued by lawfully constituted academic bodies. Hence when such institutes also carry on training schedules to prepare students for competitive exams, categorised as commercial coaching ; as per the clarification issued by the CBCE, they stand exempted. Franchisee services provided by the respondent has been excluded by the Adjudicating Authority as well as the Tribunal from exemption. It is only the service tax pertaining to commercial training or coaching services that the exemption is extended - there is no infirmity, whatsoever, in the impugned order of the Tribunal and the appeal is only to be dismissed answering the question framed in favour of the respondent and against the department-appellant.

Summary

Issues:
1. Allegation of non-discharge of service tax liability for certain financial years.
2. Classification of services provided by the respondent.
3. Interpretation of relevant provisions and circulars.
4. Application of exemption under Section 65(27) of the Finance Act, 2003.
5. Dispute regarding service tax liability and exemption for franchisee services.

Issue 1: Allegation of non-discharge of service tax liability
The respondent, a firm offering commercial training and coaching services, was accused of not fully settling its service tax obligations for the financial years 2003-04, 2004-05, and 2005-06. The services provided included training for various examinations, engineering/medical entrance exams, university courses, computer courses, and more. The firm also had franchisees at different locations, centralizing accounting at the head office.

Issue 2: Classification of services
The Revenue argued that the respondent should be categorized as a "commercial training or coaching center" and subjected to service tax under the Finance Act, 1994. Additionally, the Revenue contended that the respondent's activities also fell under "franchisee services," warranting service tax on the gross amount charged for the services rendered. The Revenue alleged that the respondent suppressed the value of taxable services to evade service tax payment.

Issue 3: Interpretation of relevant provisions and circulars
The Tribunal considered the applicability of Circular No.59/8/2003 dated 20.06.2003 of the CBEC, particularly para 2.2.3, in determining the tax liability of the respondent. The Tribunal relied on previous court decisions and the circular to support its decision to drop the proceedings against the respondent.

Issue 4: Application of exemption under Section 65(27) of the Finance Act, 2003
The Court analyzed Section 65(27) of the Finance Act, 2003, defining a "commercial training or coaching center." The Revenue argued that the respondent did not fall under the exemption for institutes providing recognized degrees or certificates. However, the Court disagreed, citing the CBCE Circular and previous court decisions to support the respondent's exemption status.

Issue 5: Dispute regarding service tax liability for franchisee services
The Tribunal excluded franchisee services from the exemption granted for "commercial training or coaching services." The Court found no error in the Tribunal's decision and dismissed the appeal in favor of the respondent, upholding the exemption for commercial training or coaching services.

This detailed analysis of the judgment provides insights into the classification of services, interpretation of relevant provisions, and the application of exemptions under the Finance Act, 1994.