2023 (11) TMI 170 - AT - Service Tax

Levy of service tax - commercial training or coaching services - imparting education in the field of Postgraduate Courses in clinical research in India, entered into collaboration with Cranfield University, UK - Input credit of the expenses incurred as per CENVAT Credit Rules, 2004 - Deduction of the value of study material supplied - Cum-tax benefit under section 67 of the Finance Act - ex-parte order - violation of principles of natural justice - Penalty under section 76 and 77 of the Finance Act and interest - HELD THAT - The commercial training or coaching means any training or coaching provided by a commercial training or coaching centre. A commercial training or coaching centre has been defined, prior to 30.04.2011, to mean any institute or establishment providing commercial training or coaching for imparting skill or knowledge or lessons on any subject or field with or without issuance of a certificate and includes coaching or tutorial classes, but does not include any institute or establishment which issues any certificate or diploma or degree or any educational qualification recognized by law for the time being in force. The definition, as amended w.e.f. 01.05.2011, deletes only that latter portion not included in the definition of commercial training or coaching centre . The Commissioner has recorded a finding, after careful examination of the activities undertaken by the Indian Institute that it was providing training or coaching for a consideration. There is no error in this finding as indeed the Indian Institute was engaged in imparting education in the field of Post Graduate courses in clinical research for a consideration - The contention of the learned Chartered Accountant for the appellant that since the Indian Institute is a registered society and is working without profit, no taxable service can be said to have been provided cannot also be accepted. Thus, if the Indian Institute itself did not appear before the Commissioner despite ample opportunities having been provided, it cannot be permitted to raise any grievance about violation of the principles of natural justice. Penalty under section 76 and 77 of the Finance Act - HELD THAT - The contention of the learned Chartered Accountant for the appellant that since there was no malafide intent to evade payment of service tax, penalty under section 76 of the Finance Act should be set aside, cannot also be accepted - The contention of the learned Chartered Accountant for the appellant that penalty under section 77 of the Finance Act should be set aside also does not deserve acceptance. In the end, learned Chartered Accountant submitted that the Indian Institute would be entitled to the following benefits out of the total demand that has been confirmed (i) Input credit of the expenses incurred as per CENVAT credit; (ii) Deduction of the value of study material supplied; and (iii) Cum-tax benefit under section 67 of the Finance Act - This matter has not been examined by the Commissioner. In the facts and circumstances of the case, it would be appropriate to remit the matter to the Commissioner to decide this aspect only, namely as to whether the Indian Institute would be entitled to the aforesaid benefits out of the total demand that has been confirmed. While confirming the findings recorded by the Commissioner, the matter is remitted to the Commissioner to decide whether the Indian Institute would be entitled to the aforesaid benefit from out of the demand that has been confirmed - appeal allowed by way of remand.

Summary

Issues Involved:
1. Taxability of services under 'commercial training or coaching'.
2. Entitlement to benefits such as input credit, deduction of study material value, and cum-tax benefit.
3. Validity of ex-parte order and principles of natural justice.
4. Imposition of penalties under sections 76 and 77 of the Finance Act.

Summary:

1. Taxability of Services under 'Commercial Training or Coaching':
The Indian Institute, engaged in imparting education in 'clinical research' in collaboration with a UK University, was adjudged to be providing 'commercial training or coaching' services. The Commissioner confirmed the service tax demand as the degrees awarded were not recognized by Indian law. The Tribunal upheld this, noting that the term "recognized by law" refers to Indian law, and thus, the degrees from the UK University did not qualify for exemption.

2. Entitlement to Benefits:
The Indian Institute claimed benefits such as input credit, deduction of the value of study material, and cum-tax benefit. The Tribunal remitted the matter to the Commissioner to decide on these specific benefits, as this aspect had not been examined in the original order.

3. Validity of Ex-parte Order and Principles of Natural Justice:
The Indian Institute argued that the ex-parte order violated principles of natural justice. The Tribunal rejected this, noting that the Commissioner had provided multiple opportunities for a personal hearing, which the Institute failed to utilize.

4. Imposition of Penalties:
The penalties under sections 76 and 77 of the Finance Act were upheld. The Tribunal found no merit in the Institute's claim of a bona fide belief that it was not liable for service tax, given the clear statutory provisions. The Commissioner's findings on the absence of a bona fide belief and the correctness of penalties were confirmed.

Conclusion:
The Tribunal confirmed the Commissioner's findings on the taxability under 'commercial training or coaching' and the imposition of penalties. However, it remitted the matter to the Commissioner to decide on the entitlement to input credit, deduction of study material value, and cum-tax benefit. The appeal was allowed only to this limited extent.