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TMI Blog2013 (6) TMI 446X X X X Extracts X X X X X X X X Extracts X X X X ..... 2/2007 The ICFAI Society, Hyderabad 7/2003 to 3/2005 Rs.18.92 crores Rs.18.92 crores u/s 78 Rs.150 per day u/s 76 Rs.1000/- u/s 77 ST/39/2007 The ICFAI University, Dehradun 12/2003 to 3/2005 Rs.8,69,716/- Rs.8,69,716 u/s 78 Rs.150 per day u/s 76 Rs.1000/- u/s 77 ST/40/2007 The ICFAIAN Foundation, Hyderabad 7/2003 to 3/2005 Rs.9.44 cr. Rs.9.44 cr. u/s 78 Rs.150 per day u/s 76 Rs.1000/- u/s 77 ST/46/2007 The ICFAI University, Tripura 8/2004 to 3/2005 Rs.1,62,205/- Rs.1,62,205/- u/s 78 Rs.150 per day u/s 76 Rs.1000/- u/s 77 The two appeals of the Department are directed against different orders passed by the Commissioner (Appeals), Hyderabad setting aside the demands of service tax confirmed under the same head against the respondents by the original authorities. The particulars of these appeals are given below: Appeal No. Appellant Respondent Period Service tax + education cess Penalties ST/365/2007 CST, Hyderabad-II Badruka Institute of Foreign Trade, Hyderabad 7/2003 to 9/2005 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd remitted the matter back to the Tribunal to consider the case de no in the light of the Explanation inserted in the Act. Since we are also concerned with the same issues in these appeals, we also pass a similar order allowing the present appeals and directing the Tribunal to examine the case de novo in the light of the aforesaid Explanation inserted in the Act. It is made clear that all issues that could arise could be urged and the same shall be decided by the Tribunal afresh. The other remand orders of the apex court are also to the same effect. The scope of remand is clear from the remand orders and accordingly the Tribunal is required to reconsider the substantive issue in the light of the explanation added, with retrospective effect, to Section 65(105)(zzc) of the Finance Act, 1994 as also to decide afresh on all other issues. Accordingly we have examined the records of all the cases. 3. The Institute of Chartered Financial Analysts of India (ICFAI, for short), Hyderabad, is a society registered under the Andhra Pradesh (Telengana Area) Public Societies Registration Act, 1350 Fasli as per the Registration Certificate No.1602/1984 issued by the Registrar of Societies, Hyd ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 05)(zzc) of the Finance Act, 1994 read with Section 65(27) of the Act. According to the show-cause notice, a total amount of Rs.35,269.88 lakhs as fees was collected from the students by the informal consortium of ICFAI entities from 7/2003 to 3/2005 and a total amount of Rs.30,84,62,460/- was payable towards service tax and a total amount of Rs.26,30,342/- towards education cess. In the proportion in which the above amount of fees was apportioned and accounted for in the books of accounts of the five ICFAI entities, the above amount of service tax was also apportioned and demanded from them. The demands were contested by the noticees but eventually came to be confirmed against them in Order-in-Original No.8/2006 dt. 29/09/2006. We have not seen any appeal from the ICFAI University, Raipur but the other 4 ICFAI entities are in appeal before us. In this context, it may also be mentioned that the ICFAI University, Raipur ceased to exist with the judgment of the Hon'ble Supreme Court, dt. 11/02/2005, in the case of Prof. Yashpal and another vs. State of Chhattisgarh and others wherein Section 5 (which empowered the State government to incorporate and establish, by Notification in the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he Commissioner in adjudication of two show-cause notices dt. 27/09/2006 and 17/09/2007 for the periods 7/2003 -- 3/2006 and 4/2006 3/2007 respectively for recovery of service tax with education cess on the fees collected by ISB from students of Postgraduate Programme(PGP) in Management and Executive Education Programme(EEP) during the respective periods, and for imposing penalties. The Commissioner confirmed the demands and imposed penalties. 5. Before proceeding to record the submissions of the parties to the dispute, we would reproduce the relevant provisions of the Finance Act, 1994, which are focal to the dispute.Section 65(26)commercial training or coaching means any training or coaching provided by a commercial training or coaching centre. Section 65(27) commercial training or coaching centre means any institute or establishment providing commercial training or coaching for imparting skill or knowledge or lessons on any subject or field other than sports, with or without issuance of a certificate and includes coaching or tutorial classes but does not include pre-school coaching and training centre or any institute or establishment which issues any certificate or diploma or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ercial appearing in clauses 26 and 27 of Section 65 of the Act and therefore the findings recorded on other issues by the Tribunal in its earlier Final Orders in these cases should be treated as final. This argument was vehemently opposed by the learned Special Consultant for the department who pointed out that the remand orders of the apex court had made it clear that all issues that could arise could be urged and the same shall be decided by the Tribunal afresh. He further submitted that the final orders passed by this Bench were set aside by the apex court and therefore nothing contained in those orders survived to be treated as conclusive findings. After considering the rival arguments, we are in full agreement with the view expressed by the learned Special Consultant for the Revenue. As per the directives of the Hon'ble Supreme Court, we have to decide afresh on all the issues on merits. The substantive issue has to be decided by taking into account the aforesaid explanation to Section 65(105)(zzc) of the Finance Act, 1994. 7. Heard both sides. Though, in the appeals of the ICFAI institutions, the territorial jurisdiction of the respondent was challenged, this objection has n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... les of association of each of these companies include establishment & running of educational institutions as the main objective. The ISB has affiliation with the world's leading business schools viz. Kellog School of Management, Warton School and London Business School. The ISB offered postgraduate programmes in management(PGPs) and also short term programmes for working executives (EEPs). Thus all the assessees are educational bodies solely imparting education to students and hence their activities cannot be brought to levy under the head commercial training or coaching service. (b) The legislature treats educational institutions/bodies as different from commercial training or coaching centres. This is clear from clause 20 (definition of cab), clause 90a (definition of renting of immovable property) and clause 115 (definition of tour operator) of Section 65 of the Finance Act, 1994. These definitions, which contain references to educational body and commercial training or coaching centre, bring out a clear distinction between the two, indicating that the legislative intent is to treat an educational institution/body imparting skill or knowledge or lessons on any subject or field, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... th of the fact that the ICFAI University, Raipur ceased to exist on 11/02/2005. (g) The ISB, the IIRM and the BIFT are, in any case, eligible for the benefit of Notification No.9/2003-ST dt. 20/06/2003 as they would satisfy the definition of vocational training institute. They could not claim this benefit in the earlier proceedings because the emphasis at that time was on their plea that they were outside the levy on account of not being commercial centres. (h) The demands of service tax and education cess are hit by limitation. The assessees have always maintained the bona fide belief that they were not liable to pay service tax under Section 65(105)(zzc) on their educational activities and therefore they cannot be held to have suppressed or misrepresented any facts or contravened any provision of law with intent to evade payment of tax. Moreover, whenever the assessees were required to furnish any information to the department, they promptly did so. The above bona fide belief of the assessees was also strengthened by certain decisions rendered by this Tribunal in favour of similar institutions, for instance, Great Lakes Institute of Management Ltd. vs. CST, Chennai [2008(10) ST ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ized by law. But the fact remains that the ICFAI institutions (appellants) were imparting skill or knowledge or lessons on any subject or field other than sports and collecting fees from the students. Their websites also clearly indicate this factual position. For instance, the website of the ICFAI University, Tripura says that it was established in 2004 to impart training in management, science & technology, law and education to students, working executives and professionals in India. The website of the ICFAI University, Dehradun says that it was formed on 8/7/2003 to impart training in management, science & technology, law and education to students, working executives and professionals in India. Therefore, the appellants squarely fall within the meaning of commercial training or coaching centre appearing in Section 65(26) and (27) and retrospectively explained in explanation to Section 65(105)(zzc). (b) The ISB was also working in the same manner and they are also covered by the definition of commercial training or coaching centre. The PG courses in management, the Executive Educational programmes and the short term courses conducted by ISB were nothing but courses that imparted ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed full details of the amounts collected by them as fees and other charges from students from 7/2003 to 3/2005. The show-cause notice was issued without delay in 5/2005 itself. In their correspondence with the department, they misrepresented facts by submitting that ICFAI University was conducting various courses while it was not an entity established under, or recognized by, law. During the period of dispute, there was no decision of the CESTAT that could have driven the ICFAI institutions to bona fide belief that they were not liable to pay service tax under the head commercial training or coaching service on the fees collected from students. Therefore, their plea of bona fide belief is untenable and they should be held to have suppressed/misrepresented material facts with intent to evade payment of service tax. The extended period of limitation was rightly invoked in the ICFAI cases inasmuch as they did not get registered, did not file ST-3 returns and did not pay service tax and suppressed/misrepresented material facts for evading this tax liability. (h) The ISB also behaved more or less in the same manner. A major part of the demand raised on them is within the normal period ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... protected on the principle of de facto recognition. [Reliance placed on the judgment dt. 19/02/2010 passed by the Punjab & Haryana High Court in CWP No.4021 of 2009 (Ms Neelam Devi & another vs. Haryana Nurses Registration Council and others).] (d) As the students of the ICFAI University, Raipur were absorbed as students of the ICFAI University, Dehradun, in terms of the apex court's judgment dt. 11/02/2005 as clarified by Order dt. 7/9/2005, in any case, the core activity of imparting education remained unaffected. (e) There is nothing exceptional about the centralized collection of fees and transfer of the same to the accounts of the different universities or about maintenance of common facilities for the benefit of all the universities. 12. We have given careful consideration to the submissions. The substantive issue which has arisen before us in these de novo proceedings is whether the assessees can claim exemption from service tax liability under Section 65(105)(zzc) read with the definition of commercial training or coaching under Section 65(26) and the definition of commercial training or coaching centre under Section 65(27) of the Finance Act, 1994 (as this provision sto ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ir students for a consideration during the respective periods of dispute. 14. It has been argued on behalf of the assessees that they are educational institutions and were imparting education, and not training or coaching, to the students. Per contra, it has been argued on behalf of the Revenue that education necessarily includes the process of imparting knowledge or lessons on any subject and hence the same would get covered within the ambit of the expression training or coaching appearing under clauses (26), (27) and (105)(zzc) of Section 65 of the Finance Act, 1994. In this connection, the learned Special Consultant has relied on P. Ramanatha Aiyer's THE MAJOR LAW LEXICON wherein some connotations of the word education have been provided. The learned counsel has referred to WHARTON'S LAW LEXICON. It cannot be disputed that the act of imparting skill or knowledge or lessons on any subject or field (other than sports) is the stated purpose of commercial training or coaching vide Section 65(27) of the Act. Both the law lexicons cited before us present various shades of meaning of education. According to one meaning appearing in MAJOR LAW LEXICON, education means the act or process ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lop skills in arts, sports etc; * create various fora to help the students imbibe social and democratic values; * issue certificates or diplomas or degrees recognized by law, to the successful students; are generally perceived as educational institutions. In our view, only such institutions were covered by the exclusion clause of the definition of commercial training or coaching centre under Section 65(27) of the Finance Act, 1994 as this provision stood during the period of dispute. 15. Any certificate/diploma/degree issued in the name of ICFAI UNIVERSITY as a consortium or conglomerate of the ICFAI institutions cannot be held to have been issued by any of these institutions and also cannot be considered to be a certificate/diploma/degree recognized by law inasmuch as the so-called ICFAI UNIVERSITY has not been shown to be a legally constituted body authorized by law to issue the same. We have, thus, found great force in the submissions made by the learned Special Consultant. As regards other assessees, it has not been established that the degrees/certificates/diplomas issued by them to their students during the relevant period were recognized by law. Acceptance of any such deg ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion to Section 65(105)(zzc) of the Act has very wide scope to encompass the activities of the assessees and render them exigible to service tax under Section 65(105)(zzc) of the Act. In the result, the assessees have no case on merits. 18. We have also considered the decisions cited by the learned counsel, such as Administrative Staff College of India (supra). All those decisions were rendered before the crucial retrospective amendment of Section 65(105)(zzc) of the Finance Act, 1994 and, hence, are of no precedential value. The same is the situation with regard to the various circulars relied on by the counsel. 19. The learned counsel representing ISB, BIFT and IIRM has (without prejudice to his submissions on the substantive issue) raised an alternative plea by claiming the benefit of exemption under Notification No.9/2003-ST dt. 20/06/2003 which benefit is available to a vocational training institute as defined in the Notification. This plea was, admittedly, not raised at any stage before, even though the case of the assessees travelled upto the apex court. It is interesting to note that the learned counsel who sought to narrow down the scope of the apex court's remand orders ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... derable part of the demand is within the normal period. 21. On the very grounds sustained in support of invocation of the extended period of limitation in these cases, it has to be held that Section 78 of the Finance Act, 1994 was also rightly invoked to impose penalties on the assessees. However, in our view, the penalties imposed under Sections 76 and 77 are liable to be set aside in the facts and circumstances of these cases. 22. To summarize our findings -- (i) The liability of the assessees to pay service tax under Section 65(105)(zzc) (read with its explanation) of the Finance Act, 1994 on the fees/charges collected from their students during the respective periods of dispute is affirmed; (ii) The extended period of limitation was rightly invoked in these cases and, therefore, no part of the demand of service tax on any of the assessees can be held to be time-barred; (iii) Section 78 of the Finance Act, 1994 was rightly invoked in these cases, but the penalties imposed on the assessees under Sections 76 and 77 of the Act are liable to be set aside; (iv) The alternative claim of the ISB, the BIFT and the IIRM for exemption under Notification No.9/2003-ST dt.20/06/2003 is ..... X X X X Extracts X X X X X X X X Extracts X X X X
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