9911796707
TMI Blog2019 (3) TMI 1075X X X X Extracts X X X X X X X X Extracts X X X X ..... 18 = 2018 (10) TMI 683 - AUTHORITY FOR ADVANCE RULING, MAHARASHTRA. BRIEF FACTS OF THE CASE A. IL&FS Education and Technology Services Ltd. ("Appellant") is a public limited company incorporated in India and registered under the Companies Act, 1956. The Appellant having GSTIN 27AABC12106H1ZO is registered in Mumbai, Maharashtra and falls within the jurisdiction of Mumbai Nodal Division-5, Maharashtra. The Appellant is the social infrastructure arm of IL&FS group and is engaged in the key areas of education, skill development, healthcare and cluster development for long term and sustainable impact. B. Inter alia, the Appellant is working with various State or Union Territory Governments to promote computer training among the students and teachers of the government and government aided higher secondary schools under the Information and Communication Technology ('ICT') @ School Project (hereinafter referred to as "ICT Project"), C. Information and Computer Technology (ICT) is universally acknowledged as an important tool for improving the quality of education. Realizing the importance of ICT and the vital role that it plays in educational sector, the Government of India framed nat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... jects. Under this scheme, the State Government or Union Territory Government shall be responsible for defining norms, standards, guidelines and framework to facilitate and monitor the implementation of the scheme in an effective manner. Thus, primary responsibility of implementing ICT Projects is on the State or Union Territory Governments. H. However, while framing the policy, standards, norms, etc. for implementation of ICT Projects, the State or Union Territory Governments would be guided by the national level policy framed by the Ministry of Human Resource and Development, Government of India. This is to ensure uniform and high standards, optimum utilization and cost-effective implementation of ICT Projects. Thus, the State and Union Territory Governments have to implement ICT Projects in accordance with the guidelines issued by the Central Government in this regard. I. As the State or Union Territory Government is required to implement ICT Projects in accordance with the guidelines issued by the Central Government, almost all states have been following the PPP model by sourcing out the ICT Project work to the private parties under the BOOT model (as suggested by the Central ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... his, the Appellant is required to provide one teacher, having specified qualifications and experience, to each school. The teachers so appointed would utilize the available ICT infrastructure (i.e. the ICT lab so created by the Appellant) for imparting computer training to the students in accordance with the curriculum developed in this regard by the Director, Pune, as per Annexure-Ill to the agreement. Q. Annually, the appointed teacher shall also impart necessary training to at least 5 school teachers including the headmaster/ headmistress of the school in computer aided learning and computer education with the usage of available ICT infrastructure. Further, the appellant shall impart technical training to the subject teachers for a period of ten days per year for normal operation, installing and use of textbook based educational software, computer education software, additional educational software, school management software, common software applications. R. Moreover, it is also the responsibility of the Appellant to maintain and upkeep the ICT labs in proper working conditions for the entire contract period at its own cost. For this, the Appellant would have to provide requi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng, the appellant is filing the present appeal, inter alia, on the following grounds which are without prejudice to each other. GROUNDS OF APPEAL 1. For quick reference, Entry No. 72 of the Notification No. 12/2017- C.T. (Rate) is reproduced herein below: Sl.No. Chapter, Section, Heading, Group or Service Code (Tariff) Description of Services Rate (per cent) Condition (1) (2) (3) (4) (5) 72 Heading 9992 Services provided to the Central Government, State Government, Union territory administration under any training programme for which total expenditure is borne by the Central Government, State Government, Union territory administration. Nil Nil 2. The corresponding exemption is provided under Entry No. 72 of Notification No. 12/2017 dated 29.06.2017 issued under Maharashtra Goods and Services Tax Act, 2017. 3. On perusal of the above extracted entry, it is clear that NIL rate under the said entry would be leviable to: a. all the education services (falling under Heading 9992); b. provided under any training programme; c. to the Central Government, State Government or Union Territory administration; and d. the total expenditure of such training programme is bor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in conjunction with each other in the ordinary course of business, one of which is a principal supply; ii. 'Mixed Supply'- Section 2(74) of the CGST Act defines 'mixed supply' to mean two or more individual supplies of goods or services, or any combination thereof, made in conjunction with each other by a taxable person for a single price where such supply does not constitute a composite supply. 8. The concept of composite supply under GST has been explained by the Department in its e-flier on the topic of 'Composite Supply and Mixed Supply' 1 to be identical to the concept of naturally bundled services prevailing in the existing service tax regime. As also referred in the flier, the said concept has been explained in the Education Guide issued by CBEC for the levy of service tax (hereinafter referred to as "Education Guide"). The concept of bundled services that were naturally bundled in the ordinary course of business under Service tax law is now known as "composite supply" under GST law. "Bundled service" was defined at para 9.2 of the Education Guide as a bundle of provision of various services wherein an element of provision of one service is combined with an element or elem ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... being principal supply. 14. The phrase 'naturally bundled in the ordinary course of business' is not defined in the CGST Act. The Education Guide, at para 9.2.4, clarifies that whether services are naturally bundled in the ordinary course of business would depend upon the normal or frequent practices followed in the field of business to which services relate. Such normal and frequent practices adopted in a business can be ascertained from several indicators, a few of which are listed below - a) The perception of the consumer or the service receiver. If large number of service receivers of such bundle of services reasonably expect such services to be provided as a package then such a package could be treated as naturally bundled in the ordinary course of business. b) Majority of service providers in a particular area of business provide similar bundle of services. For example, bundle of catering on board and transport by air is a bundle offered by a majority of airlines. c) The nature of the various services in a bundle of services will also help in determining whether the services are bundled in the ordinary course of business. If the nature of services is such that one of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aph 29); v. there is a single supply where one or more elements are to be regarded as constituting the principal services and one or more elements are to be regarded by way of contrast as anciliary services which share the tax treatment of the principal service (paragraph 30); vi. a service must be regarded as ancillary to a principal service if it does not constitute for customers an aim in itself, but a means of better enjoying the principal service supplied (paragraph 30); vii. the fact that a single price is charged may be indicative of a single service, but is not decisive (paragraph 31); 17. The Appellant submits that it fulfills all the criteria enlisted in the education guide and the Card Protection Case: a) It has been explained in the facts of the case that the national level policy framed by the Central Government for implementation of the ICT Projects provides that the State Government(s) should preferably follow BOOT model. This suggestion of the Central Government is in fact being followed by the State Governments. Multiple State Governments, as mentioned in facts also, are awarding the contracts for implementing ICT Projects on BOOT model only. b) In all such ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tional extras are taken unpaid. However, in all other cases, the question whether single or separate charges are made for different elements has been regarded as irrelevant. 20. Therefore, it is submitted that the fact, that the agreement has given bifurcation of cost element towards the goods portion and service portion, shall not be any basis to consider the training programme as not naturally bundled. 21. Therefore, in view of the industry practice and the expectation of state governments as recipient of supply, the understanding of the Appellant is, that all the activities performed by the private parties including the Appellant under the BOOT model are naturally bundled. 22. Further, Ld. AAR at para 3 of page 11 of the impugned ruling has held that computer training service is not pre-dominant / principal supply and the contracted supply has many distinct supply components out of which training is a small component. It may be noted that Ld. AAR has not given any reason or basis to say that training is not the principal supply in this case. It is a bald statement made without any discussion factually or legally. 23. In this regard, it is submitted that the supply undertaken ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt and government aided schools. 29. The Appellant humbly submits that the entire infrastructure is being developed for the purpose of imparting computer training which is the ultimate aim for the concerned schools and also for the Maharashtra Government and thus, supply of computer training services to the state of Maharashtra is the principal supply. 30. The above argument that the entire infrastructure is developed to provide computer training is also supported by the policies framed by the Central as well as the State Government in this regard. 31. The vision and mission statement in the new policy provides that the scheme has been introduced in schools with an aim to promote computer literacy and technologically-aided education among the students as well as teachers. 32. Reference is also made to the tender document issued by the Maharashtra Government for implementing ICT Projects. It provides that the whole genesis behind the project is to provide effective and quality education through ICT. This also provides that the Government is planning to set up an ICT enabled teaching environment using projector, computer-based lab for learning and reinforcement in government and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to introduction of the new policy, the Government of India had amended its old policy in 2011 by issuing revised guidelines of ICT in Schools (hereinafter referred to as revised guidelines). Under its revised guidelines also, the Government has stressed upon the fact that the 'Outright Purchase Basis' or 'Direct Procurement of Hardware' by the State Governments would be the last resort. Moreover, the State Government(s) opting to implement the ICT Project under the Outright purchase method would be required to give a detailed justification as to why BOOT model is not opted. 39. It has been experienced in the past that the 'Outright Purchase of Assets' helped in creation of assets or infrastructure, but in absence of the qualified teachers or trainers, such infrastructure was never utilized for imparting education and resultantly, the assets have eventually become obsolete. Thus, it failed to achieve the object of imparting computer training to the students and teachers. 40. Therefore, keeping in mind the past experience, BOOT model is preferred and outright purchase of assets is kept as the last resort. The Appellant humbly submits that the above discussion is to bring to the not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... onducting the education delivery services', which clearly indicates that the main aim is to deliver education services for which various goods have to be supplied and a computer lab to be created. Also, para 8 of the agreement provides that the Appellant is required to provide one faculty member for each school to provide computer education. 44. Para 7.2 of the agreement provides that the Appellant shall receive performance based payment which shall be 20% of the entire consideration. A schedule of payment is provided at para 7 of the agreement according to which the Appellant would get paid in terms of percentage of students who pass the computer subject. If 70% or more students pass the computer subject, only then will the Appellant get 100% payment, and as the percentage of students passing the subject decreases, payment to the Appellant also decreases. This speaks volumes about the crux of the agreement and establishes that the entire agreement is centred around providing quality computer education services, and not on providing hardware. 45. Para 3 of revised guidelines issued by MHRD provides individual details of each component. It provides that the total capital expenditu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... are undertaken in respect of the self-owned goods and would amount to self-service. This view of the Tribunal was upheld by the Hon'ble Supreme Court in CCE, Pondicherry vs. CMS (l) operations and Maintenance Co. Pvt. Ltd reported at 2017 (4) GSTL J75 (SC) = 2017 (11) TMI 442 - SUPREME COURT. 50. Thus, in view of the above discussion it is clear that the entire infrastructure is owned by the Appellant and the repair and maintenance activities undertaken by the Appellant are in regard to the self-owned equipment. Therefore, there is no suppiy of maintenance or operation services by the Appellant. 51. In fact, the repair and maintenance of the equipment and infrastructure is performed by the Appellant so that it may continue to provide computer training during the contract period in a smooth manner, without any obstruction. 52. At this juncture, it is also essential to analyse whether all the above referred activities carried out by the Appellant would qualify as supply of services 'under the training program' or not? 53. In order to answer this question, it is pertinent to understand the true nature, scope and extent of the activities undertaken by the Appellant in the implemen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... instruction in a particular subject to enhance skills. 58. It is to be noted that under the erstwhile service tax regime, services in the nature of commercial training and coaching provided by commercial training and coaching institutes were taxable and the term 'commercial training and coaching' was also defined under the Finance Act (both under the positive and negative regime). Further, the courts had, at various occasions, interpreted the term 'training' used therein. 59. In this regard, reference is made to the decision of Hon'ble Customs, Excise & Service Tax Appellate Tribunal (Larger Bench) in the case of Great Lake Institute of Management Ltd. vs. CST, Chennai reported at 2013 (32) STR 305 = 2013 (10) TMI 433 - CESTAT NEW DELHI - LB. In the said case, the Tribunal interpreted the definition of the term 'commercial training or coaching institute' to include any institute or establishment imparting skills/knowledge/lessons on any subject or field. Relevant extract of the judgment is reproduced below for ready reference: 14. The other facet of the definition, of 'commercial training or coaching centre' in Section 65(27) defines the expression with reference to the nature a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er defined nor qualified by adding any conditions viz. content, syllabus, periodicity, etc. Thus, once it is established that the services are in the nature of imparting skills or knowledge, the same would amount to training services for the purpose of Entry No. 72 of Notification No. 12/2017-C.T. (Rate). 64. It is already discussed in detail that the Appellant is engaged in providing computer related skills to the students as well as to the teachers. Thus, it is abundantly clear that the services provided by the Appellant viz. computer related training to the students as well as teachers under ICT Project would squarely fall within the ambit of the term 'training' used in Entry No. 72 of Notification No. 12/2017- C.T. (Rate), irrespective of the tenure, syllabus, content, etc. of the Project. 65. In view of the above, the Appellant humbly submits that the supply of various elements of goods and training services being supplied by the Appellant under the ICT @ School project are naturally bundled supplied in conjunction, with training services being the principal supply. Therefore, according to the Appellant, the Appellant is rendering composite supply to the Government of Mahara ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Court in the case of Sri Sathya Sai Institute of Higher Medical Sciences vs. Union of India reported at 2003 (158) E.L.T. 675 (S.C.) = 2003 (9) TMI 94 - SUPREME COURT OF INDIA, has held that no courts can impose additional conditions which are not provided for in the exemption notification. It was observed specifically that grant of an exemption is the prerogative of the legislature and hence it is for the legislature to impose appropriate conditions for availing the benefit of an exemption notification and not other authorities. 73. Reliance is also placed on Kohinoor Reclamations vs. C.C. Ex reported at 2017 (358) E.L.T. 307 (Tri. - Chan.) = 2016 (9) TMI 529 - CESTAT CHANDIGARH wherein it was held that when a notification does not specify a particular condition, the same cannot be read into it. 74. Further, in various judicial pronouncements it has been repeatedly held that an assessee shall be entitled to benefit of an exemption notification if he satisfies the eligibility criteria and such benefit cannot be deprived by resorting to an imperative process and by reading any condition into the exemption notification. Following are some judicial decision holding the abovementione ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... here. Thus, in the present case, the entire supply (composite supply) is to be treated as the principal supply which is computer training services under the agreement. b. Also, Schedule Il(l)(c) requires payment of full consideration for title in goods to transfer at a future date. In the present case, the agreement stipulates payment of Re. 1/- which cannot be considered as full consideration. For this reason also, Schedule II(1)(c) does not find application in the present case. 78. It is humbly submitted that the decision in the present case is not a reasoned decision against the grounds of application submitted by the Appellant, hence, the impugned ruling is unsustainable and is liable to be set aside. 79. Second pre-requisite: Services are provided to the Government of State of Maharashtra 80. The second pre-requisite of Entry No. 72 of Notification No. 12/2017-C.T. (Rate) is that the services are to be provided to the Central Government or State Government or Union Territory administration. In the instant case, the agreement pertaining to implementation of ICT Project is entered into between the Appellant and the DE (S&HS). 81. It is also apparent from the definition cla ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... have also gone through the Advance Ruling Order passed by the AAR. 90. The appellant is a social infrastructure arm of IL & FS Group and is engaged in key areas of educational skill development, health care and cluster development for a long term. The appellant is also working with various State and Union Territory Governments to promote computer training amongst the students and teachers of the Government and Government aided higher secondary schools under the Information and Communication Technology project (hereinafter referred to as ICT project) in accordance with the National Policy of Education. It is seen from the documents produced by the appellant that the National Policy of ICT school was framed in the year 2012 and the aim of the policy is to transform all government and government aided schools into smart schools where each school would have a computer lab and students are provided with computer training. For the effective implementation of the project, the policy allows the State or Union Territory Governments to take on private partners and implement the ICT project by adopting the BOOT- "Build, own, operate and transfer" model. The project also has to be implemente ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... etc. The other part is a small component of the above. * Regarding the contention of the appellant that there is no consideration for the transfer of the goods in question, it was concluded by the AAR that as per the part 10 of schedule-Il of the SGST Act, any transfer of goods under an agreement which stipulates that property shall passed in future date is also a supply of goods. * The AAR however, agrees with the contention of the appellant that the services are supplied to State Government and therefore one of the condition of the notification is fulfilled. 94. CONTENTIONS OF THE APPELLANT on the above points is given in the grounds of appeal which is not reproduced here for sake of repetition. 95. The facts can be conceptualized in the following manner:- * The Director of Education invited tender notes on e-tendering to implement the ICT project in 5000 Government and Government aided higher secondary schools in the 10 identified regions in the State of Maharashtra. * The State tender was for the supply of computer hardware and connected accessories, education software online MIS, teaching faculty and provision of IT education services. The contract under considerati ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of contract for all ICT related instances and service requests. * As per the payment terms laid down in 7.1 of the agreement, 30% payment will be made on satisfactory commissioning and installation of hardware and delivery and installation of education related software at each school within 120 days from the date of agreement. 5% will be made every semester and the balance 20% payment will be made based on the performance of student in the annual examination of the computer to be conducted by the Government of Maharashtra. (Every year the appellant will be eligible for 4% payment through this mechanism). * As per point 9 of the agreement, after completion of the contract policy of 5 years, the equipment installed and commissioned would be the property of Director of Education and the contractor shall handover all the hardware and software at the end of 5 years. * The total consideration is of Rs. 2,84,61,00,000/-. 96. A plain reading of the Notification No. 72 shows that the benefit of exemption will be given only on the fulfillment of the following three conditions i) Services would have to be given under any training program. ii) To the Central Government, State Governme ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... joyment of a main service. d. Other illustrative indicators, not determinative but indicative of bundling of services in ordinary course of business are - (i) There is a single price or the customer pays the same amount, no matter how much of the package they actually receive or use. (ii) The elements are normally advertised as a package. (iii) The different elements are not available separately. e. No straight formula has been laid down to determine whether any two services are naturally bundled in the ordinary course of business. Each case has to be individually examined in the backdrop of several factors outlined above. 101. We agree with the appellant that the supply involves both goods and training services and is a composite supply fulfilling the requirements of Section 2(30) of the CGST Act. We see that the Government of India in its nationwide policy called the National Policy on Education, 1986, stressed the need to employ information technology to improve the quality of education. This was the old policy which included schemes like computer literacy and studies in school and educational technology. Subsequently, the HRD Ministry revised its old policy and a new ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion Technologies (SIETs) and 5 Regional Institutes of Education (RIEs), as also through outsourcing." Thus, what can be seen from the above is that it is a Central Government driven project and the training along with supply of computers is an inherent part of the project and the project is imagined as such. Therefore, a major pre-requisite for a supply to be a composite supply- that the said bundle should be naturally bundled- is satisfied here. The supply of computers along with training is itself envisaged and conceived as such by the Ministry of Human Resources Development and therefore by its very nature, the supply can be said to be naturally bundled. 103. The fact that the ICT project is being implemented on similar lines in the States is brought out from the following news items on the Net:- PUDUCHERRY Computer-based education in government schools in the Union Territory will now get a fillip with the Department of School Education launching the ICT@ schools project, a Centra/ scheme after a gap of 10 years. IL&FS Education and Technology Services Limited has been selected for the supply of computers, education software and other management systems. This is the second ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hip. Thus, the agreement is in consonance with the national guidelines on computer aided education. It satisfies the criteria of composite supply in the sense that it is an established scheme or a method of training done as per national policy and having government mandate behind it. The ICT scheme is itself introduced with aim to promote computer literacy. The BOOT Model is implemented as the State Government does not have the wherewithal to purchase computer related assets and conduct the imparting of computer training while maintaining and constantly upgrading the content. 105. Further, the perception of consumers is also important here. The consumer here is the Education Department and it accepts these services in a package. The model implemented by the appellant is being followed all over the country. Therefore, it can also be said that the consumer accepts such services provided as a package. All ICT projects have the participation of private parties under the BOOT Model wherein all the activities including supply, installation, commissioning, operation and computer training are to be performed by such private parties. The competitors of the appellant are also providing simi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e the supply of technology along with education. 110. We have also gone through the Agreement of the appellant with the Director of Education. Clause 4.0 of the agreement shows that the contract is for 'provision for computer education including equipment for the same'. Clause 4.1 read thus - "The contractor shall provide computer education and computer aided learning education services in 1950 schools in 3 identified regions in the State of Maharashtra on BOOT basis. Though clause 5 shows that hardware has to be installed by the contractor, the contractor also provides contents for education which will be as per the syllabus provided by the Director of Pune. Clause 6 of the agreement also shows that the contractor shall provide computer education services. Clause8 deals with the provision of faculty. The contractor has to provide faculty members to provide computer education and also assign the subject teachers for providing computer education. There would be a one full time instructor in each school, who shall be available for entire duration of the school and impart computer aided learning to at-least 5 school teachers. Clause 8.3 further stresses that technical training will b ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
