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TMI Blog2023 (11) TMI 312X X X X Extracts X X X X X X X X Extracts X X X X ..... Training Institute and Aircraft Engineering Institutes are liable to service tax under Commercial Training or Coaching Service was considered by the Hon ble Allahabad High Court in the case of CCE, Cus., ST Vs Garg Aviations Ltd. COMMISSIONER OF CENTRAL EXCISE, CUSTOMS SERVICE TAX VERSUS M/S. GARG AVIATIONS LTD. [ 2014 (5) TMI 955 - ALLAHABAD HIGH COURT ] - The Hon ble High Court followed the decision of the Hon ble High Court in the case of Indian Institute of Aircraft Engineering [ 2013 (5) TMI 592 - DELHI HIGH COURT ] and held that the activity is not taxable. This case was appealed to Hon ble Supreme Court, and the appeal was dismissed on 6.2.2018. Thus, the issue stands covered by the above judgments which have categorially held that these institutes are not liable to pay service tax under Commercial Coaching or Training Services . The words recognized by law for the time being in force cannot be construed so as to restrict its coverage only to Universities and Educational Boards. There can be other statutes which recognize certain degree, diploma, certificate or qualification. The DGCA is a statutory authority exercising powers conferred on it under the Aircraf ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uctural support such as Hangar Houses and associated technical facility at the airport for repair and maintenance of the aircrafts to provide pilot training to its students. Being equipped with aforesaid facilities, the appellant imparted training to the students in the nature of take off, landing, flying, handling aircrafts and ground training. The appellant prepared the students for various skill tests in the Air and Ground examinations conducted by the Directorate General of Civil Aviation (DGCA) to issue Private Pilot License (PPL), Commercial Pilot License (CPL) etc. As part of the course, the appellant organized field visits for the students to international airports, Regional Meteorological Centres, Aviation maintenance facilities and laboratories so as to provide exposures to them. The Appellant collected fees from their trainees / students for providing such training. Appellant did not pay service tax on the fees collected from the students. On enquiry the appellant informed vide letter dt. 06.10.2010 that their school is not engaged in commercial activities and is not liable to pay any service tax. 3. According to department, Section 65 (26) defines the expression Co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aircraft as a full-fledged pilot. The department observed that the appellant was merely training or coaching a person so as to take an examination conducted by DGCA and so the appellant institute does not qualify to be an institute which issues a diploma, degree or educational qualification recognized by law. 6. Show Cause Notice dt. 22.10.2010 for the period April 2005 to March 2010 was issued proposing to demand service tax along with interest and for imposing penalties. After due process of law, the original authority confirmed the demand, interest and imposed penalties. Against such order No.1/2012 dt.11.1.2012 the appellant preferred an appeal before the Tribunal. At the time of final hearing, the Tribunal after referring to the judgment of the Hon ble Delhi High Court in the case of Indian Institute of Aircraft Engineering Vs Union of India - 2013 (30) STR 689 (Del.) remanded the matter to the original authority vide Final Order No.40624/2014 dt. 13.08.2014 with the direction to consider the issue afresh as to whether the activities rendered by the appellant would be taxable under the Commercial Coaching or Training Services on the basis of judgment passed by the Hon bl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ities of imparting Pilot Training course is taxable as the appellant issues only a Student Pilot License (SPL) which is a prerequisite to enter the aircraft as a trainee. It was alleged that the SPL does not qualify a person to fly aircraft as a full-fledged pilot and only after the test conducted by DGCA and the type rating of the specified aircraft is entered in the Commercial Pilot License (CPL), the trained person can handle the aircraft as pilot. Thus the main allegation is that the training and coaching offered by the appellant would only qualify a student for taking the examination conducted by DGCA. The appellant institute does not issue a diploma or degree or educational qualification recognized under law. In essence, it is alleged that the appellant is not issuing any qualification which is recognized by law and therefore will not fall in the exclusion clause of Notification No.33/2011-ST dt. 25.4.2011. 10. Notification No.33/2011-ST is as under : Notification Service Tax Service Tax Rescinded vide Notification NO.34/2012 Service Tax, Dated 20/06/2012 Exempts to preschool coaching / training and recognized courses from service tax on commercial co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... itutes would also not come under the scope of the exemption provided under the second category of the exemption notification mentioned above for the same reasons as mentioned in paragraphs 2 and 3 above. It is also pertinent to mention that the intent of the changes in the definition of Commercial Training or Coaching service as made in Budget of 2011 is evident on perusal of the explanatory letter of JS (TRU-II) D.O.F.no.334/2/2011-TUR, dated 28-2-2011 wherein at Para 3.3 it has been mentioned that The scope of the service is proposed to be expanded to include all the coaching and training that is not recognised by law, irrespective of whether the institute is providing any other course(s) recognised by law . Thus, the scope of the service has in fact been expanded. 5. In addition, it may also observed that the institutes do not fall under the exemption Notification No.24/2004 (as amended), as the institutes courses do not directly enable the training getting the requisite employment. 6. Therefore, the said institutes/academies would clearly come in the category of coaching centres as laid out in section 65 (27) of the Finance Act ibid (either prior to or after Budget 201 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... GCA the same is scrutinized by the Central Examination Organization [CEO] at DGCA office which declares the successful candidates and based on the authorization of the DGCA, appellant awards the SPL to such students on behalf of DGCA and this license is mandatory for commencement of actual flying training in the aircraft by the student. For the grant of the CPL, DGCA mandates a minimum training requirement of 200 hours of flying training which includes flying by night as well as 350 hours of ground training in the class room on various subjects. At the end of the training session, the student is put to various skill tests in the air and upon successful completion of the course, a completion certificate in the format specified by the DGCA is given and the said certificate is recognized by DGCA, a statutory authority exercising statutory powers under the Aircraft Act of 1934 and the rules made thereunder. Consequently, this certificate issued by appellant gets recognition by law for the time being in force leading to the grant of the CPL to such students. 15. The Counsel submitted that the requirement and procedure for appearing for the examination for issue/extension of flight cr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the negative list has been introduced. It is submitted by the learned counsel that the activity of the appellant is fully covered by clause (l) of Section 66D which reads as under : (i) services by way of preschool education and education upto higher secondary school or equivalent (ii) education as a part of a curriculum for obtaining a qualification recognized by any law for the time being in force (iii) education as part of an approved vocational education course. 19. The Learned counsel pointed out that the activity carried out by the appellant is covered by clause (ii) and clause (iii) as above as the institution as well as curriculum is duly approved by DGCA. The students undergo examination conducted as per the curriculum and the evaluation is done by DGCA. It is the DGCA which certifies whether a student has been qualified after the course to apply for Commercial Pilot License. It is asserted by the learned counsel that only after a student completes the course imparted by the appellant institute and passes the exam which is conducted as per DGCA norms, the student is eligible to apply for the license before DGCA. The Commercial Pilot License (CPL) and P ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... se SCNs (SODs) were kept in call book. After huge delay, and after the SLP before Apex Court was withdrawn these notices were taken up for adjudication. Further, the issue is purely interpretational in nature and for this reason the demand raised invoking the extended period cannot sustain. The Board itself was unsure and had to issue clarification to bring levy of tax on the flight training schools which was later held invalid. There is no evidence adduced that the appellant had suppressed facts with intent to evade payment of service tax. For the same reasons, the penalties imposed may be set aside. 24. Without prejudice, the Ld. Counsel pointed out that the demand has been quantified on the basis of the fees collected. The appellant did not charge or collect service tax and is therefore eligible for cum-tax benefit. 25. The Ld. Counsel prayed that the appeals may be allowed. 26. Ld. A.R Sri Rudra Pratap Singh appeared and argued for the Department. The circular issued by the Board dt. 11.5.2011 was resorted to by the Ld. A.R to argue that the it is clarified by the Board that the Commercial Coaching or Training Services provided by Flight Training School and Air Craft ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r than a University, shall be deemed to be a University for the purposes of this Act, and on such a declaration being made, all the provisions of this Act shall apply to such institution as if it were a University within the meaning of clause (f) of section 2. Also, UGC, with the approval of Central Government and under the Recognition of College in Terms of Regulations, 1974 framed under the UGC Act, can grant recognition to a college or institution run by a trust, a registered society or a body corporate or body incorporated under Central or state Act as an institution affiliated to or form as constituent member with a university , providing education up to a bachelors degree, masters degree or diploma of a duration of minimum one academic year As per National Policy on Education, 1986, a scheme of autonomous colleges was promoted. In the autonomous colleges, whereas the degree continues to be awarded by the university, the name of college is also included. These colleges develop and submit new courses of study for approval by the university. These autonomous colleges are fully responsible for the conduct of examination. As all these institutions or establishment are either ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1987. AICTE, using the powers conferred on it through 1987 Act, issued the 'AICTE (Grant of Approval for Starting New Technical Institutions, Introduction of Courses or Programme and Approval), Regulation 1994. Theses were amended in the years 1997 and 2000.Under Regulation 4 (Requirement of Grant of approval) of these Regulations, AICTE prescribed that,- After the commencement of these regulations,- a. No new Technical Institution or University Technical Department shall be started; orb. b. No course or programme shall be introduced by any Technical Institution, University including a Deemed University or University Department or Collage; orc. c. No Technical Institution, University or Deemed University or University Department or College shall continue to admit students for Degree or Diploma course; ord. d. No approved intake capacity of seats shall be increased or varied; Except with the approval of the council. The powers to issue regulations for approval are conferred on AICTE under Section 23 read with Section 10 of the AICTE Act. 27. On the basis of above Circulars and Notification, the Ld. A.R strenuously argued that as the appellant is not imp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 4 07/12 to 03/13 22,91,765/- -do- -- 6. SOD 08/2015 dated 02.03.2015 04/13 to 09/14 89,11,696/- -do- -- 7. SOD 48/2016 dated 14.07.2016 10/14 to 09/15 66,38,771/- -do- -- 32. In the first round of litigation before Tribunal, the demand confirmed for the period 2005-2010 (SCN dt. 22.10.2010) was remanded to the adjudicating authority to reconsider in the light of the decision of the Hon ble Delhi High Court in the case of Indian Institute of Aircraft Engineering Vs Union of India 2013 (30) STR 689 (Del.). As per the judgment in this case, the Hon ble High Court quashed the circular issued by Board F.No.137/132/201-ST dt. 11.5.2011. After the introduction of notification No.33/2011-ST which has already been noticed earlier, the Board issued the above circular clarifying that the Flight Training Institutes are coaching centres leviable to service tax under Section 65 (27) of Finance Act 1994. The said clarification ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... one by another person as authorized, formally acknowledging the existence; and, in Concise Oxford Dictionary as acknowledging the existence, validity or legality of. 25 . We are of the view that the Act, the Rules and the CAR, having provided for grant of approval to such institutes and having laid down conditions for grant of such approval and having further provided for relaxation of one year in the minimum practical training required for taking the DGCA examination, have recognized the Course Completion Certificate and the qualification offered by such Institutes. The certificate/training/qualification offered by Institutes which are without approval of DGCA would not confer the benefit of such relaxation. Thus, the certificate/training/qualification offered by approved Institutes, has by the Act, Rules and the CAR been conferred some value in the eyes of law, even if it be only for the purpose of eligibility for obtaining ultimate licence/approval for certifying repair/maintenance/airworthiness of aircrafts. The Act, Rules and CAR distinguish an approved Institute from an unapproved one and a successful candidate from an approved institute would be entitled to enforce the r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the petitioner cannot be withered away or ignored merely because the same does not automatically allow the holder of such qualification to certify the repair, maintenance or airworthiness of an aircraft and for which authorization a further examination to be conducted by the DGCA has to be passed/cleared. 28 . We are therefore of the view that the Instruction aforesaid holding the petitioner to be assessable to Service Tax is contrary to Section 65(27) and the Notification dated 25th April, 2011. Accordingly the said Instruction and the show cause notices given to the petitioner are quashed. The Rule is made absolute and the writ petition is disposed of. 32.3 Though the department filed appeal before the Hon ble Apex Court as SLP (C) No. 6083/2014 the same has been dismissed as withdrawn on 19.11.2020. Therefore, the decision of the Hon ble High Court of Delhi would be binding. Though, in the impugned order, the adjudicating authority has taken a frail effort to say that the appeal filed by department was withdrawn on monetary limits as per litigation policy, the order of the Apex Court dt. 19.11.2020 does not specify anything like this. Further, as per the litigation polic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... The provisions for undertaking training from such institutes is laid down in Aircraft Rules, 1937. The relevant part of letter issued by DGCA is reproduced as under : 32.8 The above document would amply support the case of the appellant. 32.9 For the period after 1.7.2012 also the discussions made above would apply. Section 66D gives the negative list of services. Clause (l) of Section 66D as it stood during the relevant time (prior to 14.5.2016) reads as under : (l) services by way of (i) pre-school education and education upto higher secondary school or equivalent (ii) education as a part of a curriculum for obtaining a qualification recognized by any law for the time being in force. (iii)education as a part of an approved vocational education course. The above clause (l) of Section 66D has been omitted by Finance Act, 2016 (28 of 2016) dt. 14.5.2016. The period of dispute covered in these appeals are upto September 2015 only. 32.10 The words recognized by law for the time being in force cannot be construed so as to restrict its coverage only to Universities and Educational Boards. There can be other statutes which recognize certain degree, d ..... X X X X Extracts X X X X X X X X Extracts X X X X
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