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TMI Blog2023 (12) TMI 481X X X X Extracts X X X X X X X X Extracts X X X X ..... s with the purpose of issuance of occasional commercial teachings not a degree or a diploma granted by the university. After 01.07.2012 the definition of service was amended and concept of negative list is brought. It is undisputed that Punjab Technical University has been constituted by the Act of State Legislature. The degree is conferred by the said university on the students who undergo the courses offered by the said university either by attending the residential programs or attending the courses through distance Education Program. The clarification or circular issued by the UGC do not bar the conferment of the degree by Punjab Technical University to the students who undertake the degree programmes offered by the university through distance education programme - Once the degree has been conferred by the university duly constituted under a State Act or a Central Act, the institute offering such programmes will, go out of the ambit of the Commercial Coaching and Training Services. Delhi bench has in case of Punjab Technical University [ 2016 (1) TMI 162 - CESTAT NEW DELHI] after examining the Memorandum of Understanding etc has held that such centres are franchisee of the PTU a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Act, is sufficient in this case." 2.1 Complain was received to the effect that: (i) the Punjab Technical University, Jalandhar, Punjab (a University established by an Act of State Legislature of Punjab), had appointed Master Companies/ Regional Learning Facilitation Centers across the county, for the purposes of their Distance Education Courses, (ii) these RLFC's had further appointed Learning Centres (LCs) who had signed Memorandum of Understanding (MoU) with the Punjab Technical University, Jalandhar, Punjab (PTU) on fee sharing basis, (iii) fees collected by the LCs were handed over to the PTU through RLFCs and the PTU after retaining their share and after deducting TDS, disbursed the balance amount to RLFCs and LCs and (iv) thus the various courses of the PTU provided by the LCs, were covered under the 'Commercial Training & Coaching Centre Services' taxable under the Finance Act, 1994, on which service tax was required to be paid. 2.2 Acting on the above complain inquiries were initiated against the appellant and it was noticed that during the period from 01.10.2011 to 31.03.2015 appellant has provided Commercial Training and Coaching Center Services without pa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Kapoor appearing for the appellant and Shri Santosh Kumar learned Authorized Representative appearing for revenue. 4.1 We have considered the impugned orders along with the submissions made in appeal and during the course of argument. 4.2 Prior to 01.07.2012 Commercial Training and Coaching Services have been defined under Section 65 (26), 65 (27) and 65 (105) (zzc) which are reproduced bellow:- "Section 65(26): "commercial training or coaching" means any training or coaching provided by a commercial training or coaching centre. Section (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 the sports, with or without issuance of a certificate and includes coaching or tutorial classes but does not include preschool coaching and training centre or 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 underlined words were omitted by the Finance Act, 2011 dated 08.04.2011. Section 65(105)(zz ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the supremacy of the University Grants Commission Act, 1956 and the Regulations issued by the University Grants Commission under Section 26 of the University Grants Commission Act, 1956 over the State Acts and after taking into consideration the UGC (Establishment of and Maintenance of Standards in Private Universities) Regulations, 2003, (which, inter alia, allows a university established under a State Act to operate within the boundary of the State concerned), struck down Sections 5 and 6 of the Chhattisgarh Niji Kshetra Vishwavidyalaya (Sthapana Aur Viniyaman) Adhiniyam, 2002. 4.4 Since the PTU established by an Act of the State Legislature of Punjab, were eligible to operate within the State of Punjab and not outside, the distance learning courses of the PTU conducted by the appellant, were, therefore, not recognized under the University Grants Commission Act, 1956 and the Regulations issued by the University Grants Commission under Section 26 of the University Grants Commission Act, 1956. 4.4.1 Further, I do not find any merit in the submission of the appellant that the territorial jurisdiction of a university established under the State Act, was notified by the UGC, onl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Above observations made in the impugned order go contrary to the entire scheme of 'distance learning program' operated by various Universities across the country. In distance learning program the university is registered in a particular state and is awarded degree on that place. He prepares for that by going to any centre that being so, once someone deserves a degree or award by a university is goes out from the purview of the scheme by the University. The details in respect of the scheme of Distance Education Program of Punjab Technical University as available on their website are reproduced below: "Punjab has been one of the most prosperous states in India since independence by way of Green Revolution coupled with white revolution. In order to give the equal momentum to the industrial growth of Punjab educated skilled workforce in sufficient numbers has always been a need of the hour. The Globalization of Indian economy in early 90's further extrapolated the need of such a young innovative workforce. To address this issue of Technical & professional workforce shortage and to usher into a new era of Industrial Development comparable to International Standards, the Punjab Gov ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... degree conferred by the university will not be recognized outside the jurisdiction of the state. It is undisputed that Punjab Technical University has been constituted by the Act of State Legislature. The degree is conferred by the said university on the students who undergo the courses offered by the said university either by attending the residential programs or attending the courses through distance Education Program. The clarification or circular issued by the UGC do not bar the conferment of the degree by Punjab Technical University to the students who undertake the degree programmes offered by the university through distance education programme. In our view once the degree has been conferred by the university duly constituted under a State Act or a Central Act, the institute offering such programmes will, go out of the ambit of the Commercial Coaching and Training Services. 4.7 Delhi bench has in case of Punjab Technical University after examining the Memorandum of Understanding etc has held that such centres are franchisee of the PTU and has held that service tax will be leviable under the category of Franchisee Services. The text of the said decision is reproduced below: ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h local centres called the LEARNING CENTRES, hereinafter referred to as the "LCs" duly set up and established at the chosen places by the PTU under separate letters of authorization issued by PTU, and each individual LC concerned is required to provide the requisite infrastructure for offering the various Courses of Information Technology and Management (for short, I.T.) and non-Information Technology (for short, Non-I.T.) and other related fields, and its said LCs being located at various local places in the respective zones in the country, and the PTU is accordingly engaging its REGIONAL CENTRES for its each zone in the country to be allotted to the RCs for providing logistic support to and effecting supervision of the said LCs on PTU's behalf within the zone allotted to the RC concerned. AND WHEREAS the PTU's and its said authorized LCs, being the very organs and authorised outreach local centres of PTU created as aforesaid, are engaged in providing training/education by offering PTU's various approved Distance Education Courses of I.T. & Non-I.T. streams and other related fields, strictly as per the commands and norms of the PTU, under the immediate supervision of their resp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Demand Drafts towards fees collected as above from all the LCs located within its allotted zone to the PTU. 1.4 Fees Sharing : Out of the total fees collected from the students and transmitted to the PTU by the RC as above, the fee shall be shared as follows between the PTU, RC and the LC : (1) Share of the PTU : 28/32.5/37% (>28 <37%) (2) Share of the RC : 18/20/22% (as per incentive based assessment) (3) Share of the LC : 45/47.5/50% (as per incentive based assessment) 1.5 Authorization fee : For all the courses offered at the LC as per letter of authorization issued by the PTU, a nonrefundable authorization fee shall be paid by the LC to the PTU by way of bank Demand Draft drawn in the name of Registrar, Punjab Technical University, Jalandhar, payable at Jalandhar, as per rates as fixed and as per norms of the PTU in force from time to time. 1.6 Additional Authorization Fee : For starting any other course(s) not initially mentioned in the letter of authorization issued to the LC, separate prior permission of the PTU shall have to be taken by the LC concerned through the RC and, if so permitted by the PTU in its sole discretion, an additional non-refundable aut ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng to students. (13) Conducting faculty training within their zone. (14) Any other matter/item at the sole discretion and with the prior approval of the PTU. Section 4 : OBLIGATIONS 4.1 OBLIGATIONS OF THE PTU (Party No. 1 herein) (1) PTU will appoint RC and allot zone of operation under this MOU, and shall monitor the working of the RC, and may at its sole discretion, for the development of the system, restructure zone(s) allotted to the RC or advertise for a new RC where performance of RC is poor or not up to the satisfaction of the University. (2) PTU will establish and monitor all the LCs in the Zone through the RC. (3) The LCs will be under the direct & strict control of PTU. (4) The PTU will approve the syllabus, courseware & examination process. (5) The students will be on the rolls of PTU. (6) The prospectus and application form will be approved by PTU. (7) The PTU will approve the update regularly at regular intervals, the course material through its statutory board of studies from time to time. (8) The PTU will conduct the examinations, undertake evaluation process, declare results, award degrees/diploma and issue the DMCs. (9) The qu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (12) To participate in national and international events pertaining to distance education within and outside the country, in consultation with the PTU. (13) The RC will assist the PTU for conduct of the examinations as per Rules & Regulations of the PTU and ensure fair practices. (14) The RC will issue State level advertisements for Admission Notices for the aforesaid courses in the leading Newspapers in coordination with the LCs in consultation with the PTU. (15) The RC will arrange to provide training for the latest technologies and teaching pedagogy to the staff of the LCs in coordination with the PTU. (16) The RC will make timely collection from the LCs of the fees paid by the students at the LCs for the allotted courses. (17) The RC will keep regular and periodic checks on the LCs so as to ensure timely completion of the allotted courses by the LCs. (18) The RC will conduct all kinds of audits (i.e. Technical audit, Management Information System audit, Library audits, Financial audit, etc.) of the LCs in respect of the PTU's courses run at the LCs. (19) The RC will frame the marketing strategy and will ensure its implementation by the LCs, in consult ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... record files and comprehensive MIS for each PTU student enrolled at the LC. (5) To follow, in letter and spirit, all rules and regulations, notifications, guidelines and office orders of the PTU issued from time to time. (6) To enhance student skills and facilitate their placements. (7) To effectively coordinate with the RC and to work in close cooperation with the RC. (8) To participate in meetings and training programmes organized by the RC/PTU. (9) To adhere to the norms & standards of the PTU at all times, as modified from time to time. If the LC is not able to admit students for two consecutive semesters or does not comply with the orders, norms & guidelines of PTU, its authorization shall stand cancelled & withdrawn. Section 5 : Intellectual Property Rights (IPRs) Issues : PTU expects the RCs and LCs to have legal software and use course material with due regard to IPRs (Copyrights, Trademarks, Patents, etc.) of the owners/authors thereof. The PTU will not be bound and legally responsible for any sort of legal consequences arising out of any violation of the IPRs by the RCs and LCs concerned. Section 6 : Authorization: 6.1 In supersession of the exi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... atter with the recommendations of the DEP Council shall then be sent to the BOG of PTU and further decision regarding any punitive action may include modification/restriction/termination of the zone of RC under this MOU, as per decision of the BOG and such decision shall be final and binding on the RC. The decision so taken may be represented against by the concerned RC and the Board may consider appointing a committee to reconsider the decision after giving an opportunity of being heard in the matter to the RC concerned. The decision so taken shall be final. Section 10 : Stipulation. 10.1 For MOU : Two sets of this MOU shall be typed, each one on a separate non-judicial paper of the requisite value meant for agreements. This MOU is to be signed by both the parties and their respective witnesses, in the manner as shown hereunder. After execution of both the original sets (i.e., the each set containing the MOU & the Affidavit) prepared as stipulated in Section 10 above, one original thereof has been kept for record by each of the two parties hereto. IN WITNESS WHEREOF both the parties hereto set their respective hands to this writing (MOU) at this day and year mentioned ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ct obligations on LCs to ensure that the quality of education remained as per the standards of the appellant. It also comes out from the MOU that RCs framed marketing strategies to be implemented by LCs in consultation with the appellant. As per the MOU, the format and style of any advertisement or hoarding to be placed by RCs/LCs had to be done with the prior written approval of the appellant lest these bring down or cast aspersions on or discredit the appellant. Owing to the fact that LCs represented the appellant with regard to providing education, MOU laid down strict requirements of infrastructure, processes, qualifications of staff, etc. as elaborated in the MOU. Though the MOU states that it is not a franchise arrangement and is a model of public-private partnership for deciding classification of the service rendered thereunder, we have to see the nature, terms and conditions thereof; it is immaterial as to what nomenclature is assigned to it. Thus, notwithstanding that the MOU states that it is not a franchise agreement, the aforesaid analysis leaves no doubt that it satisfies all ingredients of franchise as defined in Section 65(47) of the Finance Act, 1994 inasmuch as LCs ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... able to the present case is much wider than the definition which existed during the period covered by the DPS case (supra), making the ratio of the DPS judgment squarely applicable (and more) to the present case. Indeed, the MOU in question is so clear an example of "franchise" as defined in Section 65(47) ibid that any further elaboration on this point will be an exercise in over-kill. 5. Coming to the aspect of valuation of service, we find force in the contention of the appellant that the entire fee collected by LCs in the name of the appellant cannot be treated as assessable value of franchise service. We note that out of the total fee collected by the appellant through LCs, a part was given back to LCs. Obviously, the part of the collection which was given back by the appellant to LCs cannot form part of the assessable value for the purpose of taxability. As per Section 67 ibid, the value of taxable service is the gross amount charged by the service provider for such service and gross amount will be only the amount, which remained with the appellant after payments to LCs. However, the contention of the ld. advocate that only authorisation fee and additional authorisation fe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pressed the fact of providing the taxable service from the Department with an intent to evade payment of Service Tax and had the department not gathered the information on their own about the services provided by the Noticee, this huge evasion of Service Tax would not have come to the notice of the Department as the Noticee neither got themselves registered with the Department nor filed the prescribed returns during the relevant period as required under the law." The appellant was established under Punjab Technical University Act, 1996 and started distance education programme through LCs in terms of the guidelines issued by University Grants Commission (UGC). The details of such programme were advertised and also displayed on its website. It entered into MOUs with almost 1,000 LCs. In these circumstances, the allegation that it suppressed this activity or indulged in wilful misstatement is simply preposterous. In the case of Continental Foundation Jt. Venture v. CCE, Chandigarh-I [2007 (216) E.L.T. 177 (S.C.)], the Supreme Court observed that "an incorrect statement cannot be equated with a wilful misstatement - There cannot be suppression or misstatement of fact, which is not w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... we observe that the demand has been confirmed for want of evidence establishing that the income for the impugned period was received for and on behalf of IGNOU and PTU. But we observe that due accreditation of appellants from both these universities is very much on record. There is no dispute that IGNOU and PTU both are constituted under law. In view of this apparent fact the definition of Commercial Training & Coaching Services and the discussion, as above, is relevant. 9. The bare perusal makes it clear that any institute or establishment issuing any educational qualification which is recognized by law the same is exempted from the tax limits. The expression "recognized by law, no doubt, is a very wide expression as comparing to expression "Conferred by law" or "Conferred by Statue". To be covered under the term "recognized by law" the certificate/ degree/ diploma/ qualification is only required to be the product of a statue and the institute does not except it is sufficient that Institute has approval/ accreditation of some Institute constituted under statute. The Hon'ble Supreme Court in the case of Narsingh Pratap Singh Deo Vs. State of Orissa AIR 1964 (SC) 1793 and in anot ..... X X X X Extracts X X X X X X X X Extracts X X X X
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