Custom, Excise & Service Tax Tribunal
Csc Computer Education Pvt Ltd vs Service Tax - Chennai on 17 August, 2018
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IN THE CUSTOMS, EXCISE AND SERVICE TAX
APPELLATE TRIBUNAL
SOUTH ZONAL BENCH AT CHENNAI
Application No.: ST/Misc[CT]/41608/2017
Appeal No.:ST/00138/2011
(Arising out of Order-in-Original No. 20/2010 dated 30.11.2010
passed by the Commissioner of Central Excise, Chennai IV
Commissionerate)
M/s. CSC Computer Education (P) Ltd. : Appellant
Vs.
The Commissioner of Service Tax, Chennai : Respondent
[sought to be changed to:
"The Commissioner of G.S.T. & Central Excise,
Chennai South Commissionerate"]
Appearance:-
Shri. G. Natarajan, Advocate
for the Appellant
Shri. K. Veerabhadra Reddy, JC (AR)
for the Respondent
CORAM:
Hon'ble Ms. Sulekha Beevi C.S., Member (Judicial)
Hon'ble Shri Madhu Mohan Damodhar, Member (Technical)
Date of Hearing:31.07.2018
Date of Pronouncement:17.08.2018
Final Order No. 42257 / 2018
Per Bench,
The appellants are engaged in providing Commercial Coaching
and Training Service and Franchise Service and are registered with
the Service Tax Department. Consequent to Audit of Accounts, it
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was noticed that the appellants had short paid the service tax under
both these categories and had also not discharged service tax under
Business Auxiliary Services (BAS). Show Cause Notice was issued
proposing to demand the service tax along with interest and also for
imposing penalties. After due process of law, the Original Authority
vide Order dt. 30.11.2010 confirmed the following demands :
(i) Confirmation of demand of service tax of Rs. 1,86,91,417/-
under Franchise Service, along with applicable interest.
(ii) Confirmation of demand of service tax of Rs. 1,03,87,552/-
under Commercial Coaching and Training Service, along
with applicable interest.
(iii) Confirmation of demand of service tax of Rs. 4,96,720/-
under Business Auxiliary Service, along with applicable
interest.
(iv) Confirmation of demand of Rs. 22,705/- under Section 73
A of the Finance Act, 1994, along with applicable interest,
on the ground that to this extent service tax collected has
not been paid to the Government, due to the rounding off
done by the appellant.
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(v) Imposition of a penalty of Rs. 2,95,98,394/- under Section
78 and Rs. 5,000/- under Section 77 of the Finance Act,
1994.
Aggrieved, the appellants are now before the Tribunal.
2.1 The Ld. Counsel Shri. G. Natarajan appeared and argued on
behalf of the appellant. He submitted the details of the demand
which is tabulated as below :
I. Demand of Service Tax under Franchise Service (2003-04 to
2007-08) :
Sl. Details of Value ST ST Paid ST Defence
No. demand (in Rs.) Payable (in Rs.) Demande
(in Rs.) d (in Rs.)
1. ST demanded 1200020/- 114824/- 0 114824/- Not being
on Caution contested
Deposit
2. Demand 61602019/- 7138646/- 5722324/- 1416322/- ST properly paid
based on P & on realization
L Account basis
Levy is only from
01.07.2003 and
whole year
royalties
considered
3. Demand on 80681316/- 9482015/- 0 9482015/- These materials
sale of are sold to the
administrative franchisees and
material and hence no ST can
promotion be demanded
4
materials to Demand is
franchisees confirmed under
Rule 5 of the
Service Tax
(Determination of
Value) Rules,
2006, which has
been struck down
by Delhi HC/SC.
4. Demand on 62425254/- 7678256/- 0 7678256/- These materials
course are sold by
materials distinct entities to
supplied by the franchisees
CSC
These represent
Publications
the value of
and Ramiah
materials sold to
Publications
the franchisees
and hence no ST
can be demanded
24413741/- 18691417/-
II. Demand of S.T. under Commercial Coaching or Training
Service (2003-04 to 2007-08) :
Sl. Details of Value ST ST Paid ST Defence
No. demand (in Rs.) Payable (in Rs.) Demande
(in Rs.) d (in Rs.)
1. Demand 29351735/- 3276992/- 2545126/- 731866/- ST properly paid
based on on realization basis
Profit and
Loss
Account
2. Training 1216388/- 132364/- 0 132364/- Benefit of
provided to exemption as
Govt. Staff "computer training
and Private institute" and
Companies "vocational
training institute"
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available up to
15.06.2005
( Notif. 19/2005)
3. Sale of 43827737/- 5012804/- 0 5012804/- These materials are
course sold to the
materials to students and hence
students no ST can be
demanded
4. Examinatio 8342275/- 850912/- 0 850912/-
n fee and
other
charges
5. Hardware 380200-/ 38780/- 0 38780/- Benefit of
training fee exemption of
"computer training
institute" and
"vocational
training institute"
available up to
15.06.2005
6. Service 23023000/- 3400826/- 0 3400826/- Essential character
provided to of the service is
Department providing
of School computer
Education hardware to
schools on lease
basis, which was
taxable only from
16.05.2008
Benefit of
exemption under
Notification
10/2003 is
admissible
7. JDC 237604/- 24236/- 0 24236/- Benefit of
Summer exemption of
Class "computer training
institute" and
"vocational
training institute"
available up to
15.06.2005
8. Computer 1707530/- 195765/- 0 195765/- Essential character
rent and of the service is
hire providing
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charges, computer
including hardware to
TNOU schools on lease
courses basis, which was
taxable only from
16.05.2008
Benefit of
exemption under
Notification
10/2003 is
admissible
12932678/- 2545126/- 10387552/-
III. Demand of Service Tax under Business Auxiliary Service &
Demand due to rounding off (2003-4 to 2007-08) :
Sl. Details of Value ST Payable Defence
No. demand (in Rs.) (in Rs.)
1. Incentive from 4036848/- 474982/- It Is in the nature of quantity
Tally discount for the purchases
made
2. Sale of TNOU 183236/- 21739/- No BAS involved
Forms
3. Demand due to 22704/- Not pressed by the
rounding off appellant
519425/-
2.2.1 The first table relates to demand of service tax under
Franchise Service.
2.2.2 With respect to the demand made on Caution Deposit as
shown in Sl. No. 1 in the above table, it is submitted by the Ld.
Counsel that the appellant has discharged the entire service tax
payable on this count. He adverted to page 187 and 188 of the
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appeal paper book and submitted that the appellant has paid an
amount of Rs. 1,14,824/- and the demand raised on the ground of
Caution Deposit received by the appellant is thus discharged fully.
2.2.3 In respect of the demand in Sl. No. 2 based on the difference
in figures shown in ST-3 returns and the Profit and Loss (P&L)
Account, it is explained by the Ld. Counsel that the difference is
because of the fact that during the disputed period the service tax
was payable on realization basis whereas the figures appearing in
the Profit and Loss Account is shown on accrual basis.
2.2.4 A demand of Rs. 9,48,2015/- is made in Sl. No. 3 in respect of
sale of administrative materials and promotion materials to
Franchisees. It is submitted by the Ld. Counsel that these materials
were sold by the appellants to the Franchisees. No service tax can be
demanded on a transaction of sale. It is also argued by him that the
demand is raised invoking Rule 5 of the Service Tax (Determination
of Value) Rules, 2006 and the said rules have been struck down by
the Hon'ble Apex Court in the case of Union of India Vs.
Intercontinental Consultants and Technocrats Pvt. Ltd. - 2018 (10)
G.S.T.L. 401 (S.C.).
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2.2.5 The demand shown in Sl. No. 4 is with regard to the course
materials supplied by CSC Publications and Ramiah Publications.
He submitted that these concerns are different and independent
entities, who are engaged in publishing the study materials and
books for the courses provided by the appellant. The Department
has raised the demand merely for the reason that these concerns are
owned by family members of the Managing Director of the
appellant. Being separate, independent entities, the value in their
accounts cannot be made subject of demand of service tax on the
appellant. Moreover, the values represented sale of study materials
and books and no service tax can be demanded on the same.
2.3.1 The second table relates to the demand raised under
Commercial Coaching or Training Services.
2.3.2 The demand in Sl. No. 1 in this table is in respect of the
difference in figures contained in the ST-3 returns and the Profit
and Loss Account. The argument in respect of Franchise Service was
reiterated by the appellant for this demand also.
2.3.3 In Sl. No. 2, the demand is raised with regard to the training
provided to government staff and private companies. The Ld.
Counsel adverted to the various exemption Notifications which
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were in force during the disputed period and argued that Computer
Training Institute was exempted by Notification No. 09/2003-ST dt.
20.06.2003 and further, vide Notification No. 01/2004-ST dt.
04.02.2004. Thus, the training provided to government staff and
private companies would be eligible for exemption up to 30.06.2004.
The Ld. Counsel, however, fairly conceded that for the period after
30.06.2004, the exemption Notification 24/2004 dt. 10.09.2004 did not
expressly exempt Computer Training Institutes. But the Notification
exempts Vocational Training Institutes. Since the training was
imparted to government staff and private companies, the exemption
available to Vocational Training Institute would not be eligible for
training imparted to Government Employees and private
individuals as these people are already employed. That the
appellant is thus admitting the liability on this count after the period
30.06.2004.It is also submitted by him that the appellant has paid up
the amount for the period after 30.06.2004.
2.3.4 In regard to Sl. No. 3, the demand is raised on sale of course
materials to students and reiterated the arguments in regard to
Franchise Service and submitted that service tax cannot be
demanded on the transaction of sale of course materials to students.
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2.3.5 The demand raised in Sl. Nos. 4 and 5 is with regard to
computer training imparted to various schools as per the agreement
entered with the Tamil Nadu Education Department. He submitted
that up to 30.06.2004, the Notification No. 09/2003 and 01/2004
exempted computer training from the levy of service tax. After
30.06.2004, the Notification No. 24/2004-ST dt. 10.09.2004 though did
not specifically mention Computer Training Institutes to be
exempted, it was mentioned in the Notification that Vocational
Training Institute and Recreational Training Institute are exempted.
Since the computer training was imparted to students which would
help them to seek employment or undertake self-employment after
such training/coaching, the same would fall under vocational
training and therefore, the appellant is eligible for exemption under
Notification No. 24/2004. To support this argument, he relied upon
the decision in the case of C.C.E. Meerut-I Vs. Doon Institute of
Information and Techno. P. Ltd.- 2014 (35) S.T.R. 711
(Uttarakhand). After 10.09.2004, the Notification No. 19/2005 dt.
07.06.2005 came into force on 16.06.2005. This Notification expressly
excluded computer training from the exemption given in
Notification No. 24/2004. Thus, after 16.06.2005, the exemption is not
available for computer training courses. The appellant would
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therefore be eligible for exemption up to 16.06.2005. They have paid
up the demand after the period post 16.06.2005 along with interest.
2.3.6 In regard to the demand raised in Sl. Nos. 6 and 8, the Ld.
Counsel took us through the agreement entered into by the
appellant with the Contractor of School Education, Madras dt.
11.01.2001 and submitted that the contract was mainly for leasing of
computer hardware and software and connected accessories.
Though there was also agreement for imparting Computer
Education Services in Government Higher Secondary Schools, the
training character of the agreement was for providing computer
hardware to schools on lease basis. This would fall under the
category of "Supply of Tangible Goods" and would not fall under
"Computer Training Services". The Ld. Counsel submitted that the
appellant is also entitled for exemption from payment of service tax
on the said activity in terms of Notification No. 10/2003-ST dt.
20.06.2003. The said Notification exempts the taxable services
provided by a commercial training or coaching centre in relation to
commercial training or coaching which forms an essential part of a
course or curriculum. Computer training which was imparted by
the appellants as per the agreement, was part of the
course/curriculum of these schools and therefore, the exemption
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under Notification No. 10/2003 would squarely cover the activity.
That therefore the appellant is not liable to pay service tax for the
demand raised in Sl. No. 6 in the above table.
2.3.7 In regard to the demand for Junior Diploma Course (JDC)
Summer Classes in Sl. No. 7, the Ld. Counsel submitted that the
appellant is not contesting the same.
2.3.8 In regard to the demand raised in Sl. No. 8, it is argued by the
Ld. Counsel that the amount involves computer renting and hire
charges including the training imparted to the students. The very
same arguments for Sl. No. 6 would be applicable to this demand
also. Thus, it was mainly for leasing out computer hardware and a
part of the agreement also was for giving coaching to the students.
The computer coaching being part of the course/curriculum of the
school, the appellant is eligible for exemption under Notification
No. 10/2003.
2.4.1 The third table relates to the demand raised under Business
Auxiliary Services & Demand due to rounding off.
2.4.2 In Sl. No. 1, the Department has made demand under
Business Auxiliary Services (BAS) on the incentive received by them
from M/s. Tally. For providing training in the field of Accounting
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Software Packages, the appellant was using tally package and this
was used to train the students. The tally kits (in the form of books,
development by M/s. Tally) were used for that purpose. This was
purchased by the appellant from M/s. Tally Sales P. Ltd. Based on
the number of packages purchased, M/s. Tally would give incentive
to the appellant. The Department alleges that the appellant is
engaged in promotion or marketing or sale of goods produced
belonging to the client and thus, has demanded service tax under
the category of Business Auxiliary Services. He argued that the
incentive is only in the nature of quantity discount for the purchases
made and, therefore, cannot be subject matter of service tax.
2.4.3 In Sl. No. 2 of the third table, the demand is raised on the
amount received for sale of application forms of Tamil Nadu Open
University (TNOU). The appellant is one of the recognized study
centres for Tamil Nadu Open University to impart computer related
courses. The prospectus and application forms for admission into
TNOU courses are sold by the appellant. The forms are sold by the
appellant at the same price by which they purchased; while
purchase, the same is accounted as TNOU application forms and
expenses. Thus, it is partly purchase and partly sale and the
appellant is not at all promoting any product manufactured by
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TNOU or services offered by TNOU. Thus, these do not fall under
Business Auxiliary Services. Further, TNOU is a unit of the
Government of Tamil Nadu, providing education and is not at all a
business proposition.
2.4.4 In Sl. No. 3 of the said table, a demand of Rs. 22,704/- has been
raised, alleging that the appellant has short paid the duty due to
rounding of the figures. The Ld. Counsel was fair enough to submit
that the appellant is not contesting this liability and has paid up the
same.
3.1 The Ld. AR Shri. K. Veerabhadra Reddy supported the
findings in the impugned order.
3.2 With regard to the demand raised in Sl. No. 1 in the table
relating to Franchise Service, the Ld. AR submitted that admittedly,
there is a difference in the figures mentioned in the ST-3 returns as
well as the Profit and Loss Account. Though the appellant explains
that it is due to the reason that service tax is payable on realization
basis and the figures shown in Profit and Loss Account is on accrual
basis, no such plea has been put forward before the adjudicating
authority. Therefore, the said contention cannot be accepted without
verification.
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3.3 With regard to the demands raised in Sl. Nos. 3 and 4 in the
said table relating to Franchise Service, the Ld. AR reiterated the
findings in the impugned order.
3.4 In respect of the demand raised in Sl. No. 2 relating to
Commercial Coaching and Training Service, the Ld. AR submitted
that the demand raised is correct and proper.
3.5 Countering the arguments put forward by the Ld. Counsel in
respect of Sl. Nos. 4, 5 and 6 of the said table, the Ld. AR submitted
that after 30.06.2004, the appellants are not eligible for exemption of
service tax for computer training courses. The legislative intent is
very much clear from Notification No. 24/2004-ST dt. 10.09.2004.
The Notification, by its amendment, has excluded computer training
institutes. The services provided by Vocational Training Institute or
Recreational Training Institute are only exempted under
Notification No. 24/2004. Computer training will not fall within the
category of Vocational Training Institute. The subsequent
Notification No. 19/2005 has expressly excluded the Computer
Training Institute from the purview of exemption of service tax. The
legislative intent therefore is very much clear to remove the
exemption provided to computer training institutes. Thus, after
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30.06.2004, the appellant cannot claim exemption up to 16.06.2005,
contending that Computer Training Institute would fall within the
category of Vocational Training Institute.
3.6 It is also argued by the Ld. Counsel that the appellant has
imparted computer training to the students as per the agreement
entered into with the Education Department. There is no evidence to
show that this training was part of the course or curriculum of such
schools, leading to issuance of any certificate or diploma recognized
by law. For this reason, the contention of the appellants (eligible for
exemption as per Notification 10/2003) cannot be accepted.
3.7 In regard to the demand of service tax in Sl. No. 1 under
Business Auxiliary Services on the incentive received from Tally,
the Ld. AR submitted that the appellants are using the said software
and are being paid discounts based on the purchases made. This is
nothing but promotion of their software packages and programmes
and, therefore, is taxable under Business Auxiliary Services. It is also
argued by him that the amount received for sale of forms of TNOU
would also be covered under the activity of promotion of sales of
the University and therefore, is taxable under BAS.
4. Heard both sides.
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5.1 Let us consider each as per the tables furnished above.
I. Demand of Service Tax under Franchise Service (2003-04 to
2007-08)
5.2.1 In Sl. No. 1 of the table relating to Franchise Service, the
demand is in respect of the Caution Deposit collected by the
appellants. The Ld. Counsel has submitted that they have
discharged the service tax liability on this count. In page number
187 to 188 of the appeal paper book, the appellant has enclosed the
challans in respect of the service tax paid on this count. We are,
therefore, convinced that the appellant has discharged the service
tax and the demand is upheld.
5.2.2 The demand in Sl. No. 2 in this table is with respect to the
difference in the figures in the Profit and Loss Account as well as the
ST-3 returns. The Ld. AR has adverted to para 6.4 of the Order-in-
Original. Though the Ld. Counsel for the appellant contends that
the difference in figures is due to the fact that service tax is payable
on realization basis whereas the figures in the Profit and Loss
Account is mentioned on accrual basis, we do not find any such plea
taken before the adjudicating authority. As pointed out by the Ld.
Counsel, the appellant admits that there is some difference in the
18
figures. The fact as to what is the reason for the difference has to be
verified by the adjudicating authority and for this reason, we hold
that this issue has to be remanded to the adjudicating authority.
5.2.3 In Sl. No. 3, the demand is in respect of administrative
materials and promotion materials sold to the Franchisees. Even as
per the Show Cause Notice, the allegation is that these course
materials, administrative materials, promotion materials, etc., are
part and parcel of the Franchise Service and are sold to the
Franchisee. When the Department itself admits that the amount is
collected for the sale of such materials, the demand of service tax on
the same cannot sustain. It is clarified by the Ld. Counsel for
appellant that being books and study materials, these are not subject
to levy of VAT. Thus, we hold that the demand raised on the cost
recovered from the Franchisees for supply of course materials and
administrative materials cannot sustain and requires to be set aside,
which we hereby do.
5.2.4 In Sl. No. 4, the demand is raised on course material kit
supplied by CSC Publications and Ramiah Publications. It is very
much clear from the Show Cause Notice as well as from the
impugned order that the amounts for the supply of such study
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materials are collected by CSC Publications and Ramiah
Publications and not by appellants. In such event, the amount
received by CSC Publications and Ramiah Publications, who are
independent entities, cannot be included in the taxable value of the
appellant. In any case, it is settled law that study materials supplied
cannot be included in the taxable value for levy of service tax. Thus,
the demand raised on the ground of amount received by CSC
Publications and Ramiah Publications for supply of study materials
to the Franchisee cannot sustain and requires to be set aside which
we hereby do.
II. Demand of S.T. under Commercial Coaching or Training
Service (2003-04 to 2007-08)
5.3.1 In Sl. No. 1 in the above table relating to Commercial
Coaching and Training Service, the demand is based on the
difference in the figures shown in ST-3 returns and Profit and Loss
Account. Considering the arguments put forward by the Ld. AR on
the same issue with regard to Franchisee Service, we are of the
opinion that this issue also requires to be remanded to the
adjudicating authority.
5.3.2 In Sl. No. 2, the demand is raised for the amount received for
imparting training to government staff and private companies. The
Ld. Counsel for appellant has been fair enough to submit that as per
20
Notification No. 09/2003 and 01/2004 Computer Training Institutes
were exempt from service tax only till 30.06.2004 and therefore, after
30.06.2004 they are liable to pay the service tax. We find the said
contention to be legally correct and we hold that the demand prior
to 30.06.2004 cannot sustain and requires to be set aside, which we
hereby do. We make it clear that the appellant is liable to pay
service tax after 30.06.2004 on this count, and uphold the same.
5.3.3 In Sl. No. 3, the demand is made in respect of amount
received by the appellant for sale of course materials to students. In
para 7.4 of the impugned order, the adjudicating authority has
confirmed the demand stating that it is clarified that the textbooks
supplied are standard textbooks and therefore, the study materials
cannot be out of the levy of service tax. It is settled law that the
study materials supplied cannot be subject to levy of service tax.
Further, as per the Show Cause Notice itself, the amount is collected
by sale of study materials to the students. No service tax can be
levied on the transaction of sale and, therefore, the demand raised
on this count requires to be set aside, which we hereby do.
5.3.4 In respect of the demand raised in Sl. Nos. 4 and 5, the Ld.
Counsel has submitted that these are demands relating to the
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computer training imparted to students. He has contended that up
to 16.06.2005, Computer Training Institute is exempted from levy of
service tax and therefore, the demand can sustain only post
16.06.2005. The Ld. AR has vehemently opposed this contention of
the appellant stating that after 30.06.2004, the Notification No.
24/2004 has excluded Computer Training Institutes from the
purview of exemption. The appellant is seeking shelter under the
category of Vocational Training Institute mentioned in Notification
No. 24./2004. It is correct that as per Notification No. 19/2005 which
has come into force on 16.06.2005, the Computer Training Institutes
have been removed from the purview of exemption granted by
Notification No. 24/2004.
5.3.5 The issue has been addressed by the various judgments of the
Hon'ble High Court of Uttarakhand. In the decision of Doon Institute
of Information and Techno. P. Ltd. (supra) it was held that "Computer
Training Institute" would fall under "Vocational Training Institute"
in terms of Notification No. 24/2004 until 16.06.2005. The relevant
portion is reproduced as under :
"3. On 10th September, 2004, when the original Notification No. 24/2004-
Service Tax was notified, thereby, vocational training institutes and recreational
training institutes were accorded exemption, but not the computer training
institutes. Computer training institutes, therefore, could not be covered by the
exemption accorded by the Notification dated 10th September, 2004. 10th
22
September, 2004 Notification is an independent Notification. The same did not
refer to any earlier Notification. Therefore, in the matter of interpreting the
Notification dated 10th September, 2004, one has to read only the words used in
that Notification and cannot borrow any words from any other Notification. By
this Notification, there is no dispute that exemption was accorded to vocational
training institutes. Vocational training institutes had been defined by the
Notification. It said that a vocational training institute shall mean a commercial
training or coaching center, which provides vocational training or coaching that
imparts skill to enable the trainee to seek employment or undertake self-
employment directly after such training or coaching. In absence of statutory
definition, we have to proceed on the basis of the ordinary meaning of the word
"vocational", which means "relating to an occupation or employment; directed
at a particular occupation and its skills". It cannot be questioned that skill
pertaining to computer software and hardware is required to be acquired and, at
the same time, it cannot be disputed that once such a skill is acquired, it throws
open the door of an occupation relating to computer software and hardware,
which entails employment or self-employment. Inasmuch as nothing was
mentioned in the Notification dated 10th September, 2004 as regards computer
training institutes, it cannot be said that the 10th September, 2004 Notification
made any distinction in between a vocational training institute and a computer
training institute, as was made on 20th June, 2003. In that background, we find
that the Tribunal cannot be said to have erred by holding out that the
respondent assessee was a vocational training institute, but we make it clear
that it was so in terms of the Notification dated 10th September, 2004 until 16th
June, 2005, i.e. when the concept of computer training institute was introduced
for the first time in the Notification dated 10th September, 2004. Having had
said so, we find no scope of interference. The Appeal fails and the same is
dismissed."
5.3.6 Following the same, we are of the view that the appellant is
eligible for exemption up to 16.06.2005. The demand for the period
up to 16.06.2005, therefore, requires to be set aside, which we hereby
do. We make it clear that the appellant is liable to pay service tax
from 16.06.2005 along with interest.
5.3.7 In Sl. No. 6 of the table, computer training has been imparted
to schools as per the agreement entered into with the Education
Department of Tamil Nadu. The Ld. Counsel has strongly argued
23
that the essence of this agreement is for leasing of computer
hardware, software and connected accessories. We find that the
agreement also has stipulations for imparting computer training. It
is the case of the Ld. Counsel that even if the appellant has imparted
computer training to the students of these schools as per the
agreement, the same would be eligible for exemption under
Notification No. 10/2003. For better appreciation, the exemption
contained in the above Notification is reproduced as under :
"In exercise of the powers conferred by section 93 of the Finance Act, 1994 (32
of 1994), the Central Government, being satisfied that it is necessary in the
public interest so to do, hereby exempts the taxable services provided by a
commercial training or coaching centre, in relation to commercial training or
coaching, which form an essential part of a course or curriculum of any other
institute or establishment, leading to issuance of any certificate or diploma or
degree or educational qualification recognised by law for the time being in force,
to any person, from the whole of the service tax leviable thereon under sub-
section (2) of section 66 of the said Act :
Provided that this exemption shall not be applicable if the charges for such
services are paid by the person undergoing such course or curriculum directly to
the commercial training or coaching centre.
2. This notification shall come into force on the 1st day of July, 2003."
5.3.8 It is seen from the agreement that basic computer education
has been made compulsory for the Government schools by the
Government of Tamil Nadu and the appellant has been awarded the
contract to provide the hardware, software as well as for imparting
training to the students. It is very much clear that the training
imparted by the appellants is according to the syllabus, as approved
24
by the Government of Tamil Nadu. Such training does form part of
the course/curriculum of school education and we are of the
considered opinion that the appellant is eligible for exemption
under Notification No. 10/2003. We have perused the scope of the
contract enclosed in page 211 of the appeal paper book. Clause (c) to
(g) of the said contract reads as under :
".
.
.
(c) Teach (10+2) Computer Science syllabus as approved by Government of Tamil Nadu for Plus 1 and Plus 2 students. The prescribed text book available should be used. For practical class one system is to be provided for two students.
(d) Teach 9th and 10th standard students Computer Science syllabus as approved by Government of Tamil Nadu twice a week consisting of 2 periods of 45 minutes each.
(e) Teach basic computer literacy to 11th and 12th students who have not opted for computer science as an optional subject during the extended period after the close of regular class periods. For this purpose, the tenderer must extend the class periods by one more period in the evening after the regular periods are over.
(f) Teach 6th to 8th standard students Computer Science syllabus as approved by Government of Tamil Nadu also twice a week consisting of 2 periods of 45 minutes each.
(g) For the Computer appreciation course to the 6th to 10th students Practical training in Computer should be given." 5.3.9 In respect of the demand raised in Sl. No. 7 on JDC Summer Classes, the Ld. Counsel at the time of hearing submitted that the 25 appellant is not contesting the same and has paid up the amount in respect of this demand.
5.3.10 In Sl. No. 8, the demand is raised on the income received from computer rentals. The Ld. Counsel has submitted that the said agreements included both renting/leasing of computer, computer hardware/software, etc., and also imparting courses to the students. The discussions made in respect of Sl. No. 6 above, applies to the demand made under this category also. The rent income received for leasing the computer hardware, etc., cannot be taxed under Computer Training Services. In any case, these agreements include imparting computer training to the students and therefore, as argued by the Ld. Counsel for the appellant, the benefit of exemption under Notification No. 10/2003 would be applicable to the appellant and the case law as discussed above would squarely cover the said issue. For these reasons, we hold that the demand in respect of Sl. No. 8 cannot sustain and requires to be set aside, which we hereby do.
III. Demand of Service Tax under BAS & Demand due to rounding off (2003-4 to 2007-08) 26 5.4.1 In Sl. No. 1, with respect to the demand raised under Business Auxiliary Services, the incentives received from M/s. Tally has been subject to levy of service tax. We find that the said issue as to whether the incentives received for the use of software would be subject to levy of service tax, has been decided in the case of D. Pauls Consumer Benefit Ltd. Vs. C.C.E. (New Delhi) - 2017 (52) S.T.R. 429 (Tri. - Del.). Following the same we are of the view that the demand on this count is legal and proper and we uphold the same.
5.4.2 In Sl. No. 2 of this table, the demand is raised on sale of forms of Tamil Nadu Open University. In the Show Cause Notice as well as the impugned order, it is seen that the appellant has purchased and sold the forms at the actual price. We do not find any ingredients attracting the levy of service tax under Business Auxiliary Services in this activity. We, therefore, hold that the demand raised on this count cannot sustain and requires to be set aside, which we hereby do.
5.4.3 In Sl. No. 3, a demand of Rs. 22,704/- has been raised, being the short paid tax by the appellant due to rounding off. The Ld. 27 Counsel has submitted that the appellant is not contesting the said demand. The same is upheld.
6. The issues involved in all the three services are mostly interpretational, especially with regard to the exemption Notification as to whether Computer Training Institute would be eligible for exemption as also with regard to the exemption under Notification No. 10/2003. Further, there were issues with quantification. Being interpretational issues, we are of the considered opinion that the penalties on the demands upheld by us as above cannot sustain and require to be set aside, which we hereby do.
7. To sum up : -
(i) The demand raised on account of the difference in ST-3 returns and P & L Account in respect of both Franchise Service and Commercial Coaching or Training Service is remanded to the adjudicating authority for fresh consideration.
(ii) The demands set aside are discussed separately as above.
(iii) The penalties are set aside in toto.28
8. The Department has filed Miscellaneous Application No. ST/Misc[CT]/41608/2017 for change in the name of the respondent in the cause title of Appeal Nos. ST/00138/2011 consequent to the introduction of G.S.T. and the resultant change in jurisdiction. It is prayed that the name and address of the respondent be changed to :
"The Commissioner of G.S.T. & Central Excise, Chennai South Commissionerate, MHU Complex, 692, Anna Salai, Nandanam, Chennai 600035"
9. M.A. filed by the Department for change in cause title is allowed. Registry is directed to amend the cause title as prayed for. The appeal is partly allowed and partly remanded in the above terms.
(Pronounced in open court on 17.08.2018)
(Madhu Mohan Damodhar) (Sulekha Beevi C.S.)
Member (Technical) Member (Judicial)
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