Custom, Excise & Service Tax Tribunal
Focus Edu Care P Ltd vs Commissioner Of Central Tax, Bengaluru ... on 26 September, 2024
ST/20314/2022
CUSTOMS, EXCISE & SERVICE TAX APPELLATE
TRIBUNAL
BANGALORE
REGIONAL BENCH - COURT NO. 1
Service Tax Appeal No. 20314 of 2022
(Arising out of Order-in-Original No.29/2021-22 (North)/Pr.Commr.)
dated 23.02.2022 passed by the Principal Commissioner of Central
Tax, Bengaluru)
M/s. Focus Edu Care P. Ltd.,
405, Dalamal House, 4th Floor, Appellant(s)
Plot 206, J. Bajaj Marg,
Nariman Point, Mumbai - 400 021.
VERSUS
The Principal Commissioner of
Service Tax, Respondent(s)
GST West, TTMC, BMTC Building, Banashankari, Bangalore 560 070.
APPEARANCE:
Mr. Jayadeep Patel, Advocate for the appellant Mr. P. Saravana Perumal, Addl. Commissioner (AR) for the respondent CORAM: HON'BLE DR. D.M. MISRA, MEMBER (JUDICIAL) HON'BLE MR. PULLELA NAGESWARA RAO, MEMBER (TECHNICAL) Final Order No. 20903 /2024 DATE OF HEARING:28.03.2024 DATE OF DECISION: 26.09.2024 PER : DR. D.M. MISRA This appeal has been filed against Order-in-Original No.29/2021-22(North)/(Pr. Commr.) dated 23.02.2022 passed by the Principal Commissioner of Central Tax, Bengaluru.
2. Briefly stated the facts of the case are that the appellant are registered with Department for providing Commercial Page 1 of 30 ST/20314/2022 Training or Coaching Service during the relevant period. On the basis of scrutiny of their ST-3 returns by the Anti-Evasion wing of the Department, it was noticed that the appellant had been filing NIL ST-3 returns and not paid service tax. Consequently, their balance sheet and P&L account for the period 2013-14 to 2017-18 and other relevant documents have been called for and an investigation was initiated by recording statements of Shri Bhawani Singh Shekhawat, Finance Manager. On completion of the investigation, show-cause notice was issued to them on 08.04.2019 for recovery of service tax amounting to Rs.9,96,07,280/- not paid during the period 01.10.2013 to 30.06.2017 with interest and penalty. On adjudication, the demand was reduced to Rs.8,90,70,549/- with interest and penalty. Hence the present appeal.
3.1. Learned advocate for the appellant, narrating the issues involved and the activities undertaken by the appellant, has submitted as follows:
a) They had undertaken development and export of E-Learning Courses to Focus Care Inc of USA and consideration for export of such E-learning courses was received in foreign Exchange.
Development of E-learning courses involve analysis, designing, scripting and testing of the courses. The said entity in USA to whom the Appellant exported the E-learning Page 2 of 30 ST/20314/2022 courses in turn sold the same to their clients in USA, who host the same on their Learning Web Platform.
b) They have provided tutors to Advance Tech Enterprises, UAE, for online tutoring on Online Tutoring Platform of Advance Tech Enterprises. Consideration for same was received in foreign exchange.
c) The Appellant was acting as Project Implementation authority in States of Bihar, Uttar Pradesh, Rajasthan and Gujarat under Skills Development Programmes of Government of India. In the States of Bihar, Uttar Pradesh and Rajasthan, the Appellant was implementing the "Aajevika Skills Development Programme", in respect of which Service tax demand has been dropped by the Principal Commissioner and against which there is no appeal filed by the Department. In the State of Gujarat, the Appellant was implementing "Sant Shiromani Ramdas High Skill Development Program", a Centrally Sponsored scheme for Modular Employable Skills (MES) courses certified by National Council of Vocational Training (NCVT).
d) The Appellant was also engaged in Trading activity of Fabrics and receiving income from sale of fabrics. Copies of invoices of purchase and sale of fabrics are pages 39 to 78 of the Appeal.
3.2. He has submitted that the activities viz. development of e- learning course content and supply of tutors for online tutoring, Page 3 of 30 ST/20314/2022 since the consideration is received in foreign exchange and since the place of provision of service as per Rule 3 of the Place of Provision of Service Rules 2012 (POPS Rules, 2012 for short), is the location of the service recipient, which is USA and UAE, the same constitutes "export of service" under Rule 6A of the Service Tax Rules 1994 and hence no service tax was paid thereon by the Appellant. Regarding demand on implementation of the project Aajevika Skills Development Programme, he has submitted that since the Appellant was project implementation authority on behalf of the State Government under a Centrally Sponsored Scheme, the same was not liable to service tax. Further, since the courses conducted by the Appellant under the said Skill Development program were Modular Employable Skill Courses approved by NCVT, the same were approved Vocational Education Course under Section 65B(11)(ii) and therefore fell under the Negative List under Section 66D(1) of the Finance Act 1994. The Appellant accordingly did not pay service tax in respect thereof. He has also submitted that since the trading activity of sale of fabrics is not a service, question of payment of service tax in respect thereof does not arise. 3.3. Elaborating his argument, he has submitted that it is evident from the Appellant's Invoice on Focus Care Inc, USA and the corresponding Softex Form that the Appellant had exported E-learning Course content and since the consideration for the same was received in foreign exchange and since the place of Page 4 of 30 ST/20314/2022 provision of service as per Rule 3 of the Place of Provision of Service Rules 2012(POPS Rules, 2012 for short), is the location of the service recipient, which is USA, the same constitutes "export of service" under Rule 6A of the Service Tax Rules, 1994 and hence no service tax is payable thereon.
3.4. Assailing the finding of the Principal Commissioner that the said service is of "Online Information and database access retrieval", for which the place of provision of service, under Rule 9(b) of the Place of Provision of Services Rules 2012, is location of the service provider (India), it is submitted that the same is ex-facie erroneous as held by the Hon'ble Tribunal in Dewsoft Overseas P. Ltd v CST- [2008 (12) STR 730], a E-learning course is an interactive teaching/ training course which cannot be equated with mere access to online information and data and cannot be held to be service of "Online Information and database access retrieval".
3.5. Further it is submitted that the Appellant does not host the said E-learning course on any web platform. The Appellant develops the E-learning course which entails analysis, designing, scripting and testing of the courses and then sends the said course via e-mail to the foreign entity in USA, which in turn, sells the same to its clients in USA, who host the same on their Learning Web Platform. There is therefore no question of the Page 5 of 30 ST/20314/2022 Appellant having provided the service of "Online Information and database access retrieval".
3.6. It is submitted that the reliance placed by the Principal Commissioner on Para 5.9.5 of CBEC Education Guide is totally misplaced. As per the said Para 5.9.5, "Online Information and database access retrieval" service covers online automated web- based services, whereby a subscriber of the service can have access to information and data such as trade statistics, legal and financial data, matrimonial services, social networking sites, digitized contents of books and publications, etc. The said Para 5.9.5 nowhere contemplates that developing E-learning course and supplying it by e-mail to a client amounts to Online Information and database access or retrieval service. On the contrary the example given in the said Para 5.9.5 of an architect preparing a drawing/ plan and sending it by e-mail as being not covered by "Online Information and database access or retrieval service" supports the Appellant's case. The Appellant's activity of preparing the E-learning course and sending it by e-mail to the client, is analogous to the said example of an Architect preparing a drawing and sending it by e-mail to the client. The Appellant does not own or operate any web-based Platform and the Appellant does not provide any access or retrieval service to anyone on any such web-based Platform. The Show Cause notice and Order-in-Original have not identified any such Web site or Web-based Platform owned or operated by the Appellant to Page 6 of 30 ST/20314/2022 which the Appellant provide access to any customer. Thus the Appellant has therefore not provided online information and database access or retrieval services. Since the Appellant has not provided online information and database access or retrieval services, Rule 9 (b) of the Place of Provision of Service Rules 2012 does not apply to them and hence the place of provision of service is not in India, accordingly, as per Rule 3 of the Place of Provision of Service Rules 2012, the place of provision of the service is the location of the recipient i.e. USA. Consequently, the same constitutes "export of service" under Rule 6A of the Service Tax Rules 1994 and hence no service tax was payable in respect of the same.
3.7. It is submitted that the Appellant provided Tutors to Advance Tech Enterprises, UAE, for online tutoring on the Online Tutoring Platform of Advance Tech Enterprises, UAE. It is submitted that "Online Tutoring", being interactive teaching conducted by the Tutors, cannot and does not amount to "Online Information and database access retrieval". As clarified in Para 5.9.5 of CBEC Education Guide, "Online Information and database access retrieval" service covers online automated web- based services, which are completely automated and require minimal human intervention, whereby a subscriber of the service can have access to information and data. That is not so in case of online tutoring which involves interaction between the tutor and the students. As held by the Hon'ble Tribunal in Dewsoft Page 7 of 30 ST/20314/2022 Overseas P. Ltd v CST- (supra) online interactive teaching/ training cannot be equated with mere access to online information and data and cannot be held to be service of "Online Information and database access retrieval"
3.8. Further it is submitted that in any event, it is undisputed that the Web Platform for Online Tutoring was hosted by and belonged to Advance Tech Enterprises, UAE and the Appellant merely provided tutors to Advance Tech Enterprises, UAE. Since the Web Platform is not hosted by the Appellant and does not belong to the Appellant, the Appellant does not provide any access to the Web Platform and the same is provided by Advance Tech Enterprises, UAE to its students. Appellant merely provides the tutors to Advance Tech Enterprises, UAE. Since the Appellant has not provided 'online information and database access or retrieval services', Rule 9(b) of the Place of Provision of Service Rules, 2012 does not apply to the Appellant and hence the place of provision of service is not India. As per Rule 3 of the Place of Provision of Service Rules, 2012, the place of provision of the service is the location of the recipient i.e. UAE. Consequently, the same constitutes "export of service"
under Rule 6A of the Service Tax Rules 1994 and hence no service tax was payable in respect of the same. 3.9. The appellant, as Project Implementation authority on behalf of the Gujarat Government, provided training under 'Sant Shiromani Ravidas High Skill Development" programme under Page 8 of 30 ST/20314/2022 Skill Development Initiative of the Government of India, which is Centrally Sponsored Scheme. The Central Board of Excise and Customs, by Circular No. 125/7/2010-ST dated 30-7-2010, clarified that the State Governments are bound to implement Centrally Sponsored Schemes of the Central Government and that the relation between the State Government/ implementing agencies and the Central Government is not one of service provider and service recipient. In view of the said Clarification of the CBEC, since the Appellant was only Project implementing agency for the State Government under a Centrally Sponsored Scheme, the Appellant is not liable to pay service tax on the amounts received by the Appellant for implementing the project. 3.10. It is submitted that the Principal Commissioner has in Para 64 of the Order-in-Original, proceeded on the basis that the Appellant cannot be considered to be a State Government Agency referred to in the said CBEC Circular and that the Appellant is a private Agency. The said approach of the Principal Commissioner is totally erroneous and misconceived, since the Appellant is implementing the said Scheme on behalf of the State Government and reference to State Agencies in the said Circular is clearly reference to project implementing agencies who implement the State's programme. The Principal Commissioner seriously erred in ignoring in this behalf, the decision of the Tribunal in the case of Centre for Research & Industrial Staff Performance v CGST & CCE- [2019 (22) Page 9 of 30 ST/20314/2022 GSTL 385] in which the said Circular was held to be applicable to a private party who was implementing the Program/ Project. 3.11. Without prejudice to the aforesaid submissions, in any event, it is submitted that the vocational education and training imparted by the Appellant under the said 'Sant Shiromani Ravidas High Skill Development" programme, was an "approved vocational education course" as defined in Section 65B (11) (ii) of the Finance Act 1994 and therefore covered by the Negative List of services under Section 66D (l) of the said Act. Accordingly, no service tax was payable.
3.12. As per the said Section 65B (11) (ii), an approved vocational education means "Modular Employable Skill Course"
approved by National Council of Vocational Training run by a person registered with the Directorate General of Employment and Training, Union Ministry of Labour and Employment. 3.13. The Principal Commissioner has himself in Para 62 of the Order-in-Original accepted that the course conducted by the Appellant under 'Sant Shiromani Ravidas High Skill Development" programme, is Modular Employable Skill Course approved by National Council of Vocational Training. This also is apparent from the website of the Gujarat Government and the sample Certificates issued by the National Council of Vocation Training to the Appellant's students.
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ST/20314/2022 3.14. The Principal Commissioner, has however, erroneously held in the said Para 62 of the Order-in-Original that the registration of the Appellant with Director General of Training is under the Skill Development Initiative Scheme of the Ministry of Skill Development and Entrepreneurship, which is not connected with NCVT/MES.
3.15. It would be evident from the website, https://www.msde.gov.in/en/about-msde that the Director General of Training and NCVT are functional arms through which the said Ministry executes the Skill Development Scheme. The finding of the Principal Commissioner that Skill Development Scheme is not connected with NCVT/ MES is therefore ex-facie erroneous. It is also evident from the Publication of the Government of Gujarat that "Sant Shiromani Ravidas High Skill Development" programme is implemented by the State of Gujarat under "Skill Development Initiative Scheme", under which training is given in 'Modular Employable Skills" (MES) leading to Certification by National Council of Vocational Training (NCVT).
3.16. The Principal Commissioner has further in said Para 62 of the Order-in-Original erroneously held that "Sant Shiromani Ravidas High Skill Development" is not under Skill Development Initiative. This is contrary to the Publication of the Government of Gujarat which shows that "Sant Shiromani Ravidas High Skill Development" programme is implemented by the State of Page 11 of 30 ST/20314/2022 Gujarat under "Skill Development Initiative Scheme". His said finding is also contrary to letter dated 9th February 2016 of Government of India, Ministry of Skill Development & Entrepreneurship forwarding certificates issued by NCVT in Modular Employable Course to candidates trained by the Appellant.
3.17. The Show Cause Notice itself in Para 2 (b) states that it is seen from the Balance Sheet and P & L Accounts that the Appellant is involved in Sale of Fabrics. The Show Cause Notice thereafter in Para 7 goes on to list "Sale of Fabrics" as one of the Services provided by the Appellant.
3.18. It is submitted that it is ex-facie erroneous to treat the income which is reflected in the books of account as being from "Sale of Fabrics", to have been received towards Service provided by the Appellant and to demand service tax thereon, without there being any evidence of any service rendered by the Appellant. No service has been identified in the Show Cause Notice as having been provided by the Appellant for the income which was received from Sale of fabrics nor is there any evidence of any such service provided by the Appellant. Further, no service recipient has been identified and there is no evidence to show that income received from Sale of fabrics, was in fact consideration received from service recipients. 3.19. In his Statement dated 21-2-2009, the Appellant's Finance Manager, Bhawani Singh Shekhawat has clearly stated that the Page 12 of 30 ST/20314/2022 Appellant has done trading in fancy fabrics within Mumbai and have purchased the same locally in Bhiwandi. There is absolutely no contrary evidence.
3.20. It is settled law as laid down in the following judgments that merely on the basis of some figures appearing in the financial statements/ records, it cannot be presumed that the same pertained to provision of service and without any evidence of the nature of alleged service provided and without identifying any alleged service recipients, service tax cannot be demanded on such presumption:
- Indian Machine Tools Manufacturers Association v CCE- (2023)11Centax 213
- Kuoni Travel India P. Ltd v CCE - 2024 (3) TMI 406
- Umesh Tilak Yadav v CCE- (2024) 15 Centax 161
- Gopichenna v CCE - 2024 (3) TMI 11
- Raj Mohan v CCE - 2022 (8) TMI 832.
3.21. The Principal Commissioner has erroneously held that the Appellant had not provided any tangible evidence/ documents that transactions against which said income was received were on account of purchase and sale of Fabrics. 3.22. Firstly, if it is the Department's case that Income which is shown in the Appellant's financial statements as being from Sale of Fabrics, was not from sale of fabrics but was from provision of service, the burden is on the department to lead evidence in support thereof. There is no such evidence. 3.23. Secondly, in any event the Principal Commissioner has completely disregarded in this behalf the Purchase Invoices under which the Appellant had purchased the said Fabrics and Page 13 of 30 ST/20314/2022 the Sales Invoices under which the Appellant has sold the said Fabrics and Chartered Accountant's Certificate confirming the same, which had been submitted along with the reply to the Show Cause Notice. Although the Principal Commissioner has, while reproducing the Appellant's defence reply in Para 39 of the Order-in-Original, referred to the reliance placed by the Appellant on Purchase and Sales Invoices of Fabrics which were enclosed with the Reply, he has in his Discussion and Findings completely ignored the same. Likewise, he has completely ignored the Chartered Accountant's Certificate which was submitted with the reply and which is referred to in the record of personal hearing. While ignoring and disregarding the said Purchase and Sales Invoices and Chartered Accountant's Certificate, the Principal Commissioner has given a factually incorrect finding that the Appellant has not produced tangible evidence/ documents of Purchase and Sale of Fabrics. 3.24. The decisions relied upon by the Commissioner in Para 83 of the Order-in-Original holding that burden lies on the person claiming the benefit of an exemption Notification, have no application to the present case, since the Appellant is not claiming benefit of any Notification granting exemption from Service tax. It is the department who is seeking to levy Service tax by asserting/alleging that the amounts received on Sale of goods were on account of rendering of Service and liable to service tax. Therefore, the burden is on the department to prove Page 14 of 30 ST/20314/2022 by evidence that the transactions were not of sale of goods, but were of rendering of service. There is no such evidence produced by the department. The department has not produced any evidence to show what was the nature of service and to whom it was rendered. There is no inquiry from the person/entity from whom the said income/ consideration was received by the Appellant and there is nothing to show that the Appellant had rendered service to such person/entity.
3.25. Assuming while denying that the burden was on the Appellant to show that the amounts were received as consideration for sale of Fabrics, the same stands discharged by submission of the Sales Invoices and the Chartered Accountant's Certificate. There is no evidence produced by the department to rebut the same.
3.26. The Principal Commissioner has erroneously proceeded on the basis that since the sales turnover of the Fabrics was not declared in the VAT Returns, he is not inclined to accept that the transactions in question were of Sale of Fabrics. He ignored the submission that there was no VAT on the sale of Fabrics and hence question of filing VAT Returns in respect of the same does not arise. In any event, the rational of the Principal Commissioner that because no VAT return was filed for the said sales turnover of fabrics, the same cannot be accepted as Sale of Fabrics is devoid of any merit. By the same rational it would Page 15 of 30 ST/20314/2022 follow that since no Service Tax Return was filed in respect of the same, it cannot be said to be rendering of Service. 3.27. The learned advocate for the appellant has submitted that confirmation of demand invoking extended period of limitation is bad in law inasmuch as non-payment of service tax on the services referred to above was under a bona fide belief and no facts were suppressed from the knowledge of the Department nor mis-declared to the Department. The amount received has been duly reflected in the appellant's P&L Account and balance sheet and the present notice also picked up figures from the said financial records. Therefore, larger period of limitation cannot be invoked. In support, they have referred to the following judgments:
i. Steelcast Ltd v CCE- 2009 (14) STR 129 ii. CCE v Steel Cast Ltd- 2011 (21) STR 500 iii. Religare Securities Ltd v CCE -2014 (36) S.T.R. 937 (Tri. - Del.) 4. On the other hand, reiterating the findings of the
Commissioner, learned AR for the Revenue has submitted the following:-
a. The Adjudicating Authority, after careful consideration of the appellants' plea, has dropped proceeding in respect of training rendered in respect of cases except in "Sant Shri Ravidas High Skill Training Programme for Schedule caste candidates of Gujarat" to the State of Gujarat wherein he after proper analysis and examination of the issues and facts has confirmed the demand, his findings in Para 62 to 66 in the OIO are reiterated.Page 16 of 30
ST/20314/2022 b. With respect to the appellants contention that the issue is covered by the decision of the Hon'ble Tribunal in the case of Centre for Research & Industrial Staff Performance v CGST - [2019 (22) GSTL 385], it is submitted the relevant case law dealt with situation wherein consideration received in the form of Grant -in - Aid from the Central Government relating to activity with regard to special project Swarnajyanthi Gram Swarojgar yojana, a central government sponsored scheme with state government, was not liable to Service Tax. The Ratio decidendi of the above case cannot be squarely applied to the present case as the issue involved in the present case is with respect to Vocational Training Provided by a Private Agency and the appellant has nowhere produced documentary evidence in respect of Grants in Aid received as consideration, neither in the reply to SCN nor before the adjudicating authority. He has not taken the plea during the proceedings before lower authorities regarding this. The appellant's reliance in the case of Centre for Research & Industrial Staff Performance v CGST - (supra) is misplaced and not applicable to the fact and circumstances of the present case.
c. The reliance placed by the ld. counsel on the judgment of the Tribunal in Dewsoft Overseas P. Ltd. (supra) is misplaced and also not applicable in the facts and circumstances of the present case. In the said case(Dewsoft), the appellant therein was rendering an online computer teaching through interactive website and was discharging the service tax liability under the category of 'Commercial training and coaching classes' while Revenue wanted to classify under 'Online information and data base access or retrieval service'. Page 17 of 30
ST/20314/2022 There was a dispute about the classification of the service which was resolved by the Tribunal on the ground that the access to said computer education was a education which has been rendered and would be correctly classifiable under 'Commercial training and coaching classes' service and activity of providing of online licence to student is not access or retrieval of the data. In the case in hand, we find that the issue is totally different than the issue as was in Dewsoft Overseas P. Ltd. (supra). Hence the above case law cannot be squarely applied to the present case.
d. Further Attention is invited to Circular No. 202/12/2016-S.T., dated 9-11-2016 In F. No. 354/149/2016-TRU wherein indicative list of OIDAR services are mentioned wherein Sl. No. 16(5) mentions specifically supply of Distance teaching.
5. Heard both sides and perused the records.
6. The issues involved in the present appeal for determination are whether:-
i. the services rendered by the appellant viz. e-learning course provided to M/s. Focus Care Inc, USA and tutors for online tutoring platform to M/s. Advance Tech Enterprises, UAE are in the nature of "online information and data base access or retrieval service"; hence not export of service under Rule 6A of the Service Tax Rules, 1994 read with Rule 9(b) of the POPS Rules, 2012 and service tax is payable for rendering these services ;
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ST/20314/2022 ii. services rendered by the appellant under "Sant Shiromani Ravidas High Skill Development" programme for Scheduled Caste on behalf of the Government of Gujarat is liable to service tax;
iii. income reflected as 'other receipts' in their balance sheet is liable to service tax; and iv. extended period of limitation is invocable in confirming the demand.
7. The undisputed facts are that the appellant undertook development of e-learning course content for M/s. Focus Care Inc, USA and exported the same on consideration. The process of development e-learning contents involved analysis of the learning content, objective of learning, audience to be targeted, method of delivery and presentation; designing of the learning content i.e. deciding how the content will be broken down; scripting and developing the e-content by missing of texts, audio, video, animations, references etc. and testing the e- content to find out spelling mistakes, content errors, clarity of pictures etc. The said e-learning content developed and exported by the appellant to USA, who in turn supplied and sold to the clients in USA, who host the same on their learning platform i.e. Learning Management System. Invoices were raised by the appellant on M/s. Focus Care Inc. The Appellant's claim is that the recipient is located in USA and the payment if Page 19 of 30 ST/20314/2022 received in convertible foreign exchange and as per Rule 3 of POPS Rules, 2012, since the location of recipient is in USA, it constitutes 'export of service' under Rule 6A of the Service Tax Rules, 1994. Similarly, in the case of service provided to M/s. Advance Tech Enterprises, UAE, the appellant claimed to have provided tutors for online tutoring on online tutoring platform of the said M/s. Advance Tech Enterprises, UAE. Necessary invoices were raised for supply of tutors and it is claimed that since the recipient is in UAE, as per Rule 3 of the POPS Rules, 2012 and since the payment also received in convertible foreign exchange, it falls under Rule 6A of the Service Tax Rules, 1994, consequently no service tax is payable. The Revenue on the other hand is of the view that the services rendered by the appellant since are in the nature of 'Online Information and Database access or retrieval service' and as per Rule 9(b) of the POPS Rules, 2012, the place of provision of service is the place where service provider is situated, the appellant is liable to pay service tax.
8. Learned Commissioner analysing the provisions of Rule 6A of the Service Tax Rules, 1994, Rule 9 of POPS Rules, 2012 and the CBEC's Education Guide published on 20.06.2012 held that the service of e-learning training and content development provided by the appellant to M/s. Focus Care Inc, USA and also the online tutorial to M/s. Advance Tech Enterprises, UAE Page 20 of 30 ST/20314/2022 squarely covered under the scope of 'Online Information and Database Access or Retrieval Service'. The learned advocate for the appellant vehemently argued that the learned Commissioner has mis-interpreted the scope of 'Online Information and Database Access or Retrieval Service' in relation to e-learning course content provided. The appellant does not host the e- learning course on any web platform. They only develop the e- learning course content, which involves analysis, designing, scripting and testing of the course and then sends the course viz. e-mail to the foreign entity in USA, which in turn sells the same to its clients in USA. The said clients in USA host it on their web learning platform. Thus, there is no question of appellant providing 'Online Information and Database Access or Retrieval Service'.
9. To examine the rival claims it is necessary to understand the scope of 'Online Information and Database Access or Retrieval Service'. In the CBEC's Education Guide the said service is explained as follows:
"5.9.5 What are "Online information and database access or retrieval services"?
"Online information and database access or retrieval services" are services in relation to online information and database access or retrieval or both, in electronic form through computer network, in any manner. Thus, these services are essentially delivered over the internet or an electronic network which relies on the internet or similar network for their provision. The other important feature of these services is that they are completely automated, and require minimal human intervention.
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ST/20314/2022 Examples of such services are:-
i) online information generated automatically by software from specific data input by the customer, such as web-based services providing trade statistics, legal and financial data, matrimonial services, social networking sites;
ii) digitized content of books and other electronic publications, subscription of online newspapers and journals, online news, flight information and weather reports;
iii) Web-based services providing access or download of digital content.
The following services will not be treated as "online information and database access or retrieval services":-
i) Sale or purchase of goods, articles etc over the internet;
ii) Telecommunication services provided over the internet, including fax, telephony, audio conferencing, and videoconferencing;
iii) A service which is rendered over the internet, such as an architectural drawing, or management consultancy through e-mail;
iv) Repair of software, or of hardware, through the internet, from a remote location;
v) Internet backbone services and internet access services.
10. In the Circular dated 09.11.2016, what services would not be considered as OIDAR service at Sl.No.13(v), it is mentioned as follows:
Sl.No.13(v): Educational or professional courses, where the content is delivered by a teacher over the internet or an electronic network (in other words, using a remote link).
11. A simple reading of the said clarifications, it is clear that the services are rendered in relation to online information and database access or retrieval or both in electronic form through Page 22 of 30 ST/20314/2022 computer network, in any manner. Thus, these services are essentially delivered over the internet or an electronic network which relies on the internet or similar network for their provision. Laying down its characteristics, it is clarified that these are completely automated and required minimum human intervention. Thus primarily, it is a service in relation to 'Online information and database access or retrieval or both". The examples make it amply clear i.e. web based services providing trade statistics, legal and financial data, matrimonial services, social networking sites which clearly store data relevant to the user of the data and the service of access and retrieval of the said data would fall under the scope of the 'Online Information and Database Access or Retrieval Service'. In the present case, the appellant has designed and developed the e-learning course content and supplied against consideration to their counterpart in USA who ultimately sold the same to other customers in USA. The customers in USA placed the same on websites allowing the users to access and retrieve data. Therefore, in our view, the services rendered by the appellant to M/s. Focus Care Inc, USA cannot fall within the scope of 'Online Information and Database Access or Retrieval Service'. Consequently, it is an export of service since the recipient of the service is located in USA in view of the Rule 3 of the POPS Rules, 2012 read with Rule 6A of the Service Tax Rules, 1994. Similarly, also in the case of supply of tutors for online tutoring to M/s. Advance Tech Enterprises, UAE, Page 23 of 30 ST/20314/2022 the appellant merely provided tutors to M/s. Advance Tech Enterprises, UAE and the web platform is not hosted by the appellant and also does not belong to the appellant. The appellant also does not provide any access to the web platform which is provided by M/s. Advance Tech Enterprises to its students. It is not an automated web-based services which are completely automated and required minimum human intervention; but the online tutoring provided to M/s. Advance Tech Enterprises, UAE involves interaction between the tutors and the students. Therefore, in view of the judgment of the Tribunal in the case of Dewsoft Overseas Pvt. Ltd.(supra), the said service cannot be considered as 'Online Information and Database Access or Retrieval Service'. The Tribunal has observed as follows:-
4.4 The activity of providing online computer courses is not simply providing online access to data or information.
What is being provided to the clients is online lessons on various topics in computer hardware and software and besides this, the clients are also provided the facility of online interactive chat with other students, faculty and external experts and the clients can also give online test. Thus the essential character of service being provided is online training or coaching or in other words e-education and not mere the facility of access or retrieval of data or information. Wikipedia, (http://en.wikipedia.org/wiki/E- learning) describes e-learning as under :-
"E-learning is a type of education when the medium of instruction is computer technology. No in-person interaction may take place in some instances. E-learning is used interchangeably in a wide variety of contexts. In companies it refers to the strategies that use the company network to deliver training courses to employees. In the U.S.A., it is defined as a planned teaching/learning experience that uses a wide spectrum of technologies - Page 24 of 30
ST/20314/2022 mainly internet to reach learners at a distance. Lately in most universities, e-learning is used to define a specific made to attend a course or programme of study, when the students, rarely, if ever, attend face-to-face for on-campus access to educational facilities, because they study online."
In India, Indira Gandhi National Open University (IGNOU) Conducts on-line courses for its Students. Netvarsity.com, hosted by NIIT online Learning Ltd. offers 300 online computer courses. A variety of online courses are provided through websites like E-gurukool.com, classteacher.com etc. Thus online coaching or training classes through an interactive website is a well established mode of teaching/coaching and the only difference between traditional coaching and online coaching is the medium. Since in term of Board's instruction vide Circular No. 59/8/03 dated 20-6-03 correspondence courses are covered by "commercial training or coaching", the "online computer courses" being organized by the Appellants through internet will also be covered by this entry. Moreover online coaching or teaching is an interactive process and the same cannot be compared with mere "online information and database access and/or retrieval" - the difference between the two is same as the difference between teaching some students in a classroom and providing library access to the students. We, therefore, hold that the Appellant's activity of providing online computer courses is covered by the entry - "commercial training or coaching".
12. The learned AR for the Revenue has submitted that by Circular dated 09.11.2016, under Sl.No.16, the indicative list of OIDAR services which included supply of distance teaching, therefore, the services rendered by the appellant would fall under the scope of said services and the judgment delivered in the case of Dewsoft Overseas Pvt. Ltd. (supra) is not applicable. It is noticed that under Sl.No.16(5), it is clarified as follows:-
Sl.No.16(5) Supply of distance teaching. Page 25 of 30
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(a) Automated distance teaching dependent on the internet or similar electronic network to function and the supply of which requires limited or no human intervention, including virtual classrooms, except where the internet or similar electronic network is used as a tool simply for communication between the teacher and student.
(b) Workbooks completed by pupils online and
marked automatically, without human
intervention.
13. A simple reading of the same, it is clear that it mentions automated teaching dependent on the internet which does not require human intervention or limited intervention including virtual class rooms; therefore the argument of the learned AR for the Revenue that the principle laid down in the case of Dewsoft Overseas Pvt. Ltd. (supra) is not applicable is not correct.
14. Now coming to the second issue regarding applicability of service tax on providing training under the Sant Shiromani Ramdas High Skill Development Programme' by the State of Gujarat, it is the claim of the appellant that they had only acted as a project implementing agency for the State Government under a centrally sponsored scheme; hence not liable to pay service tax on the amounts received by the appellant implementing the Centrally sponsored project. In the impugned order, the Commissioner while confirming the demand observed that the said programme is under National Council of Vocational Training (NCVT) or State Council for Vocation Training (SCVT) and a Modular Employable Skill (MES) course; however to cover Page 26 of 30 ST/20314/2022 under the negative list or under entry 9A of the Exemption Notification No.25/2012-ST dated 20.06.2012, a person should have been registered with the Directorate General of Employment and Training, Union Ministry of Labour and Employment. He has observed that the appellant had not furnished any documentary proof evidencing the same. Further he has held that the training programme offered by the appellant is a different skill than through Sant Shiromani Ramdas High Skill Training Programme; hence the training programme rendered by the appellant to the Government of Gujarat does not come under the Negative List under Section 66D of the Act and Sl.No.9A of 9D of the exemption Notification No.25/2012-
ST.
15. Learned advocate for the appellant has heavily relied on the Circular No.125/7/2010-ST dated 30.07.2010. It is submitted that the appellant was only project implementing agency for the State Government under a central sponsored scheme; therefore, not liable to pay service tax on the amounts received by the appellant for implementing the project. Rebutting the finding of the adjudicating authority that the Circular is applicable even to private project implementing agencies who implement the States programmes, they referred to the judgment of this Tribunal in the case of Centre For Research & Industrial Staff Performance (supra). Further, Page 27 of 30 ST/20314/2022 it is submitted that the training imparted by the appellant under the said programme was an approved vocational educational course as defined under Section 66D(1) of the said Act. We find that the Commissioner also has not disputed the fact that the Sant Shiromani Ramdas High Skill Development Programme is modular employable course approved by NCVT. However, he has disallowed the benefit to the appellant holding that they had not registered with the Director General of Training. Answering the said finding in the impugned order, the appellant referred to the website https://msde.gov.in/en/about-msde in submitting that the Director General of Training through which the Ministry executes skill development scheme; therefore the observation of the Commissioner that skill development scheme is not connected with NCVT / MES is incorrect which is also evident from the Publication of the Government of Gujarat under "Skill Development Initiative Scheme" under which training is given in Modular Employable Skill (MES) leading to certification by NCVT. Thus, the finding of the Commissioner is contradictory of the publication of the Government of Gujarat; hence cannot be sustained.
16. On the third issue regarding leviability of service tax on 'other receipts', we find that the appellant has claimed that the amount entered into in their P&L Account relates to sale of fabrics, a trading activity; hence not connected with the services rendered by them. This fact has been disclosed by the Finance Page 28 of 30 ST/20314/2022 Manager Mr. Bhawani Singh Shekhawat of the appellant in his statement on 21.02.2009 recorded by the Department as a part of the investigation. Also, subsequently during the course of hearing before the Commissioner, the appellant has placed financial statements relating to sale of fabrics and sample invoices of purchase and sale of fabrics during the relevant period. Thus, the Commissioner's finding that the appellant has not provided evidences also seems to be not based on record. Besides, the appellant has also placed Chartered Accountant certificate confirming the entry in the P&L Account relates to purchase and sale of fabrics during the relevant period. We find that though the Finance Manager of the appellant had, at the very beginning of the investigation, disclosed the fact that 'other receipts' relates to purchase and sale of fabrics, the Department did not proceed further with the investigation to ascertain the veracity of the said claim. Also, we find that the learned Commissioner has rejected the said contention of the appellant on the ground that sales turnover of the fabrics was not declared in their VAT returns. Answering the said observation by the Commissioner, the appellant submitted that since the state VAT is not applicable to sale of fabrics, it is not necessary to include the sales turnover of fabrics in the VAT returns. In these circumstances, we do not see merit in the order of the learned Commissioner confirming the demand on 'other receipts' considering the same as rendering of services by the appellant. Page 29 of 30
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18. In the result, the impugned order is set aside and the appeal is allowed on merit with consequential relief, if any, as per law.
(Order pronounced on 26.09.2024) (D.M. MISRA) MEMBER (JUDICIAL) (PULLELA NAGESWARA RAO) MEMBER (TECHNICAL) Raja...
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