Custom, Excise & Service Tax Tribunal
Shri Jay Ajit Charia vs Commissioner Of on 4 September, 2015
CUSTOMS EXCISE & SERVICE TAX APPELLATE TRIBUNAL, West Zonal Bench, Ahmedabad -ooOoo- Appeal No. : ST/11520/2014 (Arising out of OIO-SUR-EXCUS-001-COM-045-13-14 dated 31.12.2013, passed by Commissioner Central Excise & Service Tax, Surat) Shri Jay Ajit Charia : Appellant (s) Vs. Commissioner of Central Excise & S.T., Surat - I : Respondent (s)
Represented by :
For Appellant(s) : Shri Hardik Modh, Advocate
Shri Purvin Shah, Chartered Accountant
For Respondent(s): Shri Alok Srivastava, Authorised Representative
For approval and signature :
Mr. P.K. Das, Hon'ble Member (Judicial)
Mr. P.M. Saleem, Hon'ble Member (Technical)
1
Whether Press Reporter may be allowed to see the Order for publication as per Rule 27 of the CESTAT (Procedure) Rules, 1982?
No 2 Whether it should be released under Rule 27 of CESTAT (Procedure) Rules, 1982 for publication in any authoritative report or not?
No 3 Whether their Lordships wish to see the fair copy of the Order?
Seen 4 Whether Order is to be circulated to the Departmental authorities?
Yes CORAM :
Mr. P.K. Das, Hon'ble Member (Judicial) Mr. P.M. Saleem, Hon'ble Member (Technical) Date of Hearing : 17.08.2015 Date of Decision : 04.09.2015 ORDER No. A/11254 / 2015 dtd 4/9/2015 Per : Mr. P.K. Das;
The relevant facts of the case, in brief, are that the appellant Shri Jay Ajit Charia, proprietor of M/s. The Institute of Professional Studies, situated at Athwalines, Surat, was registered with service tax department from 26.02.2001 under the category of Professional Fees of Chartered Accountant Service. The appellant was also providing Commercial Coaching to the students appearing in Chartered Accountant Examination. On 01.7.2003, Commercial Training or Coaching Service was introduced in the Service Tax net as defined under Section 65(26) and (27) of the Finance Act, 1994. On 01.12.2009, a search was conducted at the premises of the appellant, on the basis of intelligence, that the appellant was engaged in running Commercial Coaching Classes for the students of Chartered Accountant examination and providing coaching for different Chartered Accountant courses like Common Proficiency Test (CPT), IPCC to the students appearing in Chartered Accountant examination and not paying service tax, even though his annual turnover is above the small service provider exemption limit. The Central Excise officers during search operation took printout of all the records, maintained by computer and pen-drive (Transcend 4 GB) and seized CPU, LG written CD drive etc. and recovered Diary 1999. The Central Excise officers recorded the statements of the appellant during investigation.
2. A show cause notice dated 02.07.2012 was issued proposing demand of service tax amounting to Rs. 57,03,113/- alongwith interest for the period from 01.4.2007 to 31.03.2011 and to impose penalty under Section 76, 77 and 78 of the Finance Act, 1994 and also to appropriate an amount of Rs. 26,57,344/-, as paid by the appellant during investigation. The adjudicating authority confirmed the demand of service tax alongwith interest and imposed penalties under the category of Commercial Training or Coaching Services. The amount deposited during investigation was appropriated by the Adjudicating authority.
3. The learned Advocate on behalf of the appellant submits that the services rendered by them would cover within the scope of exemption Notification No. 24/2004-ST dated 10.09.2004 as Vocational Training Institute. He further submits that the demand was raised by clubbing the income of appellants relatives, such as, father, mother, wife, brothers etc., as fees of coaching classes, who are all separate income tax assessees. It is submitted that all the relatives were filing income tax returns regularly under the Income Tax Act. Incomes of the relatives were clubbed with the appellants income without issuing any show cause notice to their relatives and the demand of tax is liable to be set-aside on this ground alone. He relied upon several case laws on this issue.
3.1 He further submits that there is no basis on demand of tax in so far as the demand was quantified partly on the basis of the computer printout, ledger and partly by clubbing the incomes of relatives and the taxable value taken into consideration, which is highest of these documents in each year. It is clear that the demand is not based on a particular document. It is well settled law that tax can not be levied on a pick and choose method. He submits that the appellant claimed benefit of exemption Notification No. 24/2004-ST (supra) as it is a Vocational Training Institute and coaching provided to the students for Chartered Accountant examination. He relied upon the decision of the Tribunal in the case of Pasha Educational Training Inst. Vs. CCE & C& ST (A-II), Hyderabad 2009 (14) STR 481 (Tri. Bang.).
3.2 The appellant was under a bonafide belief that the appellant is entitled to benefit of exemption notification on Vocational Training Institute as per the decision of the Tribunal Pasha Educational Training Inst. (supra). So, the extended period of limitation can not be invoked.
3.3 Without prejudice, the learned Advocate submits that the appellant during investigation deposited tax alongwith interest of Rs. 26,57,344/-, before issue of show cause notice. Therefore, imposition of penalty under various provisions of Finance Act, 1994 cannot be sustained. He further submits that the Adjudicating authority had not extended cum-tax benefit and option to pay penalty 25% of tax under Section 78 of the Act. The Tribunal had extended the benefit of cum-tax value in the following cases:-
i) Robot Detective & Security Agency Vs C.C.Ex. reported in 2009(14)STR.689(Tri.)
ii) C.C.Ex. & Cus. Patna Vs Advantage Media Consultant reported in 2008 (10) STR.449 (Tri.)
4. On the other hand, the learned Authorised Representative on behalf of the Revenue submits that it is evident from the records that the appellant was providing commercial coaching service to the students appearing in Chartered Accountant examination. The demand was raised on the basis of detailed investigation, including the income tax returns filed by the appellants relatives. Several summons were issued, but none of the relatives appeared before the investigating officer and therefore, the income of the said relatives were clubbed with income of the appellant. It is further submitted that the appellant also avoided to appear before the investigating officers initially and after a compliant was filed before the competent authority, the appellant appeared before the investigating officers. He submits that the evidence in the nature of income tax returns of the relatives are corroborating with the appellants Diary, which are fees for coaching classes. The relatives had not appeared before the investigating officers, so, it is to be considered as conclusive piece of evidence. The adjudicating authority rightly clubbed the income of the appellants relative with the appellants income to determine taxable value and confirmed the demand of tax. It is submitted that the appellant is Chartered Accountant and knowingly and wilfully had not paid the tax and therefore, extended period of limitation would be invoked and imposition of various penalties are warranted.
5. After hearing both the sides and on perusal of the records, we find that the appellant is engaged in providing Coaching Classes to the students preparing for examination of Institute of Chartered Accountant of India. The appellant was registered with the service tax authorities from 26.02.2001, under the category of Chartered Accountant Service. On 28.06.2002, PAN based registration was issued. On 1.7.2003 Commercial Training or Coaching Service was introduced in Service Tax net. It is contended by the appellant that thereafter, on 16.7.2003, the appellant got amended the Registration Certificate and added the category of Commercial Training or Coaching Service in the registration certificate. The Learned Advocate submitted that the coaching was provided to the students for passing the examination conducted by Institute of Chartered Accountant of India and for seeking employment thereon. Learned Advocate submitted that such activities are exempted from payment of Service Tax in terms of Notification No. 24/2004-ST dated 10.09.2004. They are also entitled benefit of exemption of small service provider. By the said notification, whole of the service tax leviable in relation to Commercial Training or Coaching by a Vocational Training Institute was exempted. Explanation (i) of the said notification provides, vocational training institute, means a commercial training or coaching centre, which provides vocational training, which impart skills to enable the trainee to seek employment or undertake self employment, directly after such training or coaching. Thus, the vocational training institute would provide training or coaching to enable the trainee to seek employment or undertake self employment. The job of the vocational training institute is that after such training or coaching, the trainee would be able to get job or to undertake self-entrepreneurship. In the present case, the appellant had provided the coaching to the students to appear in the examination conducted by The Institute of Chartered Accountants of India. It can not be considered that the appellants institute is providing any coaching to seek employment or undertake self-employment after this coaching. After the coaching provided by the appellant, the students are not seeking employment, otherwise, they are appearing in examination conducted by Institute of Chartered Accountants of India. We agree with the submission of the learned Authorised Representative for the Revenue that there are several coaching centres in the country for admission of joint entrance examination for Engineering & Medical, UPSC, SSC etc. which can not be treated as vocational training institute.
6. The learned Advocate strongly relied upon the decision of the Tribunal in the case of Pasha Educational Training Inst. (supra). In that case, the appellants were providing training on various fields, such as, Insurance Agents for various Insurance Companies. The Tribunal observed that this definition should not be interpreted in a very narrow sense. After the comprehensive training given by the appellant, enables the trainees to appear in the examination conducted of Insurance Regulatory Development Authority (IRDA). The appellants institute was recognised by IRDA. In such a situation, the Tribunal held that the training imparted should be considered a vocational training. In the present case, the appellants institute is not recognised for imparting coaching by the Institute of Chartered Accountants India and therefore, the said case law would not applicable in the facts of this case. So, the appellant is not eligible for the benefit of exemption notification as vocational training institute.
7. The next submission of the learned Advocate is that the demand of service tax was raised by clubbing the income of relatives of the appellant as fees of coaching classes. It is seen from the record that after a search of the appellants premises, a Diary 1999 was recovered amongst others. In the said Diary, 13persons (including the appellant) names, Bank account number and PAN Number appeared, who were relatives/associate with the appellant. The Learned Consultant of the appellant had produced challans for Rs. 7,91,238/- in the month of July 2011 of service tax liability alongwith interest by clubbing the income shown in the income tax return of Shri Jay Ajit Charia, Shri Jai Ajit Charia (HUF) (both are appellants), Shri Shailesh Arun Ghule (Student), and Fenil M Gandhi (Student). The Consultant of the appellant also produced the Income Tax returns/Profit and Loss Accounts/balance sheet for the financial year 2007-08 to 2010-11 of the family members and relatives, which are mentioned in the Diary, to the investigating officers. At the time of recording statement dated 25.5.2012, the appellant by his letter dated 25.5.2012, under which he prepared and produced Service Tax liability of Rs 16,51,460.00 and interest of Rs 2,99,017.00 for the period 2006-07 to 2009-10, by clubbing the income of the appellant, the appellant (HUF), Shri Shailesh Arun Ghule (student) and Fenil M Gandhi (student) and the said amount was paid by the appellant. The appellant had not accepted the income of the other relatives as shown in the Income Tax returns, as fees collected by him. It is evident from the record that the appellant had admitted the tax liability by taking into consideration of the income of himself and his two students namely Shri Shailesh Arun Ghule and Shri Fenil M Gandhi. So, there is no force in the submission of the Learned Advocate, in respect of the clubbing of income of the appellant with the said two students.
8. The clubbing of income of the appellants with the income of the other relatives, as appeared in the seized Diary 1999, the Adjudicating authority observed that on scrutiny of income tax return of relatives/ associates of the appellant submitted by the appellant, it is noticed that relatives and associates of the appellant have shown their income as fees like Tuition Income, CA Branch fees, Professional Fees, Rent Income, other income, Sales, Stitching & Designing income, in their income tax return. Summons were issued to the said persons and nobody turned up and therefore, the income (except salary income, interest, shares, mutual fund income, PPF, GPF, Fixed Deposit interest income etc.) shown in the income tax return and all these incomes have been considered as fees receipts from coaching classes by the appellant and the incomes of the relatives were clubbed with the appellants income for the purpose of determining taxable value. It is also observed that the appellant and his relatives have failed to produce documentary proof of source of their income and purported documents like fees receipt, ledger of relatives, thus there is no other way for the department except to conclude the investigation by considering the income persons as the fees receipt by the appellant for coaching classes.
9. We are unable to accept the findings of the adjudicating authority. On perusal of the Income Tax return of Ms. Yashvina Jayantilal Kapadia, we find that the assessee had declared income from house property in respect of property at B-207, Tirupati Plaza, Surat, Gujarat and B-208, Tirupati Plaza, Surat, Gujarat. The Income Tax return of Ms. Sameeta Jay Charia, for the assessment year 2010-11 had shown fees from coaching classes as income. She has also paid income tax on such income. Ms Purvi Vijay Charia in her Income Tax return for the assessment year 2009-10 had shown income from Stitching and Design. The income tax assessee had paid tax on the income shown in the Income Tax return under the Income Tax Act. There is no material available on record that the Central Excise Officers had made any inquiry of the property shown in the income tax returns and from the Income Tax Department in respect of such Income Tax returns. Hence, we are unable to accept the clubbing of the income of the other relatives of the appellant as fees on the basis of the Income Tax returns.
10. The other aspect of this matter is that while clubbing the income of the relatives with the appellant, no show cause notice was issued to the relatives. The relatives are all independent existence, not disputed by the Department. The Adjudicating authority should not pre-determine the issue, without issuing show cause to the relatives. It is observed by the Adjudicating authority that two students has made payment of fees to the brother of the appellant by cheque. Another student Ritu Lodha has made payment of fees of Rs 8,200/- by cheque to the appellants father. These transactions are indication that the appellant had distributed his coaching fees in the account of his relatives. In our considered view, it is a serious infirmity in the present proceeding that the Revenue considered the income of the other relatives as taxable service on the basis of their Bank Account and Income Tax returns, but, no notice was issued to them, which is a gross violation of principle of natural justice.
11. The Tribunal in the case of Ogesh Industries vs. CCE, Kanpur 1997 (94) ELT 88 (Tribunal), in respect of Central Excise case, held that at all times, the existence of M/s. Gore Industries was projected, the department should have issued show cause notice to M/s. Gore Industries. The adjudicating authority cannot pre-determine the issue and limit the show cause notice only to that unit which he consider to be only a real unit. The failure to issue show cause notice to one of them would show non-application of mind on the part of the authorities. There are several decisions of the Tribunal on identical issue as under:
(a) S.K.N. Gas Appliances vs. CCE, New Delhi 2000 (120) ELT 732 (Tribunal)
(b) Ramsay Pharma (P) Limited vs. CCE, Allahabad 2001 (127) ELT 789 (Tri. Del.)
(c) Premier Printers vs. CCE, Cochin 2000 (126) ELT 788 (Tri.)
(d) Shree Krishna Minerals vs. CCE, Hyderabad 2005 (190) ELT 251 (Tri. Bang.)
(e) Copier Force India Limited vs. CCE, Chennai 2008 (231) ELT 224 (Tri. Chennai)
(f) Southern Plywoods vs. CCE (Cochin) 2009 (243) ELT 693 (Tri. Bang.)
(g) Asian Industries vs. CCE, Delhi 2002 (139) ELT 391 (Tri. Del.)
(h) CCE, Jaipur vs. Sethia Foods 2003 (156) ELT 395 (Tri. Del.)
(i) Shiplachem vs. CCE, Indore 2005 (187) ELT 360 (Tri. Del.)
(j) Velmurugan Engineering vs. CCE, Coimbatore 2005 (187) ELT 371 (Tri.Chennai)
(k) Sri Chakra Cements Limited vs. CCE, Guntur 2007 (217) ELT 255 (Tri. Bang.)
(l) CCE, Pune vs. Arofine Polymers Limited 2007 (214) ELT 241 (Tri. Mum.)
12. The Honble Calcutta High Court in the case of CCE, Kolkata-II vs. Diamond Scaffolding Company 2011 (274) ELT 10 (Cal.) held as under:-
8?In respect of the second point, i.e., clubbing of clearance, the Tribunal further came to the conclusion that clearances of two other units were clubbed with the clearance made by the importer without issuing any show cause notice to the other units and there was no notice to the two units for clubbing clearance with the clearance of the importer. In such circumstances, in our opinion, the Tribunal was quite justified in holding that demand by clubbing the clearance of other units without issuing any show cause notice was not sustainable.
13. It is noticed that the taxable value was determined on the basis of three sources (a) Fees collected (as per computer print out Pages taken out at the time of search) (b) Fees collected (as per details provided by the appellant vide Annexure A, B and C (fees receipt ledger) letter dated 04.05.2012 and (c) Fees collected/ income (by clubbing the income shown in the income tax return of the 13 persons/firm). The highest amount, among all these three sources in each year had taken on year-wise taxable value for determining demand of tax. We find that there is no definite stand taken by department for a particular source and documents for determining taxable value. In our considered view, service tax cannot be levied in such manner, on the basis of pick and choose method of the documents, which is totally inconsistent, misconceived and irrational.
14. We find force in the submission of the Learned Authorised Representative that the appellant had not disclosed to the department tax liability and it is a clear case of suppression of facts with intent to evade payment of tax and extended period of limitation and penal provisions under Finance Act, 1994 would be invoked. The appellant had disclosed the tax liability during investigation and voluntarily paid the tax with interest and therefore, in our view, the penalty imposed under Section 78 of the Act is sufficient.
15. In view of the above discussion, we modify the impugned order to the extent the demand of service tax alongwith interest against the appellant by clubbing the income of Shri Jay Ajit Charia, Shri Jai Ajit Chari (HUF), Shri Shailesh Arun Ghule (student), Shri Fenil M Gandhi (student) and imposition of penalty under Section 78 are upheld and the balance amount of demand of tax alongwith interest and penalties are set-aside. Accordingly, the Adjudicating Authority is directed to quantify the demand of tax after extending the cum-tax benefit. The appellant is directed to provide all the documents to the Adjudicating authority for the purpose of quantification of demand, within 30 days from the date of receipt of this order. As the adjudicating authority had not extended the option to pay penalty 25% of the tax within 30 days, as per Section 78 of the Act, the appellant is entitled to pay penalty of 25% of the tax alongwith entire amount of tax and interest, as determined, within 30 days from the date of communication of the order of the Adjudicating Authority. The appeal filed by the appellant is disposed of in the above terms.
(Pronounced in the Court on 4.9.2015)
(P.M. Saleem) (P.K. Das)
Member (Technical) Member (Judicial)
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