Custom, Excise & Service Tax Tribunal
Nis Sparta Ltd vs Cst, New Delhi on 18 December, 2014
IN THE CUSTOMS, EXCISE & SERVICE TAX
APPELLATE TRIBUNAL
West Block No. 2, R.K. Puram, New Delhi 110 066.
Date of Hearing : 18.12.2014
Appeal No. ST/1806/2011-CU(DB)
[Arising out of Order-in-Original No. 02/AKM/CST (Adj.)/2011 dated 29.7.2011 passed by the Commissioner (Adjudication), Service Tax, New Delhi]
For Approval & Signature :
Honble Mr. Ashok Jindal, Member (Judicial)
Honble Mr. R.K. Singh, 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?
2.
Whether it would be released under Rule 27 of the CESTAT (Procedure) Rules, 1982 for publication in any authoritative report or not?
3.
Whether their Lordships wish to see the fair copy of the order?
4.
Whether order is to be circulated to the Department Authorities?
NIS Sparta Ltd. Appellant
Vs.
CST, New Delhi Respondent
Appearance:
Shri Ajay Agarwal, Advocate - for the Appellant
Shri Govind Dixit, A.R. - for the Respondent
Coram : Honble Mr. Ashok Jindal, Member (Judicial)
Honble Mr. R.K. Singh, Member (Technical)
F. Order No. 54909/2014
Per Ashok Jindal :
The appellant is in appeal against the impugned order where service tax liability has been confirmed against him under the category of Commercial Training and Coaching Services along with interest and various penalties under the Finance Act, 1994.
2. The brief facts of the case are that the appellant is providing training to candidates who intent to become Insurance Agent. The candidates are sponsored by the insurance company, who pays the appellant instead of candidates themselves paying the appellants. To become the insurance agent, it is mandatory in the law for him to undergo a training programme which is imparted by the appellant and thereafter to clear an exam conducted by Insurance Regulatory and Development Authority (IRDA). IRDA has been established under Section 3 of the Insurance Regulatory and Development Authority Act, 1999. IRDA has been conferred powers under Section 42 of the Insurance Act, 1938 to prescribe rules for Licensing of Insurance Agents. IRDA is further empowered to prescribe requisite qualification, training and examination by the Insurance Agent under Section 114A of the Insurance Act, 1938. As per IRDA (Licence of Insurance Agent) Regulation, 2000 approves and notifies certain institutions as approved institutions within the meaning of Regulation 2(b) of said Regulation. The appellant is an approved institution as per IRDA Regulation. To obtain a licence, Regulation 3(1) prescribed that the candidate is to apply by making an application, Regulation 3 (ii) prescribed that the candidate should possess the practical training as specified under Regulation 5, a licence can be issued. As per Regulation 5 provides that a training is mandatory which is to obtain by the candidate from approved institutions as prescribed under the said rules. Thereafter under Rule 6, the candidate has to pass an examination conducted by Insurance Institute of India, Mumbai or some other body which issues a certificate to practice as an Insurance Agent. In these set of facts, the appellant is imparting practical training to the candidates who desirous to become Insurance Agent and issues a certificate for completion of training and on the basis of that certificate the candidate is entitled to appear in the examination conducted as per Regulation 6 of the said Regulation, thereafter who passes the exam becomes the Insurance Agent. The appellant did not pay service tax on their activity on the premise that they are not liable to service tax on their activity. But investigation conducted by the Revenue, it was revealed that the applicant is a Commercial Training and Coaching Institute as defined under Section 65(27) of the Finance Act, 1994. Therefore, they are liable to pay service tax. In these set of facts proceedings were initiated against the appellant and for the period 1st July 2003 to 9th September 2004, a Show Cause Notice dated 1.7.2008 was issued to the appellant for demand of service tax along with interest and proposal for various penalties under Section 76, 77 & 78 were also made. Adjudication took place, the proposals made in the Show Cause Notice were confirmed by converting into the demand of service tax along with interest and imposing various penalties on the appellant under the Finance Act. Aggrieved for the said order, the appellant is before us.
3. Shri Ajay Agarwal, ld. Counsel appeared on behalf of the appellant and submits that the appellant although a Commercial, Training and Coaching Institute is not covered for levy of service tax under Section 65(27) of the Finance Act, 1994. To support this contention, he drew our attention to Section 65(27) of the Act and says that appellant is imparting training for which a certificate is issued which is recognised by law. Therefore, they are under the exclusion clause of Section 65(27) of the Act. In these set of facts, he prays that impugned order is required to be set aside. He further submits that the appellant is entitled for the benefit of Notification No. 10/2003-ST dated 20th June 2003 which provides an exemption to commercial training or coaching centre which forms an essential part of a course or curriculum of any other institute or establishment, leading to the issuance of any certificate or educational qualification. He further submits that in alternate the appellant is entitled for the benefit of Notification No. 9/2003-ST dated 20th June 2003 which provides exemption to vocational training institute. To support this contention he relied on the decision in the case of Pasha Educational Training Institute Vs. CCE, Hyderabad - 2009 (14) STR 481 to say that in the case of the competitor of the appellant in similar set of facts, this Tribunal held that the training to the candidate is a vocational training. Therefore, the institute is Vocational Training Institute and eligible for exemption under Notification No. 9/2003 ibid.
4. He further submits that a similar issue came up before the Honble High Court of Delhi in the case of Indian Institute of Aircraft Engineering Vs. Union of India 2013 (30) STR 689 (Del.), wherein the Honble High Court has held that such type of training which is governed by a law is not covered under the definition of Section 65(27) of the Finance Act, 1994. He further submits that the appellant is having a good case on limitation also as the appellants was under the bona fide belief that their activity is not liable for service tax. Therefore, they did not take registration and did not pay the service tax. In these circumstances, he prays that impugned order is to be set aside.
5. On the other hand, Shri Govind Dixit, Additional Commissioner (AR) oppose the contention of the ld. Counsel and submits that the activity undertaken by the appellant is squarely covered by Section 65(27) of the Finance Act, 1944 and does not exclude the appellant from levy of service tax. He submits that the appellant is not issuing any certificate of training recognised by law, therefore they are not covered under the exclusion clause of Section 65(27) of the Finance Act. He submits that a similar issue was referred to the Larger Bench of this Tribunal in the case of Great Lakes Institute of Management Ltd. Vs. CST, Chennai - 2013 (32) STR 305 (LB) wherein this Tribunal held that such type of institute which are not issuing training certificate recognised by law are Commercial Coaching and Training Institute, therefore, the appellant is liable to pay service tax. He further submits that the appellants are issuing only a certificate of completion of training and not conducting any exam and issuance of certificate of Training is not recognised by law. In these circumstances, he cannot take the shelter of the decision of Honble High Court of Delhi in the case of Indian Institute of Aircraft Engineering (supra). He further submits that the exam conducted by Insurance Institute of India, Mumbai has no concern with the training imparted by the appellant as that has not prescribed any syllabus for conducting the training. To support this contention, he relied on the decision of the Honble Kerala High Court in the case of St. Antonys Educational & Charitable Society Vs. Union of India 2006 (1) STR 137 (Ker.).
6. He further submits that as the appellant was well aware of their activities liable to tax and suppressed deliberately their activity from the department therefore, extended period of limitation is rightly invoked.
7. Heard the parties.
8. In this case the issue before us is that whether the activity undertaken by the appellant is liable to service tax under Section 65(27) of the Finance Act, 1994 or not? For better appreciation Section 65(27) is extracted below:
65(27) Commercial training or coaching centre means any institute skill or knowledge or lessons on any subject or field other than the or establishment providing commercial training or coaching for imparting sports, with or without issuance or a certificate and include coaching or tutorial classes but does not include preschool coaching and training centre or any institute or establishment which issues any certificate or diploma or degree or any educational qualification recognized by law for the time being in force.
9. On plain reading of the said provision, we find that any institute or establishment which issues any certificate or diploma or degree or any educational qualification recognised by law for the time being in force is not covered under Commercial Training or Coaching Centre. Therefore, the issue arises before us whether the training imparted by the appellant is having any recognition by law or not?
10. We have seen Insurance Regulatory and Development Authority (Licensing of Insurance Agents) Regulation, 2000 and gone through the various provisions of said regulations which are extracted here below :
2(b) Approved Institution means an Institution engaged in education and/or training particularly in the area of insurance sales, service and marketing, approved and notified by the Authority.
(c) Authority means the Insurance Regulator and Development Authority established under the provisions of Section 3 of the Insurance Regulatory and Development Authority Act, 1999.
(g) Examination Body means an Institution, which conducts pre-recruitment tests for insurance agents ad which is duly recognised by the Authority.
(h) Licence means a certificate of licence to act as an insurance agent issued under these regulations:
(j) Practical Training includes orientation, particularly in the area of insurance sales, service and marketing, through training modules as approved by the Authority.
3 (1) A person desiring to obtain or renew a licence (hereinafter referred to as the applicant) to act as an insurance agent or a composite insurance agent shall proceed as follows :-
(a) the applicant shall make an application to a designated person-
(i) in Form IRDA-Agents-VA, if the applicant is an individual;
(ii) in Form IRDA-Agents-VS, if the applicant is a firm or a company;
provided that the applicant, who desires to be a composite insurance agent shall make two separate applications.
(b) The fees payable by the applicant to the Authority shall be as specified in Regulation 7 (2) The designated person may, on receipt of the application along with the evidence of payment of fees to the Authority, and on being satisfied that the applicant
(i) possesses the qualifications as specified under Regulation 4;
(ii) possesses the practical training as specified under Regulation 5;
(iii) has passed the examination as specified under Regulation 6 5 (1) The applicant shall have completed from an approved institution, at least, fifty hours practical training in life or general insurance business, as the case may be, which may be spread over one to two weeks, where such applicant is seeking licence for the first time to act as insurance agent.
(3) An applicant, who has been granted a licence after the commencement of these regulations, before seeking renewal of licence to act as an insurance agent, shall have completed, at least twenty five hours practical training in life or general insurance business, as the case may be, from an approved institution.
6. The Applicant shall have passed the pre-recruitment examination in life or general insurance business, or both, as the case may be, conducted by the Insurance Institute of India, Mumbai, or any other examination body. On going through these regulations, we observe to become an insurance agent, the candidate needs three qualifications :
(a) He should be having a statutory qualification i.e. studied up to 12th standard.
(b) He should have undergone a practical training from a recognised institute and
(c) To pass an examination conducted by Insurance Institute of India, Mumbai or any other institute prescribed by regulations.
11. After going these provisions, we find that it is mandatory for a candidate to go for practical training from the approved institute which is the appellant. In these set of facts, we are of the view that the certificate of completion of training issued by the appellant having recognition of law.
12. We also find that both sides have relied on certain case law. We deal in the case of Great Lakes Institute of Management Ltd. (supra) the issue referred before Larger Bench of this Tribunal is as under :
5.?On primary analysis of the relevant statutory provisions it is legitimate to infer that any institute or establishment providing commercial training or coaching (including any centre or institute, irrespective of its nomenclature, where training or coaching is provided for consideration and irrespective of its constitutive or organisational basis or architecture; i.e., whether or not such centre or institute is registered as a trust, a society or other similar organisation under any law for the time being in force; and carrying on its activity with or without a profit motive), engaged in imparting skill or knowledge or lessons on any subject or field (excluding sports), irrespective of whether on culmination of the training or coaching regimen, a certificate is issued; and including coaching or tutorial classes, is a commercial training or coaching centre. Pre-school training and coaching centre or any institute or establishment which issues any certificate, diploma, degree or any other educational qualification recognized by law for the time being in force, are however excluded from the sphere of the defined entity.
13. To answer this reference, this Tribunal has restricted to examine the meaning of Commercial, Training & Coaching Centre and restricted not to examine the exclusion clause of Section 65(27) of the Act. As this Tribunal has not examined the said issue, therefore, answer to such reference is of no help to the Revenue.
14. We further find that a similar issue came before the Honble High Court of Delhi in the case of Indian Institute of Aircraft Engineering (supra) wherein the facts were like as under:
3.?It is inter alia the case of the petitioner :
(ii) that the petitioner issues a certificate approved by the DGCA to candidates who successfully complete the approved training curriculum and successfully pass the examinations as per the approved course syllabus;
(iii) that the DGCA fully controls such training institutes by prescribing syllabus, number of seats per session, manner in which the exam is to be conducted as well as the manner in which the certificate is to be issued, though the candidates get the Final Licence i.e. BAMEL from the DGCA after qualifying further examination conducted by the DGCA;
(iv) that though Service Tax in India was introduced in the year 1994 but commercial training or coaching services were brought under the Service Tax net only with effect from 1-7-2003 by insertion of Clause 65(105)(zzc) in the Finance Act by making services provided by a commercial training or coaching centre in relation to commercial training or coaching as a taxable service;
In these set of facts, the Honble High Court has examined the issue and observed as under :
20.?The position which thus emerges is that :-
(A) That successful completion of Aircraft Maintenance Engineers course from an approved training school by itself does not authorize such candidate to certify the airworthiness of an aircraft or its repair or maintenance. For the same, an examination to be conducted by the DGCA is to be passed.
(B) For appearance in the said examination, it is not essential to undergo the course offered by the approved training school and others are also eligible to take the said examination.
21.?Nonetheless, the law dealing with the subject of aircrafts has not left the institutes imparting such courses/training and which course completion/training makes the successful candidates eligible to one year exemption, unregulated. It is not as if anyone can start, offering such course and imparting training. The Act, Rules and CAR provide for approval of institutes such as the petitioners. DGCA regulates the course content offered by such institute and gives relaxation to the successful candidates from such institutes in the matter of taking the examination to be conducted by the DGCA for grant of authority/license to render services of aircraft repair and maintenance and to certify the aircrafts airworthiness. Though qua the fee etc. to be charged by such institutes there does not seem to be any restriction but the powers under the Act and the Rules in exercise of which such CAR has been issued are wide enough to also issue a direction with respect to the fee etc. to be charged by such institute.
22.?The question which falls for consideration is whether the aforesaid would amount to recognition by law of the Course Completion Certificate and On Job Training Certificate given by such institute.
23.?The expression recognized by law is a very wide one. The legislature has not used the expression conferred by law or conferred by statute. Thus even if the certificate/degree/diploma/qualification is not the product of a statute but has approval of some kind in law, would be exempt.
24.?Recognize is defined, in the Blacks Law Dictionary, 8th Edition as confirmation of an act done by another person as authorized, formally acknowledging the existence; and, in Concise Oxford Dictionary as acknowledging the existence, validity or legality of.
26.?There can be no doubt that such recognition through the Rules framed as aforesaid and through issuance of CAR, is a recognition by law, which is defined in Blacks Law Dictionary, 8th Edition as the aggregate of legislation, judicial precedents and accepted legal principles and the set of rules or principles dealing with a specific area of legal systems. The Rules and the CAR aforesaid dealing with aircrafts, there can be no doubt, are law. The Supreme Court in Narsingh Pratap Singh Deo v. State of Orissa - AIR 1964 SC 1793 held that a law generally is a body of rules which have been laid down for determining legal rights and legal obligations which are recognized by Courts. Similarly, in R.S. Nayak v. A.R. Antulay - (1984) 2 SCC 183 it was held that law includes any Ordinance, By-law, Rule, Regulation, Notification, Custom or Usage having force of law. The Rules and CAR aforesaid have been enacted in exercise of legislative power as aforesaid.
27.?The reasoning in the impugned Instruction dated 11th May, 2011 that because the qualification awarded by the Institute does not culminate in automatic issuance of license/ by the DGCA to certify the repair, maintenance or airworthiness of an aircraft and for authorization which purpose a further examination to be conducted by the DGCA is to be taken, in our view mixes up and confuses, qualification with a license to practice on the basis of that qualification. An educational qualification recognized by law will not cease to be recognized by law merely because for practicing in the field to which the qualification relates, a further examination held by a body regulating that field of practice is to be taken. Immediate instance can be given of the qualification in the field of law. Though by amendment of the recent years, the right to practice law on the basis of the said qualification has been made subject to clearing/passing a Bar Exam to be held by the Bar Council of India, the same does not make the qualification of law not recognized by law. The recognition accorded by the Act, Rules and CAR supra to the Course Completion Certificate issued by the Institutes as the petitioner cannot be withered away or ignored merely because the same does not automatically allow the holder of such qualification to certify the repair, maintenance or airworthiness of an aircraft and for which authorization a further examination to be conducted by the DGCA has to be passed/cleared.
15. Thereafter, Honble High Court concluded that the training conducted by the appellant in that case having a recognition of law and is not covered under commercial or coaching training centre as defined under Section 65(27) of the Finance Act, 1994. We have further gone through the decision of Pasha Educational Training Inst. (supra) wherein similar set of facts, in the case of the competitor of the appellant this Tribunal held that the appellant was imparting the vocational training and held that the appellant was entitled for benefit of exemption under Notification No. 9/2003-ST dated 20th June 2003. The reliance by the ld. AR in the case of St. Antonys Educational & Charitable Society is also of no help as in the case in hand, we have already observed that the training imparted by the appellant is having recognisation of law.
16. As discussed above, to conclude, we hold that the facts of this case are similar to the facts of the case of Pasha Educational Training Inst. (supra) and Indian Institute of Aircraft Engineering (supra) wherein it was held that the training imparted by the appellants were not covered under the definition of Section 65(27) of the Finance Act, 1994.
17. Therefore, we hold that in this case also the training imparted by the appellants does not fall under the ambit of Section 65(27) of the Finance Act, 1994 as the training imparted by the appellant is having the recognition of law and covered under exclusion clause of Section 65(27) of the Finance Act, 1994, therefore the appellant is not liable to pay service tax at all.
18. In these circumstances, we set aside the impugned order and allow the appeal with consequential relief if any.
19. As we have allowed the appeal on merits, therefore, we are not considering other issues raised by the ld. Counsel for the appellant.
(Ashok Jindal) Member (Judicial) (R.K. Singh) Member (Technical) RM 1