Madras High Court
Academy Of Maritime Education And ... vs The Commissioner Of Service Tax on 3 July, 2014
Author: B. Rajendran
Bench: B. Rajendran
IN THE HIGH COURT OF JUDICATURE AT MADRAS DATED : 03-07-2014 CORAM: THE HONOURABLE MR.JUSTICE B. RAJENDRAN Writ Petition No. 13615 of 2014 and M.P. No. 1 of 2014 Academy of Maritime Education and Training Trust rep. By its Managing Trustee Mrs. Susheela Ramachandran 5107, H-2, Second Avenue Anna Nagar, Chennai 600 040 .. Petitioner Versus The Commissioner of Service Tax O/o. the Commissioner of Service Tax Newry Towers, No.2054-1, II Avenue Anna Nagar, Chennai 600 040 .. Respondents Petition filed under Article 226 of The Constitution of India praying for a Writ of Certiorari calling for the records in C.No.IV/9/416/2012-STC Adj, dated 22.01.2014 in order in Original No.CHN/SVTAX-OOO-COM-046-13-14 dated 22.01.2014 issued by the respondent and quash the same as arbitrary and illegal. For Petitioner : Mr. Joseph Prabakar For Respondent : Mr. V. Sundareswaran ORDER
The petitioner institution has come forward with this writ petition challenging the order dated 22.01.2014 passed by the respondent, in and by which, the respondent classified the activities of the petitioner into one of Commercial Training or Coaching service attracting payment of service tax and consequentially confirmed the demand for service tax of Rs.7,79,53,322/- after appropriating the sum of Rs.3,69,749/- paid by the petitioner company during the course of investigation, besides leving a penalty of Rs.7,79,53,322/-.
2. The petitioner is managing the Academy of Maritime Education and Training Trust in Chennai imparting training to the students in various activities such as Higher National Diploma (HND) Courses in Nautical Science and Marine Engineering and also also conducting short term courses in Oil Pollution and REsponse Course, Fire Prevention and Fire Fighting Course, Personal Survival Technique Course, Tanker Familiarization Course, Personal Safety and Social REsponsibility Course for sea men and students. During the course of such activities, the Additional Director General, Directorate General of Central Excise Intelligence, Chennai Zonal Unit, Chennai has issued a show cause notice on 01.10.2012 calling upon the petitioner to show cause as to why service tax be not levied under the three categories of taxable services namely Commercial coaching or training, Renting of immovable property services and business support services. In and by the said notice, a personal hearing was also given to the petitioner, which the petitioner attended on 26.02.2013 and putforth their submissions to prove that they are not liable to pay any service tax. The petitioner also filed a written submissions by way of written reply on the same day namely 26.02.2013. Thereafter, the petitioner was not heard from the respondent in this regard for a long time. While so, according to the petitioner, suddenly, by the order dated 22.01.2014, the respondent classified the activities of the petitioner into one of Commercial Training or Coaching service attracting payment of service tax and consequentially confirmed the demand made in the show cause notice for service tax of Rs.7,79,53,322/- after appropriating the sum of Rs.3,69,749/- paid by the petitioner company during the course of investigation, besides leving a penalty of Rs.7,79,53,322/-.
3. The learned counsel appearing for the petitioner would mainly contend that there is an inordinate delay on the part of the respondent in passing the impugned order and it is vitiated by delay. The petitioner attended personal hearing on 26.02.2013 and on the same day they have submitted a written submission. While so, the impugned order came to be passed nearly after 11 months from the date on which the petitioner attended the personal hearing. In this regard, the learned counsel for the petitioner relied on the Circular dated 05.08.2003 issued by the Central Board of Excise & Customs, New Delhi, wherein it was directed that in all such cases where personal hearing have been concluded, it is necessary to communicate the decision immediately or within a reasonable time of 5 days. Where, for certain reasons, the above time limit cannot be adhered to in a particular case, the order should be issued within 15 days or at most one month from the date of conclusion of personal hearing. Relying on the above circular, the learned counsel for the petitioner would contend that the delay in passing the impugned order renders it vitiated. The learned counsel for the petitioner also relied on the decision rendered by the Delhi High Court in the case of Indian Institute of Aircraft Engineering vs. Union of India reported in 2013 (30) S.T.R. 689 (Delhi) to contend that the impugned order of the respondent holding that the petitioner is assessable to service tax is unsustainable under law. As per the order of the Delhi High Court, flying training institutes providing training for obtaining commercial pilot licence (CPL) and aircraft engineering institutes providing training for obtaining basic aircraft maintenance engineer licence are not liable to pay service tax. According to the learned counsel for the petitioner, the said decision of the Delhi High Court is squarely applicable to the facts of this case. The respondent, without following the aforesaid order passed by the Delhi High Court or without giving any further notice to the petitioner has straightaway passed the impugned order.
4. The learned counsel for the petitioner also relied on the decision of the CESTAT in the case of Great Lakes Institute of Management Limited vs. Commissioner of Service Tax, Chennai reported in 2013 (32) STR 305 to contend that the activity of imparting skills, knowledge, lessons on any subject or field or when provided by any entity, institution or establishment which is excluded by specific and legislated exclusionary clause would alone be outside the fold of the taxable activity. In this case, the courses offered by the petitioner would qualify for exemption under vocational training for the period from 2007-2008 to 27.02.2010. Therefore, the respondent ought to have considered the said decision of the Tribunal before assessing the liability of the petitoiner for payment of service tax. In fact, the department preferred an appeal as against the decision of the Tribunal before the Delhi High Court and it was dismissed. In any event, the learned counsel for the petitioner would contend that the delay in passing the order, which is impugned in this writ petition, renders the same vitiated and on that ground, he prayed this Court to allow the writ petition.
5. On the contrary, the learned standing counsel for the respondent vehemently opposed this writ petition by relying on the decision of the Honourable Supreme Court in the case of (Telestar Travels Pvt Ltd., vs. Special Director of Enforcement) reported in 2013 (289) ELT 3 (SC) to contend that even though there is a delay in passing the order, which is impugned in this writ petition, such delay by itself will not be a ground for setting aside the order when it is otherwise legally valid and justified. The Honourable Supreme Court further held that if there is a delay in passing an order, such order requires careful and closer scrutiny. Therefore, according to the learned standing counsel for the respondent, the argument advanced on behalf of the petitioner with reference to delay is legally not sustainable. If the petitioners pleads that the delay vitiates the order impugned in this writ petition, it is for the petitioner to prove that such delay has caused prejudice to him in any manner. Therefore, the learned counsel for the respondent prayed this Court for dismissal of the writ petition.
6. I heard the counsel for both sides and perused the materials placed on record. The short point arise for consideration in this writ petition is whether, the delay in passing the impugned order by itself would vitiate it.
7. The learned counsel for the petitioner mainly contended that the petitioner was issued with a show cause notice on 01.10.2012, a personal hearing was given to the petitioner on 26.02.2013, on which date, the petitioner submitted his written submissions putting forward his objections for levying service tax. Thereafter, nothing was heard from the respondent. While so, the impugned order came to be passed after 11 months from the date of personal hearing given to the petitioner and therefore, the delay would render the impugned order invalid. The learned counsel for the petitoiner also relied on the Circular dated 05.08.2003 issued by the Central Board of Excise & Customs, New Delhi wherein directions have been given to the effect that in cases where personal hearing have been concluded, the copy of the order has to be communicated within 5 days or within 15 days or at most one month from the date of conclusion of personal hearing. This argument of the learned counsel for the petitioner cannot be accepted. As per the decision of the Honourable Supreme Court reported in (Telestar Travels Pvt Ltd., vs. Special Director of Enforcement) reported in 2013 (289) ELT 3 (SC) the delay by itself will not be a ground for setting aside an order, which may otherwise be legally valid and justifiable, however, such order only requires a closer and careful scrutiny by the Court. In such event, the petitioner has to prove that the delay by itself has caused prejudice to him.
8. The learned counsel for the petitioner relied on the Order passed by the CESTAT in the case of Great Lakes Institute of Management Limited vs. Commissioner of Service Tax, Chennai reported in 2013 (32) STR 305 to contend that the petitioner institute will not come under the purview of service tax. The order was taken on appeal before the Delhi High Court and it was dismissed. A further appeal was preferred to the Honurable Supreme Court by the Department in Civil Appeal No. 4464 of 2008 and by order dated 14.05.2010, the appeal was disposed of in view of the amendment made to the Finance Act 14 of 2010 inserting Section 65 (105) (zzc) from 01.07.2003. By virtue of the amendment, the expression Commercial training or coaching centre in clauses (26) (27) and (90a) was made to mean and include any centre or institute registered as a trust or society or similar other organisation under law for the time being in force and carrying on its activity, with or without profit motive. In view of the said order passed by the Honourable Supreme Court, the reliance placed by the learned counsel for the petitioner to the order passed by the Tribunal cannot be considered at this stage. In this context, it is relevant to refer to the decision of the Honourable Supreme Court in the case of Assistant Commissioner, Income Tax, Rajkot vs. Saurashtra Kutch Stock Exchange Ltd., reported in 2008 (230) ELT 385 (SC) wherein the Honourable Supreme Court held that if a subsequent decision alters the earlier one, it (the later decision) does not make new law. It only discovers the correct principle of law which has to be applied retrospectively. Therefore in the light of the above decision of the Honourable Supreme Court, the reliance placed by the learned counsel for the petitioner on the order passed by the CESTAT cannot be of any use to the case of the petitioner.
9. It is seen from the impugned order that the respondent, relying upon various decisions on the subject, has concluded that the activities of the petitioner institution will attract levy of service tax. In the impugned order, the respondent, relied on the decision of the CESTAT, Mumbai in the case of Bombay Flying Club (2013) 29 STR 156 rendered in a similar case, wherein it is held as follows:-
5.2 The first issue to be considered is whether the appellant falls under the exclusive clause of the definition, that is, whether it issues any certificate or diploma or degree or any educational qualification recognised by law for the time being in force. The appellant imparts training in air craft maintenance, engineering and flying and issues a course completion certificate. Thereafter, the students who have undertaken the course has to appear for examinations conducted by the Directorate General of Civil Aviation and on successful completion of the same, the DGCA issues/grants licence to the student under the Aircraft Act and the Rules. What is recognised under the law is the licence issued by the DGCA and not course completion certificate issued by the appellant. With that certificate, the student cannot get any employment or engage in self-employment, without clearing the examination conducted by the DGCA. Since the appellant is a charitable institution, can they be considered as a commercial training or coaching centre. Here again the answer is negative. So long as the appellant imparts training or skill in any subject or field other than sports for a consideration, the said activity would come under the purview of commercial training or coaching. It is on record that the appellant is collecting substantial amjount of fees from the students for impartikng training. Merely because the appellant is registered as a Charitable Institution under the Income Tax Act, 1961, that does not entitle the appellant to claim exclusion from the ambit of service tax. Thus, it is obvious that the appellant does not come under the exclusion clause of the definition of commercial training or coaching centre.
10. In the present case, even on merits, it has to be noted that the petitioner is an institution which is imparting training to the students in various activities. Admittedly, the petitioner institution is collecting fee from the students for imparting such training and therefore, I do not find any reason to interfere with the order passed by the respondent.
In the result, the writ petition is dismissed. No costs. Consequently, connected miscellaneous petition is closed.
03.07.2014 rsh Index : Yes / No Internet : Yes / No To The Commissioner of Service Tax O/o. the Commissioner of Service Tax Newry Towers, No.2054-1, II Avenue Anna Nagar, Chennai 600 040 B. RAJENDRAN, J rsh WP No. 13615 of 2014 03-07-2014