Custom, Excise & Service Tax Tribunal
Commissioner, Service Tax-Delhi I vs Bsl Training Co. Pvt. Ltd on 3 April, 2023
Author: Dilip Gupta
Bench: Dilip Gupta
CUSTOMS, EXCISE & SERVICE TAX APPELLATE TRIBUNAL
NEW DELHI
PRINCIPAL BENCH-COURT NO. I
SERVICE TAX APPEAL NO. 51704 of 2015
[Arising out of Order-in-Appeal No. 03/ST/DLH/2014 dated 29.12.2014 passed by
the Commissioner of Service Tax (Appeals 1), New Delhi ]
Commissioner of Service Tax- Delhi I APPELLANT
VS.
BSL Training Co. Pvt. Ltd. RESPONDENT
4, Satya Niketan, 2nd Floor Above Gold's Gym, New Delhi-110 021.
WITH SERVICE TAX APPEAL NO. 53491 of 2015 [Arising out of Order-in-Appeal No. 03/ST/DLH/2014 dated 29.12.2014 passed by the Commissioner of Service Tax (Appeals 1), New Delhi ] BSL Training Co. Pvt. Ltd.
4, Satya Niketan, 2nd Floor APPELLANT
Above Gold's Gym,
New Delhi-110 021.
VS.
RESPONDENT
Commissioner of Service Tax- Delhi I
APPEARANCE:
Shri Harshvardhan, Authorized Representative of the Department Shri Dhruv Tiwari, Advocate for the Respondent CORAM:
HON'BLE MR.JUSTICE DILIP GUPTA, PRESIDENT HON'BLE MS. HEMAMBIKA R PRIYA, MEMBER (TECHNICAL) DATE OF HEARING : 28 February, 2023 DATE OF DECISION : 03 April, 2023 FINAL ORDER No.50424-50425/2023 PER HEMAMBIKA R PRIYA The current appeals have been filed to assail the Order-in- Appeal No.03/2014 dated 29.12.2014 passed by the Commissioner of Central Excise & Service Tax, Udaipur confirming the demand of Rs.42,91,058/- [Rs.40,62,724/- relating to coaching service and Rs.2,28,334/- relating to franchise service) along with interest under section 75 and penalty under section 76, 77 and 78 of Finance Act, 1994. An amount of Rs.3,00,000/- already paid by the appellant was appropriated. The Department has filed the appeal to contest the dropping of the demand to the extent relatable to the value of study material. The assessee has filed the appeal seeking setting aside the penalty under section 73(1) of the Finance Act, 1994 and seeking benefit of Section 80 of the Act.
1.1 M/s. BSL Training Company Private Limited (hereinafter referred to as the assessee), is a private limited company which was incorporated on 23.01.2010 under the Companies Act, 1956.
BSL began its operations in April 2010 and is carrying on the business in imparting education and training in general spoken English, business English for corporate communication, professional English (i.e., English for Engineers and MBA, etc.), foreign languages, call centre grooming, voice and accent, presentation skills, interview skills, group discussion, preparation test and entrance exams, etc. The assessee was carrying on the said business by operating franchisees of M/s British School of Language. The assessee had initially applied for centralised Service Tax registration under the category of commercial training and coaching service ("coaching service") on 09.10.2010 with the Service Tax Department, Division-II, Delhi. On enquiry from the Department, BSL was advised to re-submit the application at Service Tax Department, Division-I, Delhi as the correct jurisdiction fell within Division-I. 2 1.2 Meanwhile, vide letter dated 08.09.2011 and subsequent letters, Department initiated enquiry and sought certain clarifications/ documents from the assessee which was duly provided.
1.3 Thereafter, a Show Cause Notice dated 23.04.2012 was issued to the assessee, raising a demand of Service tax amounting to Rs. 42,91,058 under the proviso to Section 73(1) of Chapter V of the Finance Act, 19941 along with interest under Section 75 ibid and penalty under Section 76, Section 77 and Section 78 ibid, by invoking the extended period of limitation and further proposing to appropriate Service tax amount of Rs.3,00,000/- already paid by the appellant. The demand was on the grounds that the assessee had failed to pay Service Tax on the amount received under the category of coaching service and franchise service under Section 65(105)(zzc) and Section 65(105)(zze) of the Finance Act, respectively, for the financial year 2010-11 and 2011-12 ("period of dispute"); that the assessee was providing its own study material/ books for training and coaching, value of which was not included in the taxable value of coaching service in terms of Para 2.2.3 and Para 2.9.1 of Circular No. 59/8/2003 dated 20.06.2003 ("Circular"); that amount of franchise fee and royalty fee received by BSL is taxable under the category of franchise service.
1.4 The Additional Commissioner vide Order-in-Original dated 29.12.2014 confirmed the demand of Rs. 40,62,724/- relating to coaching service and Rs. 1,46,327/- relating to franchise service by re-computing the same, totaling to Rs. 42,09,058/-, along with interest under the extended period of limitation and further appropriated Service tax amount of Rs. 9,50,000/- already paid by BSL. The Adjudicating Authority further imposed penalty equal to demand confirmed under Section 78 of the Finance Act and Rs.1,000/- under Section 77 ibid, while he dropped penalty under Section 76 ibid.
1 Finance Act 3 1.5 Aggrieved by the Order-in-Original, the assessee filed an appeal before the Commissioner (Appeals-I), New Delhi on 05.11.2013.
1.6 The Commissioner (Appeals) vide Order-in-Appeal dated 29.12.2014 ("impugned order"), partly allowed the assessee's appeal holding that the value of study material is not includible in the taxable value of coaching service as the issue is settled by Tribunal in the case of Cerebral Learning Solutions Pvt. Ltd. v. Commissioner of Central Excise, Indore2, and accordingly, set aside the demand to the extent of inclusion of value of study material in the taxable value of coaching service. The Commissioner (Appeals) further set aside the demand to the extent of Rs.3,00,000/- already paid by the appellant. The Commissioner (Appeals) allowed the benefit of Cenvat credit available to the assessee which was to be adjusted against the remaining demand. However, the Commissioner (Appeals) upheld the remaining demand and the imposition of penalty under Section 78 of the Finance Act on the ground that the assessee did not deposit Service tax so collected since it was aware of its tax liability, did not file ST- 3 returns, and did not provide any plausible explanation to seek benefit under Section 80 ibid.
2. Being aggrieved with the impugned order to the extent of invocation of extended period of limitation and imposition of penalty under Section 78, the assessee has filed the present Appeal No. Service Tax Appeal No. 53491 of 2015. Meanwhile, the Department also filed another appeal Service Tax Appeal No. 51704 of 2015 against impugned order to the extent of the tax demand relating to inclusion of value of study material, which has been set aside.
3. The learned counsel appearing on behalf of the assessee submitted that penalty under section 78 of the Finance Act is not imposable and is entitled to the benefit under section 80 ibid. He 2 2013 (32) S.T.R. 379 (Tri.-Del) 4 further submitted that non-payment of Service tax on the part of the assessee in the present case, was not on account of any fraud, suppression, etc. with intent to evade payment of tax. The assessee had already applied for Service tax registration with the Department on 09.10.2010, which was before the initiation of enquiry by Department on 08.09.2011, and the registration was granted to BSL only on 02.03.2012. Subsequent to such grant of registration in March, 2012, the assessee paid its Service tax liability along with interest in respect of coaching service and franchise service in instalments, with the first payment of Rs.3,00,000/- paid on 05.03.2012 and 16.03.2012 prior to the issuance of show cause notice, which amount was appropriated. The subsequent payments were made in May, 2012 (Rs.6,50,000/-), November 2012 (Rs.12,34,767/-) and February, 2014 (Rs.4,00,000/-), totalling to Rs.25,84,767/- after availing the benefit of Cenvat credit. Thus, non-payment of Service tax collected by the assessee but not paid to Government Exchequer, was beyond the control of the assessee since it could not have paid tax without grant of registration. Hence, because of the said reasonable cause, the assessee is entitled to the benefit of Section 80 of the Finance Act which provides that penalty is not imposable under Section 78 if the assessee proves that there was reasonable cause for the said failure. He placed reliance on the decision of Tribunal in the case of Laxmi Color Pvt. Ltd. v. Commissioner of Central Excise, Jaipur3.
3.1 He further submitted that the assessee had indicated its Service tax liability in its audited financial statements for the financial year 2010-11 and 2011-12, which were duly filed with the Registrar of Companies, even when its Service tax registration application was pending with the Department. Thus, it cannot be said that the assessee had any malafide intention to evade payment of tax by reason of fraud, suppression, etc. 3 [2006 (3) S.T.R. 760 (Tri.-Del.)] 5 3.2 In support of above submissions, reliance was placed on the following decisions where it was held that penalty under Section 78 cannot be imposed when tax liability shown in balance sheet:
Commissioner of Central GST and Central Excise v.
Tirupati Sarjan Limited, [2018 (18) GSTL 216 (Guj.)];
Calderys India Refractories Ltd. v. C.C.E.,
Aurangabad, [2014 (36) S.T.R. 102 (Tri.-
Mumbai)]; and
DCM Textiles v. Commissioner of Central Excise,
Gurgaon, [2012 (26) S.T.R. 359 (Tri.-Del.)]
4. As regards the issue being agitated by the Department in the appeal No. ST/51704/2015 wherein value of study material is not includible in the taxable value of coaching service, the learned Counsel submitted that the aforesaid decision in Cerebral Learnings (supra) has been subsequently relied upon in the case of same assessee reported as Cerebral Learning Solutions Pvt. Ltd. v. Commissioner of Central Excise & Service Tax, Indore4, , which has been affirmed by Supreme Court in the case of Commissioner of Central Excise & Service Tax, Indore v. Cerebral Learning Solutions Pvt. Ltd.5.
4.1 In the above decisions, the Tribunal held that the cost of study material is not includible in the taxable value of coaching service since the assessee is entitled to the benefit of exemption under Notification No. 12/2003-ST dated 20.06.2003 ("Notification"), and that Board's Circular No. 59/8/2003-ST dated 20.06.2003 which is relied upon by Department, has transgressed into the domain of Central Government under Section 93 of the Act by engrafting restrictions on the generality and plenitude of the exemption granted which is prohibited.
4 [2018 (10) GSTL 37 (Tri.-Del.)] 5 [2022 (67) G.S.T.L. 4 (S.C.)] 6 4.2 Further reliance was placed on the following decisions where it was held that the value of study material is not includible in the taxable value of coaching service and the assessee is entitled to the benefit of exemption under Notification. Thus, the issue is no more res integra and decided in favour of the assessee:
Commissioner of Customs, Central Excise & Service Tax, Guntur v. Vignan Tutorials6 STC Technologies Pvt. Ltd. v. Commissioner of Service Tax, Chennai7
5. He prayed that the impugned order is not sustainable to the extent of imposition of penalty under Section 78 and the same may be set aside to the said extent, and the impugned order is required to be upheld to the extent of setting aside the tax demand relating to inclusion of value of study material.
6. The learned authorised representative appearing for the Department has submitted that issue of abatement of value for the supply of material of coaching centre is no longer res integra and has been settled by the following case laws:
1. M/s. Cerebral Learning Solutions Pvt. Ltd. vs. Commissioner8
2. M/s. Cerebral Learning Solutions Pvt. Ltd. vs. Commissioner9
3. Commissioner vs. M/s. Cerebral Learning Solutions Pvt. Ltd.10
4. M/s. Lakshya Education vs. Commissioner11
7. However, as regards the penalty under section 78, he stated that the assessee was collecting service tax and were not depositing it to the government exchequer. The assessees also did not file Service Tax returns and in fact took Service Tax registration only upon initiation of investigation by the department. Hence, both 6 [2019 (2) TMI 487 - CESTAT Hyderabad] 7 [2018 (11) TMI 1092 - CESTAT Chennai].
8 [2013 (32) S.T.R. 379 (Tri. - Del.)] 9 [2018 (10) G.S.T.L. 37 (Tri. - Del.)]
10. [(2022) 1 Centax 7 (S.C.)]
11. [2022 (11) TMI 598 - CESTAT NEW DELHI] 7 the learned Adjudicating Authority and learned Commissioner (Appeals) are justified in imposing penalty under Section 78.
8. We have heard Shri Harshvardhan, learned Authorised Representative appearing for the Department and Shri Dhruv Tiwari learned Counsel appearing for the respondent-assessee.
9. In Appeal No. 51704/2015, the short issue for decision is whether the respondent-assessee is entitled to the benefit of exemption notification No. 12/2003-ST dated 20.6.2003. In Appeal No. 53491/2015, the issue for decision is for setting aside the penalty under section 78 and extending the benefit of section 80 of the Finance Act.
10. As regards the issue of abatement of value for supply of material by a coaching centre, we find that this issue is no longer res integra and has been settled by precedent decisions:
1. M/s. Cerebral Learning Solutions Pvt. Ltd. vs. Commissioner8
2. M/s. Cerebral Learning Solutions Pvt. Ltd. vs. Commissioner9
3. Commissioner vs. M/s. Cerebral Learning Solutions Pvt. Ltd.10
4. M/s. Lakshya Education vs. Commissioner11
11. Therefore, we hold that the Commissioner (Appeals) was correct in extending the benefit of abatement available under Notification No. 12/2003-ST dated 20.6.2003 and accordingly, this appeal stands dismissed.
12. As regards the prayer in Appeal No. 53491/ 2015, we note that the attempts made by the assessee to get registered with the Service Tax Department are as under:
Date Particulars 09.10.2010 Application filed before Service Tax Registration Division-II for the first time.
30.11.2011 Re-submission of application with Service Tax Department, Division-I. 8 However, on enquiry, assessee was informed by Department that application was transferred back to Service Tax Department, Division-II.
19.01.2012 On enquiry, assessee was informed by Department that the application was transferred back to Service Tax Department, Division-I. 09.02.2012 On enquiry, BSL was informed by Department that application was again transferred back to Service Tax Department, Division-II.
13.02.2012 On enquiry, BSL was informed by Department that registration shall be granted in another fortnight.
02.03.2012 Centralised Service tax registration was granted to BSL, vide No. AAECB0530BSD001.
We find from the table above that though the assessee had applied for Service Tax registration on 09.10.2010, there was no follow up done by the assessee. No attempt was made to seek any clarification from department as to why the registration had not yet been granted to them. In this regard, we find that section 69 of the Finance Act provides for registration, which is as follows:
"69. Registration. -- (1) Every person liable to pay the service tax under this Chapter or the rules made thereunder shall, within such time and manner and in such form, as may be prescribed, make an application for registration to the Superintendent of Central Excise.
(2) The Central Government may, by notification in the Official Gazette, specify such other person or class of persons, who shall make an application for registration within such time and in such manner and in such form as may be prescribed."
The Service Tax Rules, 1994 in Rule 4 lays down the procedure for seeking registration under section 69 of the Finance Act.
RULE [4. Registration. -- (1) Every person liable for paying the service tax shall make an application to the concerned Superintendent of Central Excise in Form ST-1 for registration within a period of thirty days from the date on which the service tax under section 66B of the Finance Act, 1994 (32 of 1994) is levied :
9Provided that where a person commences the business of providing a taxable service after such service has been levied, he shall make an application for registration within a period of thirty days from the date of such commencement :
Provided further that a person liable for paying the service tax in the case of taxable services referred to in sub-section (4) or sub-section (5) of section 66 of the Finance Act, 1994 (32 of 1994) may make an application for registration on or before the 31st day of December, 1998 :
Provided also that a person liable for paying the service tax in the case of taxable services referred to in sub-clause (zzp) of clause (105) of section 65 of the Act may make an application for registration on or before the [31st day of March, 2005.
Provided also that a person located in non taxable territory liable for paying the service tax in the case of online information and database access or retrieval services may make an application for registration in form ST-1A for registration within a period of thirty days from the date on which the service tax under section 66B of the Act is levied or the person located in non taxable territory has commenced supply of taxable services in the taxable territory in India and notwithstanding anything contrary in these rules, the registration shall be deemed to be granted in form ST-2A from the date of receipt of the application.
[ * * * * * *]
[(1A). * * * * * *]
(2) .............
(3) .............
(4) .............
(5). The Superintendent of Central Excise] shall after due verification of
the application form, [or an intimation under sub-rule (5A), as the case may be, grant a certificate of registration in Form ST-2 within seven days from the date of receipt of the application [or the intimation.] If the registration certificate is not granted within the said period, the registration applied for shall be deemed to have been granted.
13. We find that sub-Rule (5) of Rule 4 of the Service Tax Rules (supra) categorically state that if the registration certificate is not granted within a period of 7 days of receipt of application, then the said registration is deemed to have been granted. Once the registration was not granted even after the lapse of 7 days, it is seen that the assessee did not make a single attempt for more than a year to seek clarification. It is evident that the assessee in the meantime was collecting service tax from his students for the 10 services being extended by them. So it is apparent that the assessee was very much aware that service tax was liable to be paid but they did not deposit the said amount so collected to the Government exchequer nor did they file their ST 3 returns. We note that urgency for seeking the registration was shown only once the investigations was initiated by the department. In view of the above, we are not inclined to accept the arguments of learned Counsel that there was reasonable cause for the said failure.
14. In view of the above, we hold that penalty under section 78 upheld by Commissioner (Appeals) is correct. Accordingly, we dismiss the appeal No. 53491 of 2015. We also dismiss the Departmental appeal No. 51704 of 2015.
(Pronounced in the open court on 03.04.2023) (JUSTICE DILIP GUPTA) PRESIDENT (HEMAMBIKA R PRIYA ) MEMBER (TECHNICAL) ss 11