Custom, Excise & Service Tax Tribunal
Orient Flight School vs Commissioner Of Gst & Central ... on 7 November, 2023
IN THE CUSTOMS, EXCISE AND SERVICE TAX APPELLATE
TRIBUNAL,
SOUTH ZONAL BENCH, CHENNAI
COURT HALL No. III
SERVICE TAX APPEAL Nos.40250-40256 OF 2022
(Arising out of Order-in-Original No.60-66/2021 (C) dated 31.12.2021 passed
by Commissioner of GST & Central Excise, Chennai South, 692, M.H.U. Complex,
5th Floor, Anna Salai, Nandanam, Chennai 600 035)
M/s. Orient Flight School .... Appellant
No.40, GST Road,
St.Thomas Mount,
Chennai 600 016.
Versus
The Commissioner of GST & Central Excise, ...Respondent
Chennai South Commissionerate
MHU Complex, No.692, Anna Salai,
Nandanam,
Chennai 600 035.
APPEARANCE :
Mr. N. Viswanathan, Advocate
For the Appellant
Mr. Rudra Pratap Singh, Additional Commissioner (A.R)
For the Respondent
CORAM :
HON'BLE MS. SULEKHA BEEVI C.S., MEMBER (JUDICIAL)
HON'BLE MR. VASA SESHAGIRI RAO, MEMBER (TECHNICAL)
DATE OF HEARING : 11.10.2023
DATE OF DECISION : 07.11.2023
2
Service Tax Appeal Nos.40250-40256 of 2022
FINAL ORDER Nos.40996-41002/2023
ORDER :Per Ms. SULEKHA BEEVI C.S. The issue involved in all these appeals being the same, they are heard together and disposed by this common order.
2. Brief facts are that the appellant is registered as a Society under the Societies Registration Act, 1816 and are engaged in flight training to students. On intelligence gathered that the appellant is providing taxable services viz. Commercial Training or Coaching services without obtaining service tax registration and without payment of service tax, the Survey, Intelligence & Research (SIR) Branch of the Chennai Service Commissionerate took up investigation. The accounts of the appellant were verified and statements were recorded. On verification of records, it was noticed that the appellant is having 12 Aircrafts of different models and sizes, infrastructural support such as Hangar Houses and associated technical facility at the airport for repair and maintenance of the aircrafts to provide pilot training to its' students. Being equipped with aforesaid facilities, the appellant imparted training to the students in the nature of take off, landing, flying, handling aircrafts and ground training. The appellant prepared the students for various skill tests in the Air and Ground examinations conducted by the Directorate General of Civil Aviation (DGCA) to issue Private Pilot License (PPL), Commercial Pilot License (CPL) etc. As part of the course, the appellant organized field visits for the students to international airports, Regional Meteorological 3 Service Tax Appeal Nos.40250-40256 of 2022 Centres, Aviation maintenance facilities and laboratories so as to provide exposures to them. The Appellant collected fees from their trainees / students for providing such training. Appellant did not pay service tax on the fees collected from the students. On enquiry the appellant informed vide letter dt. 06.10.2010 that their school is not engaged in commercial activities and is not liable to pay any service tax.
3. According to department, Section 65 (26) defines the expression 'Commercial Training or Coaching' means any training or coaching provided by a commercial training or coaching centre'. As per Section 65 (27) of the Finance Act, 1994 'Commercial Training or Coaching Center' means any institute or establishment providing commercial training or coaching for imparting skill or knowledge or lessons on any subject or field other than the sports, with or without issuance of a certificate and includes coaching or tutorial classes but does not include pre-school coaching and training center 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'.
4. In terms of Section 65 (105) (zzc) of the Finance Act, 1994 the taxable service is defined as "any service provided to any person, by a commercial training or coaching centre in relation to commercial training or coaching". An Explanation was inserted to sub-clause (zzc) of Section 65 (105) of the Finance Act 1994 vide Finance Act, 2010 which is effective retrospectively from 1.7.2003. As per the Explanation "For the removal of doubts, it is hereby declared that the expression 'commercial training or coaching centre' occurring in this subclause and in clause (26) 4 Service Tax Appeal Nos.40250-40256 of 2022 and clause (27) and (90a) shall include any centre or institute, by whatever name called, where training or coaching is imparted for consideration, whether or not such centre or institute is registered as a trust, or a society or similar other organization under any law for the time being in force and carrying on its' activity with or without profit motive and the expression 'commercial training or coaching" shall be construed accordingly. Thus, even if the training or coaching centre / institute is registered as a trust or a society or carrying out its activity with or without profit motive would fall under the expression 'Commercial Training or Coaching Centre'.
5. It was further observed from the prospectus of the course conducted by the appellant that on completion of the training, the students of the appellant are required to take an examination stipulated by DGCA to get qualified for issue of pilot license. The appellant issues only Student's Pilot License (SPL) which is a prerequisite for entering the aircraft as a trainee. This SPL is not the license issued by DGCA and it does not qualify a person to fly an aircraft as a full-fledged pilot. The department observed that the appellant was merely training or coaching a person so as to take an examination conducted by DGCA and so the appellant institute does not qualify to be an institute which issues a diploma, degree or educational qualification recognized by law.
6. Show Cause Notice dt. 22.10.2010 for the period April 2005 to March 2010 was issued proposing to demand service tax along with interest and for imposing penalties. After due process of law, the original authority confirmed the demand, interest and imposed penalties. 5
Service Tax Appeal Nos.40250-40256 of 2022 Against such order No.1/2012 dt.11.1.2012 the appellant preferred an appeal before the Tribunal. At the time of final hearing, the Tribunal after referring to the judgment of the Hon'ble Delhi High Court in the case of Indian Institute of Aircraft Engineering Vs Union of India - 2013 (30) STR 689 (Del.) remanded the matter to the original authority vide Final Order No.40624/2014 dt. 13.08.2014 with the direction to consider the issue afresh as to whether the activities rendered by the appellant would be taxable under the 'Commercial Coaching or Training Services' on the basis of judgment passed by the Hon'ble Delhi High Court. The relevant part of the Tribunal order is reproduced as under :
"6. The Hon'ble Delhi Hich Court in the case of Indian Institute of Aircraft Engineering Vs Union of India reported in 2013 (30) S.T.R. 689 (Del.) had decided the issue in respect of CBEC Instruction No.137/132/2010-ST, dated 11.05.2011 to the effect that Fight Training Institutes providing training for obtaining Commercial Pilot License and Aircraft Engineering Institutes tor obtaining Basic Aircraft Maintenance Engineering License would come under the category of Coaching centres as laid down in Section 65(27) of the Finance Act, 1994 and, therefore, assessable to service tax. The Hon'ble High Court held that the instructions issued by the CBEC is contrary to (Section 65(27) and the Notification dated 22.04.2011. Accordingly, the said instruction and the show-cause notices given to the Petitioner were quashed.
7. It is seen from the Adjudication order that the Adjudicating authority had not examined the activities of the appellant in detail. In our considered view, it is appropriate the matter should be remanded to the Adjudicating authority to decide afresh after considering the facts in detail in the light of case laws in accordance with law".
7. The matter was then kept in call book as the department had filed S.L.P No.6083/2014 before the Hon'ble Apex Court against the decision of the Hon'ble Delhi High Court in the case of Indian Institute of Aircraft Engineering (supra). Meanwhile, several SODs and SCNs were issued to 6 Service Tax Appeal Nos.40250-40256 of 2022 the appellant proposing to demand the service tax with interest and for imposing penalties. Thus, there were total 7 show cause notices issued to the appellant, which was kept in call book.
8. The S.L.P filed by the department before the Hon'ble Supreme Court was dismissed as withdrawn on 19.11.2020. Thereupon all the 7 show cause notices (including SOD) were taken up for adjudication from the call book. Personal hearing was granted to the appellant. After due process of law, the original authority confirmed the demand, interest and imposed penalties. Aggrieved by such order, the appellant is once again before the Tribunal.
9. The Learned Counsel Sri N. Viswanathan appeared and argued for the appellant. It is submitted by the learned counsel that in the first show cause notice dt. 22.10.2010 the allegation raised is that the activities of imparting Pilot Training course is taxable as the appellant issues only a Student Pilot License (SPL) which is a prerequisite to enter the aircraft as a trainee. It was alleged that the SPL does not qualify a person to fly aircraft as a full-fledged pilot and only after the test conducted by DGCA and the type rating of the specified aircraft is entered in the Commercial Pilot License (CPL), the trained person can handle the aircraft as pilot. Thus the main allegation is that the training and coaching offered by the appellant would only qualify a student for taking the examination conducted by DGCA. The appellant institute does not issue a diploma or degree or educational qualification recognized under law. In essence, it is alleged that the appellant is not issuing any 7 Service Tax Appeal Nos.40250-40256 of 2022 qualification which is recognized by law and therefore will not fall in the exclusion clause of Notification No.33/2011-ST dt. 25.4.2011.
10. Notification No.33/2011-ST is as under :
Notification - Service Tax - Service Tax Rescinded vide Notification NO.34/2012 - Service Tax, Dated 20/06/2012 Exempts to preschool coaching / training and recognized courses from service tax on commercial coaching or training centre New Delhi, the 25th April, 2011 Notification No.33/2011 - Service Tax Service Tax G.S.R. (E) - In exercise of the power conferred by sub-section (1) of section 93 of the Finance Act, 1994 (32 of 1994), the Central Government on being satisfied that it is necessary in the public interest so to do, hereby exempt,-
(i) any preschool coaching and training;
(ii) any coaching or training leading to grant of a certificate or diploma or degree or any educational qualification which is recognised by any law for the time being in force; when provided by any commercial coaching or training centre from the whole of the service tax leviable thereon under section 66 of the Finance Act, 1994.
2. This notification shall come into force on the 1st day of May, 2011.
[F. No. 334/3/ 2011 - TRU] (Sanjeev Kumar Singh) Under Secretary to the Government of India
11. It is submitted by the Ld. Counsel that though the appellant had taken the contention that they do not fall under the category of 'commercial' institute, the appellant does not intend to raise such a plea now. The appellant collects fees from the students and therefore is a Commercial Institute. However, they fall outside the levy of service tax in terms of notification 33/2011 as above as the course imparted by appellant is recognized by law. Ld. Counsel submitted that the appellant is an approved institute by the DGCA to conduct coaching and training to students. The courses are conducted on the basis of curriculum and 8 Service Tax Appeal Nos.40250-40256 of 2022 subjects prescribed by DGCA. The training is also imparted on the guidelines issued by DGCA. The courses imparted by the appellant leads to the grant of a certificate / license to fly an aircraft. Such license is issued by the statutory authority viz. DGCA.
12. It is submitted by the Ld. Counsel that after the notification 33/2011 came into force w.e.f. 1.5.2011, the Board issued a circular. The demand has been confirmed mainly relying on this Circular F.No.137/132/2010-ST dt. 11.5.2011. The said circular was challenged before the Delhi High Court in the case of Indian Institute of Aircraft Engineering Vs Union of India - 2013 (30) STR 689 (Del.). The relevant part of the said Circular reads as under :
"4.1 It is to also clarify that the coaching being provided by Flying Training Schools and Aircraft Maintenance Engineering Institutes would also not come under the scope of the exemption provided under the second category of the exemption notification mentioned above for the same reasons as mentioned in paragraphs 2 and 3 above. It is also pertinent to mention that the intent of the changes in the definition of Commercial Training or Coaching service as made in Budget of 2011 is evident on perusal of the explanatory letter of JS (TRU-II) D.O.F.no.334/2/2011-TUR, dated 28-2-2011 wherein at Para 3.3 it has been mentioned that - "The scope of the service is proposed to be expanded to include all the coaching and training that is not recognised by law, irrespective of whether the institute is providing any other course(s) recognised by law". Thus, the scope of the service has in fact been expanded.
5. In addition, it may also observed that the institutes do not fall under the exemption Notification No.24/2004 (as amended), as the institutes courses do not directly enable the training getting the requisite employment.
6. Therefore, the said institutes/academies would clearly come in the category of coaching centres as laid out in section 65 (27) of the Finance Act ibid (either prior to or after Budget 2011) and therefore would be taxable. It is clarified that the contents of this instruction shall not override any statutory provisions. It is accordingly requested that immediate action may please be taken to safeguard revenue."9
Service Tax Appeal Nos.40250-40256 of 2022 The above circular issued by the Board has been quashed by the judgment passed in the case of Indian Institute of Aircraft Engineering (supra). The adjudicating authority ought not to have relied on the same circular to confirm the demand even after remand.
13. Ld. Counsel explained that the DGCA is the authority for giving approval to institutes which conduct coaching and training for flying aircrafts as well as aircraft engineering courses. The appellant is an approved flight training institute for the conduct of pilot training courses duly approved by DGCA in terms of the Indian Aircraft Act, 1934 and Rules made thereunder and the approval is renewed periodically and covers the entire disputed period. Appellant is a self-contained institute not only for imparting skills to students to become licensed pilots by seeking aircraft rating but also to conduct the examinations and skill tests strictly based on the syllabus prescribed by DGCA; the results of which are recognised and approved by the DGCA leading to the issuance of CPL to the successful students by the DGCA.
14. The Ld. Counsel further submitted that a candidate who joins the DGCA approved course for obtaining the CPL is first required to undergo a preliminary test to ascertain his basic aptitudes by the Chief Flying Instructor, an officer approved and authorized by the DGCA as well as for his medical fitness by DGCA approved medical examiners. After the candidate is admitted to the flying training by the FTI, the student undergoes classes on aeronautical subjects and aircraft familiarization with practical classes lasting about months. All the training are conducted under the supervision of CGI [Chief Ground Instructor] who is also authorized by DGCA as per the syllabi published by the DGCA in order to obtain the minimum standards prescribed by the DGCA for the award of 10 Service Tax Appeal Nos.40250-40256 of 2022 Students Pilot's License [SPL]. After completion of the ground training as per SPL syllabi, the student becomes eligible to appear for the SPL examination conducted by DGCA for the award of SPL. Appellant is authorized to conduct SPL examination by the DGCA and on the results being forwarded to DGCA the same is scrutinized by the Central Examination Organization [CEO] at DGCA office which declares the successful candidates and based on the authorization of the DGCA, appellant awards the SPL to such students on behalf of DGCA and this license is mandatory for commencement of actual flying training in the aircraft by the student. For the grant of the CPL, DGCA mandates a minimum training requirement of 200 hours of flying training which includes flying by night as well as 350 hours of ground training in the class room on various subjects. At the end of the training session, the student is put to various skill tests in the air and upon successful completion of the course, a completion certificate in the format specified by the DGCA is given and the said certificate is recognized by DGCA, a statutory authority exercising statutory powers under the Aircraft Act of 1934 and the rules made thereunder. Consequently, this certificate issued by appellant gets recognition by law for the time being in force leading to the grant of the CPL to such students.
15. The Counsel submitted that the requirement and procedure for appearing for the examination for issue/extension of flight crew licenses/rating is as per Section 7 of Flight Crew Standards are prescribed by the DGCA. Curriculum and syllabus for oral examination for SPL is detailed in Civil Aviation Requirement (CAR) Issue II. Syllabus and curriculum for obtaining CPL is as per CAR Series B Part IV issued by the DGCA. The syllabus/curriculum includes subjects like Air Regulation Acts and Rules, Air Craft General Knowledge, Flight Performance and planning, 11 Service Tax Appeal Nos.40250-40256 of 2022 Human performance and limitations, Meteorology, Navigation, Operational Procedures, Principles of Flight, Radio Telephony etc. These are Civil Aviation Requirement standards known as CAR which is issued under Schedule Il and Rule 133 A of Air Craft Rules 1937. The above facts and legal position are not disputed by the respondent and are in fact admitted.
16. It is thus argued by the learned counsel that the courses imparted by the appellant leads to the grant of a educational qualification recognized by law and is therefore outside the purview of levy of service tax.
17. The Ld. Counsel submitted that the issue has been considered in detail by the Hon'ble Delhi High Court, in the case of Indian Institute of Aircraft Engineering (supra). The circular issued by the Board F.No.137/132/2010-ST dt. 11.5.2011 was analysed by the Hon'ble High Court and held to be ultra vires and invalid. Though the department filed appeal before the Hon'ble Apex Court as SLP (C) 6083/2014, the same has been dismissed as withdrawn on 19.12.2020. The adjudicating authority has erroneously observed in the impugned order that the appeal was withdrawn on monetary grounds based on litigation policy. It is argued by the Ld. Counsel that there is nothing in the order passed by the Hon'ble Apex Court which says that the appeal was dismissed on monetary limits. Further, the litigation policy itself says that when important issues like validity of circular etc. is involved, the litigation policy on monetary limits would not apply. The department having chosen to withdraw the appeal unconditionally before the Hon'ble Apex Court, then further cannot contend that the circular issued is valid and apply the same to confirm the demand. The ratio laid down by the 12 Service Tax Appeal Nos.40250-40256 of 2022 Hon'ble Delhi High Court in the case of Indian Institute of Aircraft Engineering (supra) is applicable and binding.
18. Show Cause Notices (SODs) have been issued for the period after 1.6.2012 also, when the negative list has been introduced. It is submitted by the learned counsel that the activity of the appellant is fully covered by clause (l) of Section 66D which reads as under :
"(i) services by way of preschool education and education upto higher secondary school or equivalent
(ii) education as a part of a curriculum for obtaining a qualification recognized by any law for the time being in force
(iii) education as part of an approved vocational education course."
19. The Learned counsel pointed out that the activity carried out by the appellant is covered by clause (ii) and clause (iii) as above as the institution as well as curriculum is duly approved by DGCA. The students undergo examination conducted as per the curriculum and the evaluation is done by DGCA. It is the DGCA which certifies whether a student has been qualified after the course to apply for Commercial Pilot License. It is asserted by the learned counsel that only after a student completes the course imparted by the appellant institute and passes the exam which is conducted as per DGCA norms, the student is eligible to apply for the license before DGCA. The Commercial Pilot License (CPL) and Private Pilot License (PPL) are obtained after undergoing the course which is one recognized under law for the time being in force. The DGCA is a Government body exercising its power under the provisions of Aircraft Act, 1934 and the Rules made thereunder. The activity of the appellant of imparting such course would fall under clause (l) of Section 13 Service Tax Appeal Nos.40250-40256 of 2022 66D of Finance Act, 1944. The appellant being an institute conducting coaching and training for issue of pilot certificate which is recognized by law is therefore excluded from the ambit of levy of service tax.
20. To assert the argument that the course imparted by the appellant leads to educational qualification recognized by law, the learned counsel submitted that the DGCA being a statutory authority and exercising the power conferred on it in terms of Aircraft Act, 1934 and the Rules made thereunder, the activity of coaching or training would not attract levy of service tax. Since the curriculum, the method of training, the examination are all conducted and recognized by DGCA pursuant to the provisions of the Aircraft Act,1934 / Aircrafts Rules, 1934, the educational qualification obtained after completion of course is one recognized by law. Therefore, the demand of service tax is made without any legal basis.
21. The very same issue was considered by the Tribunal in the following cases and it was held that the demand of service tax cannot sustain :
(i) CCE, CUS. & ST Vs Garg Aviations Ltd. - 2014 (35) S.T.R. 441 (All.)
(ii) Star Aviation Academy Vs CST, Delhi - 2018 (15) G.S.T.L 342 (Tri.-Del.)
(iii) Hindustan Institute of Aeronautics Vs CCE Bhopal 2014 (36) STR 703 (Tri.- Del.)
22. The second issue is with regard to the demand made under Management, Maintenance or Repair (MMR) Service. The Ld. Counsel submitted that for the period 2005-10 an amount of Rs.1,17,091/- has been confirmed under MMR services. The appellant has made some 14 Service Tax Appeal Nos.40250-40256 of 2022 repair services of aircrafts but such services were not done in pursuance of contracts or agreements as there are no contracts / agreements available and submitted that the tax under this head cannot be demanded.
23. The Ld. Counsel argued on the ground of limitation as well as on the delay in adjudication. It is submitted that after the department filed appeal before the Hon'ble Apex Court in the case of Indian Institute of Aircraft Engineering (supra) these SCNs (SODs) were kept in call book. After huge delay, and after the SLP before Apex Court was withdrawn these notices were taken up for adjudication. Further, the issue is purely interpretational in nature and for this reason the demand raised invoking the extended period cannot sustain. The Board itself was unsure and had to issue clarification to bring levy of tax on the flight training schools which was later held invalid. There is no evidence adduced that the appellant had suppressed facts with intent to evade payment of service tax. For the same reasons, the penalties imposed may be set aside.
24. Without prejudice, the Ld. Counsel pointed out that the demand has been quantified on the basis of the fees collected. The appellant did not charge or collect service tax and is therefore eligible for cum-tax benefit.
25. The Ld. Counsel prayed that the appeals may be allowed.
26. Ld. A.R Sri Rudra Pratap Singh appeared and argued for the Department. The circular issued by the Board dt. 11.5.2011 was resorted to by the Ld. A.R to argue that the it is clarified by the Board that the 'Commercial Coaching or Training Services' provided by Flight Training School and Air Craft Maintenance Engineering Institutes would come within the scope of levy of service tax and the exclusion clause in 15 Service Tax Appeal Nos.40250-40256 of 2022 notification 33/2011 would not be applicable to them. It is explained by the Ld. A.R that the appellant Institute does not issue to the student any certificate recognized by law. The appellant only conducts course by which the student would be able to apply for a pilot license. This being so, the activity will fall within the definition of "Commercial Coaching or Training Service". The circular issued by the Board No.107/01/2009 dt. 28.1.2009 was also referred to support his argument. The relevant paras are extracted below :
"3.1 Determination of taxability of education, other than school education is more complex and poses more questions. This is because, it covers an entire gamut of educational courses, such as formal higher education (i.e. bachelors, masters, doctoral,post doctoral course), specialized education, vocational education, language (including foreign language) courses etc. These vary in terms of their content; purpose; scope; and the type of institutes or establishments, which impart them.3.2 The system of statutory recognition of educational establishments or institutions in India is still in the state of evolution. As regards university education, University Grants Commission (UGC) is the apex regulating body. As per the objects of the University Grants Commission Act, 1956 (which established UGC) the said Act is 'to make provision for the co-ordination and determination of standards in Universities and for that purpose, to establish a University Grants Commission'.
As per the definition, in terms of Section 2(f) of the Act, a University means a University established or incorporated by or under a Central Act, a Provincial Act or a State Act, and includes any such institution as may, in consultation with the University concerned, be recognized by the Commission in accordance with the regulations made in this behalf under this Act. .Therefore, all universities which are a creature of a State or Union Act fall within this definition of 'University'.
Further, Section 3 of the Act, explains the scope of a 'deemed university' and defines that the Central Government may, on the advice of the Commission, declare by notification in the Official Gazette, that any institution for higher education, other than a University, shall be deemed to be a University for the purposes of this Act, and on such a declaration being made, all the provisions of this Act shall apply to such institution as if it were a University within the meaning of clause (f) of section 2.
Also, UGC, with the approval of Central Government and under the Recognition of College in Terms of Regulations, 1974 framed under the UGC Act, can grant recognition to a college or institution run by a trust, a registered society or a body corporate or body incorporated under Central or state Act as an institution affiliated to or form as constituent member with a university , providing education up to a bachelors degree, masters degree or diploma of a duration of minimum one academic year As per National Policy on Education, 1986, a scheme of autonomous colleges was promoted. In the autonomous colleges, whereas the degree continues to be awarded by the university, the name of college is also included. These colleges develop and submit new courses of study for approval by the university. These autonomous colleges are fully responsible for the conduct of examination.16
Service Tax Appeal Nos.40250-40256 of 2022 As all these institutions or establishment are either created or recognized in terms of the power conferred by statutes, they would fall in the category of institutes/ establishments which issues diploma or certificate recognized by the law for the time being in force. As regards issuance of degree, section 22(1) of the said Act, provides for right of conferring or granting degrees only by a 'university' (as defined above) or a 'deemed university' (as defined above).
3.3 In addition, for recognition of professional courses, promotion of professional institutions and providing grants to various programmes, a number of 'professional councils (Such as All India Council for Technical Education-AICTE, Medical Council of India-MCI, Indian Council for Agricultural Research-ICAR, Bar Council of India- BCI) have been created through independent Union Acts. Since, inter alia these councils are entrusted with ensuring norms and standards of the courses, physical and instructional facilities, undertaking assessment etc., they have also been provided with powers to make subordinate legislations (i.e. through notifications, circulars, rules) that the institutions or the establishments within their ambit must abide. In case of default, the councils have the power to derecognize an institution or establishment or a particular course being conducted by them, even if they are recognized as a university, a deemed university or an affiliated college. If an institution or establishment is derecognized, then such institution or establishment cannot be called to be an institute or establishment which issues any certificate or diploma or degree or any educational qualification recognized by the law for the time being in force. With the result, the courses conducted would fall under the ambit of 'commercial training or coaching centers' and would be charged to tax. It may however, be noted that for exercising such power, there should be a valid rule / notification / circular, prescribing the minimum requirements or standards as also the consequences of default.
3.4 All India Council for Technical Education-AICTE, was started in 1945 with the objectives stated above. Based on the recommendations of a 'National Working Group' (constituted by the Government of India) that AICTE be vested with the necessary statutory authority, it was given legislative support through an Act, called the AICTE Act, 1987. AICTE, using the powers conferred on it through 1987 Act, issued the 'AICTE (Grant of Approval for Starting New Technical Institutions, Introduction of Courses or Programme and Approval), Regulation 1994. Theses were amended in the years 1997 and 2000.Under Regulation 4 (Requirement of Grant of approval) of these Regulations, AICTE prescribed that,-
"After the commencement of these regulations,-
a. No new Technical Institution or University Technical Department shall be started; orb.
b. No course or programme shall be introduced by any Technical Institution, University including a Deemed University or University Department or Collage; orc.
c. No Technical Institution, University or Deemed University or University Department or College shall continue to admit students for Degree or Diploma course; ord.
d. No approved intake capacity of seats shall be increased or varied;
Except with the approval of the council.
The powers to issue regulations for approval are conferred on AICTE under Section 23 read with Section 10 of the AICTE Act."
27. On the basis of above Circulars and Notification, the Ld. A.R strenuously argued that as the appellant is not imparting a course which 17 Service Tax Appeal Nos.40250-40256 of 2022 leads to grant of a certificate recognized by law and the appellant cannot move out of the ambit of the levy of service tax.
28. With regard to the demand of service tax under MMR, it is submitted by the Ld. A.R that the argument of the appellant that there is no contract executed for rendering Management, Maintenance and Repair Service cannot be accepted as even oral contract is sufficient for rendering service. The fact that the appellant has rendered repair and maintenance service is brought out from invoices/documents and therefore appellant is liable to pay service tax on this activity. It is prayed that the appeals may be dismissed.
29. Heard both sides.
30. The issues that arise for analysis are as follows :
(i) whether the appellant is liable to pay service tax under 'Commercial Coaching or Training Services' for the period prior to 01.07.2012 and after.
(ii) whether the appellant is liable to pay service tax under 'Management, Maintenance and Repair Services' for the period 2005-2007.
(iii) whether the extended period is invokable for the period 2005-
2010.
(iv) Whether the penalties imposed are legal and proper. 18
Service Tax Appeal Nos.40250-40256 of 2022
31. The details of the demand confirmed for the different periods is given in the table below :
S.No. SCN/SOD No.& Period Amount of tax Amount Remarks date Demand confirmed proposed Rs.
1. SCN 738/2010 2005-10 5,23,03,526/- Confirmed Denovo dated 22.10.2010 (Rs.1,17,091/- under proceeding as under MMR) extended ordered by the period with CESTAT, Chennai mandatory vide its order penalty dated 13.08.2014 2 SCN 324/2011 04/10 to 7,60,013/- Confirmed --
dated 14.09.2011 03/11 under
normal
period with
penalty
under
Section 76
3 SOD 54/2013 04/11 to 11,67,145/- -do- --
dated 01.04.2013 03/12
4 SOD 130/2014 04/12 to 5,47,425/- -do- --
dated 15.05.2014 06/21
5. SCN 285/2015 07/12 to 22,91,765/- -do- --
dated 08.10.2014 03/13
6. SOD 08/2015 04/13 to 89,11,696/- -do- --
dated 02.03.2015 09/14
7. SOD 48/2016 10/14 to 66,38,771/- -do- --
dated 14.07.2016 09/15
32. In the first round of litigation before Tribunal, the demand confirmed for the period 2005-2010 (SCN dt. 22.10.2010) was remanded to the adjudicating authority to reconsider in the light of the decision of the Hon'ble Delhi High Court in the case of Indian Institute of Aircraft Engineering Vs Union of India - 2013 (30) STR 689 (Del.). As per the judgment in this case, the Hon'ble High Court quashed the circular issued by Board F.No.137/132/201-ST dt. 11.5.2011. After the introduction of notification No.33/2011-ST which has already been noticed earlier, the Board issued the above circular clarifying that the Flight Training Institutes are coaching centres leviable to service tax under Section 65 19 Service Tax Appeal Nos.40250-40256 of 2022 (27) of Finance Act 1994. The said clarification issued by Board appeared to be contrary to the Notification No.33/2011-ST. The Hon'ble High Court quashed the same observing that the circular is invalid. It was in this background that the Tribunal in earlier round of litigation remanded the matter for fresh consideration. However, even in such denovo-consideration, the adjudicating authority has relied upon the very same circular to confirm the demand.
32.1 The appellant has explained the nature of the course imparted by them. The appellant institute is approved by DGCA. The syllabi curriculum, the nature of theory classes, practical training everything is imparted as approved by DGCA. The appellant issues certificate approved by DGCA to the students who successfully complete the coaching and training. From the documents furnished by appellant it can be seen that DGCA fully controls the appellant institute, by prescribing the syllabus, the intake of students for each session, the manner in which exam is to be conducted etc; though the Final License (CPL/PPL) is issued by DGCA after a further examination conducted by DGCA. The DGCA is the statutory body under the Air Craft Act, 1934, read with Air Craft Rules, 1937. Under Rule 38 of Air Craft Rules, the DGCA is authorized to grant, renew and vary flight crew license, Student Pilot License, Private Pilot License Commercial Pilot License etc. 32.2 The question is whether the course imparted by appellant institute would fall within the meaning of 'recognized by law'. The Hon'ble High Court of Delhi in the case of Indian Institute of Aircraft Engineering (supra) has considered precisely the very same issue, so as to reach the conclusion that the clarification issued by the board vide circular dt. 11.5.2011 is invalid. The relevant paras read as under : 20
Service Tax Appeal Nos.40250-40256 of 2022 "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 Black's 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.
25. We are of the view that the Act, the Rules and the CAR, having provided for grant of approval to such institutes and having laid down conditions for grant of such approval and having further provided for relaxation of one year in the minimum practical training required for taking the DGCA examination, have recognized the Course Completion Certificate and the qualification offered by such Institutes. The certificate/training/qualification offered by Institutes which are without approval of DGCA would not confer the benefit of such relaxation. Thus, the certificate/training/qualification offered by approved Institutes, has by the Act, Rules and the CAR been conferred some value in the eyes of law, even if it be only for the purpose of eligibility for obtaining ultimate licence/approval for certifying repair/maintenance/airworthiness of aircrafts. The Act, Rules and CAR distinguish an approved Institute from an unapproved one and a successful candidate from an approved institute would be entitled to enforce the right, conferred on him by the Act, Rules and CAR, to one year relaxation against the DGCA in a Court of law. The inference can only be one, that the Course Completion Certificate/training offered by such Institutes is recognized by law.
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 Black's 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/authorization by the DGCA to certify the repair, maintenance or airworthiness of an aircraft and for which purpose a further examination to be conducted by the DGCA is to be taken, in our 21 Service Tax Appeal Nos.40250-40256 of 2022 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.
28. We are therefore of the view that the Instruction aforesaid holding the petitioner to be assessable to Service Tax is contrary to Section 65(27) and the Notification dated 25th April, 2011. Accordingly the said Instruction and the show cause notices given to the petitioner are quashed. The Rule is made absolute and the writ petition is disposed of." 32.3 Though the department filed appeal before the Hon'ble Apex Court as SLP (C) No. 6083/2014 the same has been dismissed as withdrawn on 19.11.2020. Therefore, the decision of the Hon'ble High Court of Delhi would be binding. Though, in the impugned order, the adjudicating authority has taken a frail effort to say that the appeal filed by department was withdrawn on monetary limits as per litigation policy, the order of the Apex Court dt. 19.11.2020 does not specify anything like this. Further, as per the litigation policy F.No.390/Misc./163/2010-JC, New Delhi 20.10.2010 it has been emphasized that where notification/instruction/circular has been held illegal or ultra vires the matter should be contested. Relevant para of Litigation Policy Circular reads as under :
"6. Adverse judgments relating to the following should be contested irrespective of the amount involved:
a) Where the constitutional validity of the provisions of an Act or Rule is under challenge.
b) Where notification/instruction/order or Circular has been held illegal or ultra vires.
c) Where audit objection on the issue involved in a case has been accepted by the Department."22
Service Tax Appeal Nos.40250-40256 of 2022 32.4 The very same issue as to whether Flight Training Institute and Aircraft Engineering Institutes are liable to service tax under 'Commercial Training or Coaching Service' was considered by the Hon'ble Allahabad High Court in the case of CCE, Cus., ST Vs Garg Aviations Ltd. 2014 (35) STR 441 (All.) The Hon'ble High Court followed the decision of the Hon'ble High Court in the case of Indian Institute of Aircraft Engineering (supra) and held that the activity is not taxable. This case was appealed to Hon'ble Supreme Court, and the appeal was dismissed on 6.2.2018. 32.5 In the case of Star Aviation Academy Vs CST, Delhi - 2018 (15) GSTL 342 (Tri.-Del.) the Tribunal held that the Aircraft Maintenance Engineers (AME) Training imparted by an institute authorized by DGCA and issue of AME basic course completion certificate is valid and recognized by law and therefore the levy of service tax under 'Commercial Coaching or Training Servies' cannot sustain. The department filed appeal before the Hon'ble Apex Court as reported in 2018 (15) GSTL J117 (SC). It is seen that the Hon'ble Apex Court directed to tag with SLP (C) No.6083/2014. The said SLP is the one filed against the judgment of Hon'ble High Court of Delhi which has already been dismissed as withdrawn by department.
32.6 From the above, we find that the issue stands covered by the above judgments which have categorially held that these institutes are not liable to pay service tax under 'Commercial Coaching or Training Services'.
32.7 The DGCA vide letter dt. 19.5.2011 has issued clarification to the Board stating that the certificates issued by these Flight Training Institutes like that of appellant Institute are approved by DGCA for issue 23 Service Tax Appeal Nos.40250-40256 of 2022 of respective licenses. The provisions for undertaking training from such institutes is laid down in Aircraft Rules, 1937. The relevant part of letter issued by DGCA is reproduced as under :
32.8 The above document would amply support the case of the appellant.
32.9 For the period after 1.7.2012 also the discussions made above would apply. Section 66D gives the negative list of services. Clause (l) of 24 Service Tax Appeal Nos.40250-40256 of 2022 Section 66D as it stood during the relevant time (prior to 14.5.2016) reads as under :
"(l) services by way of --
(i) pre-school education and education upto higher secondary school or equivalent
(ii) education as a part of a curriculum for obtaining a qualification recognized by any law for the time being in force.
(iii)education as a part of an approved vocational education course."
The above clause (l) of Section 66D has been omitted by Finance Act, 2016 (28 of 2016) dt. 14.5.2016. The period of dispute covered in these appeals are upto September 2015 only.
32.10 The words 'recognized by law for the time being in force' cannot be construed so as to restrict its' coverage only to Universities and Educational Boards. There can be other statutes which recognize certain degree, diploma, certificate or qualification. The DGCA is a statutory authority exercising powers conferred on it under the Aircraft Act, 1934 and the Rules made thereunder. Consequently, if a course completion certificate is recognized by DGCA for any specific purpose, in pursuance to the provisions contained in Aircraft Act / Rules, then the said certificate will satisfy the condition of having been recognized by law for the time being in force.
32.11 From the above, we hold that the demand of service tax for the period after 1.7.2012 also alleging that appellant is imparting Commercial Coaching or Training services cannot sustain and requires to be set aside.
33. The second demand is on 'Management, Maintenance and Repair Services'. The Ld. Counsel has adverted to the definition and argued that 25 Service Tax Appeal Nos.40250-40256 of 2022 as there is no written contract entered by appellant to render the maintenance / repair activity of aircrafts, therefore the demand cannot sustain. The definition of Management, Maintenance and Repair Services' reads as under :
'As per clause (64) of section 65 of Finance Act, 1994, maintenance or repair' means any service provided by ;
(i) Any person under a maintenance contract or agreement, or
(ii) a manufacturer or any person authorized by him, in relation to ;
(a) Management of properties, whether immovable or not;
(b) Maintenance or repair of properties whether immovable or not or
(c) Maintenance or repair including recondition or restoration, or ;
servicing of any goods or equipment, excluding motor vehicle". We find the argument put forward by appellant on this services to be too flimsy to be acceptable. The appellant can render services on the basis of oral contract also. For these reasons, we find that on merits the appellant is liable to pay service tax on Maintenance or Repair Services for the period 2005-06 (Rs.90,848/-) and 2006-07 (Rs.26,243/- Total Rs.1,17,091/-).
34. The Ld. Counsel has argued on the ground of limitation. The demand under Management, Maintenance and Repair Servies fall completely within the extended period. The SCN for this period is issued on 22.10.2010. After remand by the Tribunal the department has kept the matter including this issue under call book. There is no specific allegation of suppression of facts brought out against the appellant alleging intent to evade payment of tax. Further though SCN was issued in 2010, the same has been adjudicated with much delay only on 31.12.2021. For these reasons the SCN issued invoking the extended period cannot sustain and requires to be set aside which we hereby do. The appellant succeeds on the issue of limitation also. The demand raised 26 Service Tax Appeal Nos.40250-40256 of 2022 under Management, Maintenance & Repair Services is set aside on the ground of limitation.
35. In the result, the impugned orders are set aside. The appeals are allowed with consequential reliefs, if any.
(pronounced in court on 07.11.2023)
sd/- sd/-
(VASA SESHAGIRI RAO) (SULEKHA BEEVI C.S.)
Member (Technical) Member (Judicial)
gs