Custom, Excise & Service Tax Tribunal
Indian School Of Business vs Rangareddy - G S T on 29 January, 2019
(1)
Appeal No: ST/26693/2013
CUSTOMS, EXCISE AND SERVICE TAX APPELLATE TRIBUNAL
REGIONAL BENCH AT HYDERABAD
Division Bench
Court - I
Appeal No. ST/26693/2013
(Arising out of Order-in-Original No.22/2013-Adjn (Commr) ST (denovo) dated 30.03.2013
passed by CCCE & ST, Hyderabad - IV)
Indian School of Business ..... Appellant(s)
Vs.
CCT, Rangareddy - GST ..... Respondent(s)
Appearance Shri S. Thirumalai, Advocate for the Appellant.
Shri P.S. Reddy, Dy. Commissioner/AR for the Respondent. Coram:
HON'BLE Mr. M.V.Ravindran, MEMBER (JUDICIAL) HON'BLE Mr. P. Venkata Subba Rao, MEMBER (TECHNICAL) Date of Hearing: 08.01.2019 Date of Decision: 29.01.2019 FINAL ORDER No. A/30137/2019 [Order per: P.V. Subba Rao.]
1. This appeal has been filed against the Order-in-Original No. 22/2013-
Adjn (Commr) ST - denovo dated 30.03.2013.
2. Learned counsel for the appellant takes us through the meandering course of events of this case. Initially, a show cause notice dated 27.09.2006 was issued to the appellant covering the period July, 2003 to March, 2006 which was followed by another show cause notice covering the period April, 2006 to March, 2007. After following due process, the lower authority confirmed the demand against the assessee under the category of 'commercial training or coaching services' under Sec.65(105)(zzc) of the Finance Act, 1994. Aggrieved, the appellant filed an appeal before CESTAT- Bangalore who, allowed their appeal and set aside the demand on limitation holding that there was no suppression of facts. Aggrieved by the order of the CESTAT, revenue filed an appeal before the Hon'ble Supreme Court in Civil (2) Appeal No: ST/26693/2013 Appeal No. 579/2010. The Hon'ble Supreme Court remanded the matter back to the CESTAT directing to dispose the appeal in the light of the retrospective amendment by insertion of an explanation to Sec.65(105)(zzc) made effective from 01.07.2003. In the remand proceedings, CESTAT- Bangalore vide Final Order No. 514-520/2012 dated 31.07.2012 confirmed the demand along with penalty. However, it observed that the appellant could have availed the benefit of notification 09/2003 available for vocational training services. Therefore, CESTAT remanded the matter back to the adjudicating authority to examine the availability of the benefits of this notification.
3. Not satisfied with the order of the CESTAT, the appellant preferred an appeal before the Hon'ble Supreme Court vide Civil Appeal No.8787/2012 dated 18.11.2013 which is pending before the Hon'ble Apex Court. Meanwhile, the adjudicating authority, in pursuance of the CESTAT's Final Order No.514-520/2012, took up the matter for adjudication and decided it, vide the impugned OIO. He held that the benefit of exemption notifications Nos.09/2003-ST & 24/2004-ST are not available to the appellant. This impugned order covered the period July, 2003 to September, 2011.
4. The issue which falls for consideration is whether the appellant who provides training in management are covered by the definition of 'commercial training or coaching services' and consequently, whether the courses conducted by them are liable to be taxed as such. A related issue is whether the appellant is entitled for the benefit of notification Nos. 09/2003- ST and 24/2004-ST. If the appellant is entitled to the benefit of these exemption notifications they would be exempted up to September, 2010.
5. On the first question of whether appellant is liable to pay service tax on 'commercial training or coaching services' under Sec.65(105)(zzc) read (3) Appeal No: ST/26693/2013 with its explanation, the Tribunal-Bangalore has already held against the appellant. Similarly, on the question of invocation of extended period of demand, the Tribunal held that the proviso to Sec.73(1) was rightly invoked. It is also held that appellant is liable to penalty under Sec.78 of the Act but no penalties are imposable under Sec.76 and 77 of the Act. The findings of the Tribunal in short were as follows:
The effect of the amendment to section 65(105)(zzc) of the Act seems to be a conceptual change with regard to the term "commercial" used in sections 65(26) and 65(27) of the Act. The change of law, which is substantial, has come about with retrospective effect from 01.07.2003; A line cannot be drawn to separate 'education' from 'training & coaching'. It has not been established that the degrees/certificates/diplomas issued by the other assessees (other than IFCAI) to their students during the relevant period were recognized by law. Acceptance of any such degree/certificate/diploma by any varsity or other institutions abroad cannot mean recognition thereof by Indian law. Thus a conspectus of facts presented to us would clearly disclose the real character of the assessees' activity - training or coaching for a consideration. The explanation to section 65(105)(zzc) of the Act has a very wide scope to encompass the activities of the assessees and render them eligible to service tax under section 65(105(zzc) of the Act.
The decision of the Tribunal and this Court in Administrative Staff College of India and all other crucial decisions were rendered before the crucial retrospective amendment of section 65(105)(zzc) of the Act and, hence, are of no precedential value. The same is also the situation with regard to Board Circulars issued prior to amendment;' Without prejudice alternative plea of availability of exemption under Notification 9/2003-ST dated 20.06.2003 is a virgin plea which has got to be substantiated by the parties concerned and will have to be examined by the adjudicating authorities concerned;
The state of affairs of most assessees, on the issue of the extended period of limitation is more or less the same state of affairs as in the IFCAI cases. The show cause notices and the relied upon documents loudly disclose the suppression of facts by these parties, whose intent to evade payment of service tax is evident from the records. The decision of this Hon'ble Court in CCE v. Mehta & Co, 2011 (264) ELT 481 (SC) which holds that the extended period of limitation could be reckoned from the date of acquisition of knowledge by the department would squarely apply to the present cases. The proviso to section 73(1) of the Act was rightly invoked in these cases.
6. The appellant's appeal against this order is pending before the Hon'ble Supreme Court. Therefore, the only issue to be decided now is whether the lower authority was right in denying the benefit of Notifications 09/2003 & 24/2004. The finding given by the lower authority in the impugned order on this point is as follows:
"15.2 In so far as the claim that ISB is a vocational training institute they reproduced the definition given in the notifications 9/2003 & 24/2004 and claimed that the syllabi and curriculum of the courses offered by them were so (4) Appeal No: ST/26693/2013 designed that the individuals who undergo these classes would be imparted specialized skills. In many instances they would get direct employment after these courses. They also enclosed the list of the individuals who were offered campus placements in the managerial cadres in reputed organizations with handsome salaries and perks. It is true that ISB has been imparting training in advanced management to enable the trainees to secure jobs. But it is to be understood that these courses are purely academic and educational. These are based on bookish literature, intellectual lectures from persons of repute related to advanced management and have no relevance to any non academic skills. Vocational training, as understood in general parlance, relates to the imparting of special skills related to activities which are generally non-academic in nature. For example, embroidery, tailoring, carpentry, artisan work, electrification, weaving, plumbing, etc., which involve development of skills in field which are generally not academic in nature. The contention made by ISB is that after completion of the courses, the individual so trained in the campus of ISB would get direct employment. If this is the only criteria, there are many institutions which conduct campus interviews for placement of the students/clients. The engineering colleges, degree colleges which are reputed attract many organizations from private and public sector for recruitment of the personnel. In fact, many of these institutions give utmost importance to campus recruitment by specially appointing Placement Officers to coordinate this task to achieve better results in securing jobs for their students. This aspect of getting direct employment soon after completion of studies/courses which are offered by these institutions cannot make them vocational institutes. They continue to be academic institutions with the distinction of being called and known as professional (like engineering, medicine, polytechnic, management) colleges and non-professional colleges offering pure and applied sciences, arts, commerce, etc., By no stretch of imagination they can be called as vocational colleges or institutes."
7. The appellant also pleaded some additional grounds before the Commissioner as follows:
1) That the appellant had rendered educational services which cannot be classified under the category of 'commercial training or coaching services'.
2) That the courses offered by ISB were recognized by law in view of Maharashtra State Government resolution and circulars issued by the Ministry of Education.
8. The learned Commissioner has not accepted either of these submissions. The present appeal by the appellant is on the following grounds:
a) They are a not for profit organisation created in pursuance to Memorandum of Association and not a commercial organisation.(5)
Appeal No: ST/26693/2013
b) They have got exemption from Income Tax under the Income Tax Act, 1961.
c) They have formal association with leading international business schools and are ranked among the 34 best business schools among the world.
d) The campuses were established in Hyderabad and in Punjab as per the MOUs entered into with the respective State Governments.
e) They conduct the following programmes:
Post Graduate Programme in Management (PGP);
Post Graduate Programme in Management for Senior Executives
(PGPMAX);
Masters Programme in Family Business (MFAB)
Executive Education Programme (EEP); and
Research Programmes & Fellow Programme in Management
(Equivalent of Ph.D.)
f) These programmes were all taught by eminent academic experts. They also have set up Centres of Excellence with the areas related to business.
g) Indian Institute of Management in Ahmedabad and Bangalore also offer similar diplomas and programmes and have also obtained accreditation internationally similar to the ones from whom they have obtained the accreditation.
h) They also render the services of management consultant for which they have obtained service tax registration. Thereafter they also voluntarily got themselves registered with the service tax department under the category of 'commercial training or coaching services'. However, they later intimated the department that no service tax is payable by them on the PGP, EEP, PGPMAX courses but have been paying service tax under protest. The department investigated the (6) Appeal No: ST/26693/2013 matter and after more than a year issued another summons and issued show cause notice on 27.09.2006 followed by periodical show cause notices.
9. This was followed by adjudication and subsequent legal proceedings culminating in the impugned denovo adjudication order. This order is not correct for the following reasons:
1. The demand of service tax is under 'commercial training or coaching services' which according to Sec.65(105)(zzc) read with Sec.65(26) of the Act is any training or coaching provided by a commercial training or coaching centre. Sec.65(27) of the Act defines 'commercial training or coaching centre' as follows:
"'commercial training or coaching centre' 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 preschool coaching and training centre or 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."
2. The intention of the legislation, as may be seen was to levy service tax on training or coaching which are commercial in character and the institution or the establishment undertaking the activity must essentially be a commercial concern. In 2006, CBEC has issued circular stating that institutions like IITs & IIMs cannot be called commercial concerns. Similarly, in the present case, ISB is also a non-profit making company and not a commercial concern. The appellant is engaged in imparting education and such education is clearly beyond the intention of the legislation. They registered as a company under Sec.25(1)(a) of the Companies Act as a not for profit company and they do not declare any dividend or distribute surplus of profit. In the case of Institute of Banking Personnel Selection v. CST, Mumbai [2007 (8) (7) Appeal No: ST/26693/2013 STR 579 (Tri-Mumbai)] it was held that the institute is a charitable organisation. It is immaterial that they are collecting fees from the students to determine the taxability. Without prejudice to their contention that they are not covered by the definition of commercial training or coaching centre and if they are regarded as such they would be eligible for exemption under notification 9/2003-ST dated 20.06.2003 & 24/2004-ST dated 10.09.2004, which are as follows:
"Notification No. 9/2003 - Service Tax In exercise of the powers conferred by section 93 of the Finance Act, 1994 (32 of 1994), the Central Government, being satisfied that it is necessary in the public interest so to do, hereby exempts the taxable services provided in relation to commercial training or coaching, by, -
a. vocational training institute;
b. computer training institute; or c. recreational training institute;
to any person, from the whole of the service tax leviable thereon under sub-section (2) of section 66 of the said Act.
Explanation.- For the purposes of this notification,-
i. "vocational training institute" means a commercial training or coaching centre which provides vocational coaching or training that impart skills to enable the trainee to seek employment or undertake self-employment, directly after such training or coaching;
ii. "computer training institute" means a commercial training or coaching centre which provides coaching or training relating to computer software or hardware;
iii. "recreational training institute" means a commercial training or coaching centre which provides coaching or training relating to recreational activities such as dance, singing, martial arts, hobbies.
2. This notification shall come into force on the 1st day of July, 2003 and shall remain in force upto and inclusive of the 29th day of February, 2004.
Notification No. 24/2004-Service Tax In exercise of the powers conferred by sub-section (1) of section 93 of the Finance Act, 1994 (32 of 1994), the Central Government, being satisfied that it is necessary in the public interest so to do, hereby exempts the taxable services provided in relation to commercial training or coaching, by, -
(a) a vocational training institute; or
(b) a recreational training institute, to any person, from the whole of the service tax leviable thereon under section 66 of the said Act.(8)
Appeal No: ST/26693/2013 Explanation.- For the purposes of this notification,-
(i) "vocational training institute" means a commercial training or coaching centre which provides vocational training or coaching that impart skills to enable the trainee to seek employment or undertake self-employment, directly after such training or coaching;
(ii) "recreational training institute" means a commercial training or coaching centre which provides training or coaching relating to recreational activities such as dance, singing, martial arts or hobbies."
10. Both these notifications define vocational training institution as 'commercial training and coaching centre' which provides vocational coaching or training that impart skills to enable trainee to seek employment or undertake self employment after such training or coaching. If their institute is held to be commercial training or coaching institute, then they would be covered by this definition of vocational training institute in the above two notifications. The type of courses which they offer are theoretical and practical skill based training in areas such as Analytical Finance, Entrepreneurship, Strategy & Leadership, Operational Management, Information Technology Management and Strategic Management.
11. Learned counsel for the appellant at this stage draws the attention of the bench to the order of the CESTAT-Hyderabad in the case of Institute of Chartered Financial Analysts of India [2018 (10) GSTL 444] in which on an identical case, it was held that service tax demands raised and confirmed by the lower authority in denovo adjudication denying the benefit of aforesaid two exemption notifications is incorrect and unsustainable.
12. Learned departmental representative reiterates the findings of the lower authority and asserts that the appeal deserves to be dismissed.
13. We have considered the arguments on both sides and perused the records. The first issue to be decided is whether the appellant can be considered as 'commercial training and coaching institute' within the meaning of Sec.65(105)(zzc) as retrospectively amended effective from 01.07.2003. This matter had gone up to the Hon'ble Supreme Court and on (9) Appeal No: ST/26693/2013 remand CESTAT-Bangalore vide Final Order No.514-520/2012 dated 31.07.2012 held that three co-appellants in the case viz., ISB (appellant herein), the Institute of Chartered Financial Analysts of India and Badruka Institute of Foreign Trade were commercial training and coaching institutes. The matter was remanded back to the Commissioners only with respect to examining the availability of the benefit of notifications 9/2003-ST & 24/2004-ST. This order of CESTAT-Bangalore has been challenged by the appellant herein in Civil Appeal No.8787/2012 and is pending before the Hon'ble Supreme Court. In view of the factual situation, we do not find it necessary for us to pass any order on this aspect or deviate from the view already taken by the CESTAT an appeal against which is before the Hon'ble Apex Court. As far as the second issue of the benefit of exemption notifications is considered, both these exemption notifications are available for 'vocational training institutes' which have been defined as in 'commercial training or coaching centre' which provide vocational coaching or training that imparts skills to enable the trainee to seek employment or undertaken self employment directly after such training or coaching. We cannot think of a more practical job or self employment oriented training or coaching than management courses conducted by the appellant. In respect of another appellant in Final Order No.514-520/2012, we have already held that ICFAI is entitled to the benefit of these exemption notifications. In view of the above, we find that the appellant is entitled to the benefit of exemption notifications 9/2003-ST and 24/2004-ST. Consequently, the demand for the period July, 2003 to September, 2010 needs to be set aside and we do so. As far as the period October, 2010 to September, 2011 is concerned, the demand needs to be upheld as it is not covered by any exemption notification. The appropriate rate of interest has also to be paid. The (10) Appeal No: ST/26693/2013 question of penalty does not apply in this case as it is a demand for normal period under Section 78. It has already been held in Final Order No.514- 520/2012 dated 31.07.2012 that no penalties were to be imposed under Sec.76 & 77 of the Act. In view of the above, the appeal is disposed of as follows:
a) The demand for service tax for the period July, 2003 to September, 2010 is set aside as the appellant were covered by the Notification Nos.9/2003-ST & 24/2004-ST.
b) The demand for the period October, 2010 to September, 2011 is upheld under the 'commercial training or coaching services'
c) All penalties are set aside.
14. The appeal is disposed of as indicated herein above.
(Pronounced in the Open Court on 29.01.2019)
(P.VENKATA SUBBA RAO) (M.V. RAVINDRAN)
MEMBER (TECHNICAL) MEMBER (JUDICIAL)
Veda