Custom, Excise & Service Tax Tribunal
Cc&Ce, Hyderabad-Iv vs Oio No.01/2008 Dt. 27/02/2008 on 31 July, 2012
CUSTOMS, EXCISE AND SERVICE TAX APPELLATE TRIBUNAL
SOUTH ZONAL BENCH AT BANGALORE
Bench Division Bench
Court I
Dates of Hearing:22/05/2012; 23/05/2012
24/05/2012; 28/05/2012;
29/05/2012
Date of decision:
Appeal No., Appellant, Respondent, O-in-Original/Order-in-Appeal details are as under:
Appeal No. Appellant Respondent OIO/OIA No. ST/32/2007 M/s. The Institute of Chartered Financial Analysts of India, Hyderabad CC&CE, Hyderabad-II OIO No.08/2006-Service Tax dt. 29/09/2006 ST/39/2007 M/s. The ICFAI University, Dehradun
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ST/40/2007 M/s. The ICFAIAN Foundation, Hyderabad
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ST/46/2007 M/s. The ICFAI University, Tripura
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ST/365/2007 CC,CE&ST, Hyderabad-II M/s. Badruka Institute of Foreign Trade, Hyderabad OIA No.18/2007(H-II) S.Tax dt. 31/5/2007 ST/392/2007 CC,CE&ST, Hyderabad-II M/s. Institute of Insurance & Risk Management, Hyderabad OIA No.12/2007(H-II) S.Tax dt. 12/04/2007 ST/194/2008 M/s. Indian School of Business, Hyderabad CC&CE, Hyderabad-IV OIO No.01/2008 dt. 27/02/2008 For approval and signature:
Honble Mr. P.G. Chacko, Member(Judicial) Honble Mr. M. Veeraiyan, Member(Technical)
1.
Whether Press Reporters may be allowed to see the Order for publication as per Rule 27 of the CESTAT (Procedure) Rules, 1982?
2. Whether it should be released under Rule 27 of the CESTAT (Procedure) Rules, 1982 for publication in any authoritative report or not?
3. Whether their Lordship wish to see the fair copy of the Order?
4. Whether Order is to be circulated to the Departmental authorities?
Appearance Mr.V. Sridharan and Mr. G. Shivadass, Advocates for the assessees.
Mr. P.R.V. Ramanan, Special Consultant and Mr. R.K. Singla, Commissioner(AR) for the Revenue.
Coram:
Honble Mr. P.G. Chacko, Member(Judicial) Honble Mr. M. Veeraiyan, Member(Technical) FINAL ORDER No._______________________ [Order per: P.G. Chacko] The first four appeals were filed by the respective assessees against a common order passed by the Commissioner of Central Excise, Hyderabad-II. These appeals are directed against demands of service tax and education cess (with interest) confirmed against the assessees and penalties imposed on them by the adjudicating authority. The demands of service tax are under the head commercial training or coaching service and for the periods shown below:
Appeal No. Appellant Period Service tax + education cess demanded Penalties ST/32/2007 The ICFAI Society, Hyderabad 7/2003 to 3/2005 Rs.18.92 crores Rs.18.92 crores u/s 78 Rs.1000/- u/s 77 Rs.150 per day u/s 76 ST/39/2007 The ICFAI University, Dehradun 12/2003 to 3/2005 Rs.8,69,716/-
Rs.8,69,716 u/s 78 Rs.1000/- u/s 77 Rs.150 per day u/s 76 ST/40/2007 The ICFAIAN Foundation, Hyderabad 7/2003 to 3/2005 Rs.9.44 cr.
Rs.9.44 cr. u/s 78 Rs.1000/- u/s 77 Rs.150 per day u/s 76 ST/46/2007 The ICFAI University, Tripura 8/2004 to 3/2005 Rs.1,62,205/-
Rs.1,62,205/- u/s 78 Rs.1000/- u/s 77 Rs.150 per day u/s 76 The two appeals of the Department are directed against different orders passed by the Commissioner(Appeals), Hyderabad setting aside the demands of service tax confirmed under the same head against the respondents by the original authorities. The particulars of these appeals are given below:
Appeal No. Appellant Respondent Period Service tax + education cess Penalties ST/365/2007 CST, Hyderabad-II Badruka Institute of Foreign Trade, Hyderabad 7/2003 to 9/2005 Rs.22,77,288/-
Rs.22,77,288/- u/s 78 Rs.1000/- u/s 77 Rs.150 per day u/s 76 ST/392/2007 CST, Hyderabad-II Institute of Insurance & Risk Management, Hyderabad 3/2003 to 3/2006 Rs.4,76,013/-
Rs.4,76,013/- u/s 78 Rs.1000/- u/s 77 Rs.100 per day u/s 76 The remaining appeal of another assesse is against an order of the Commissioner demanding service tax under the same head, imposing penalties etc. as shown below:-
Appeal No. Appellant Period Service tax + education cess demanded Penalties ST/194/2008 Indian School of Business, Hyderabad 7/2003 to 3/2007 Rs.21.82 cr.
Rs.12.25 cr. u/s 78 Rs.1.05 cr. u/s 76
2. The earlier Final Orders passed by this Bench in all these appeals were set aside by the Honble Supreme Court vide Order dt. 14/05/2010 in Civil Appeal No.579 of 2010(Commissioner vs. ISB), Order dt. 25/10/2010 in Civil Appeal No.9539 of 2010 (Commissioner vs. BIFT), Order dt. 04/02/2011 in Civil Appeal No.5453 of 2010 (Commissioner vs. IIRM) and Order dt. 14/02/2011 in Civil Appeals Nos.4820-4823 of 2009 (Commissioner vs. the ICFAI institutions) and all the cases were remanded for fresh decision. As per these remand orders, the Tribunal has to reconsider the substantive issue in the light of the explanation added (with retrospective effect from 01/07/2003) to clause (zzc) of Section 65(105) of the Finance Act, 1994 by the Finance Act, 2010. One of the remand orders (Order dt. 14/02/2011 in the cases of the ICFAI institutions) reads as follows:
Delay condoned.
Counsel appearing for the appellant has drawn our attention to the judgment passed by Three Judges Bench of this Court in Commissioner of S.T., Chennai Vs. Great Lakes Institute of Management Ltd., reported in 2010(19) STR 481 (SC). The issues that arise for consideration in the present appeals are similar with that of the aforesaid appeals which was decided by Three Judges Bench of this Court. While allowing the appeal filed by the Commissioner of Sales Tax, Chennai, the Three Judges referred to the newly inserted Explanation in Section 65(105)(zzc) of Finance Act, 1994 by Finance Act, 2010 which was made effective from 1st of July, 2003.
In view of the fact that the aforesaid Explanation has been inserted in the Act, this Court set aside the order of the Tribunal and remitted the matter back to the Tribunal to consider the case de no in the light of the Explanation inserted in the Act.
Since we are also concerned with the same issues in these appeals, we also pass a similar order allowing the present appeals and directing the Tribunal to examine the case de novo in the light of the aforesaid Explanation inserted in the Act. It is made clear that all issues that could arise could be urged and the same shall be decided by the Tribunal afresh. [underlining supplied] The other remand orders of the apex court are also to the same effect. The scope of remand is clear from the remand orders and accordingly the Tribunal is required to reconsider the substantive issue in the light of the explanation added, with retrospective effect, to Section 65(105)(zzc) of the Finance Act, 1994 as also to decide afresh on all other issues. Accordingly we have examined the records of all the cases.
3. The Institute of Chartered Financial Analysts of India (ICFAI, for short), Hyderabad, is a society registered under the Andhra Pradesh (Telengana Area) Public Societies Registration Act, 1350 Fasli as per the Registration Certificate No.1602/1984 issued by the Registrar of Societies, Hyderabad. The ICFAIAN Foundation is also a society registered under the same Act as per the Registration Certificate No.1800/1998 issued by the Registrar of Societies, Hyderabad. The ICFAI University, Dehradun was established in 2003 under the ICFAI University Act, 2003 of the State of Uttaranchal and the same was sponsored by the ICFAI Society, Hyderabad. The ICFAI University, Tripura was established in 2004 under the ICFAI University Tripura Act of the State of Tripura and the same was also sponsored by the ICFAI Society, Hyderabad. M/s. Badruka Institute of Foreign Trade(BIFT, for short), Hyderabad is an institution belonging to the Seth Ghasiram Gopikishen Badruka Educational Society registered under the aforesaid Public Societies Registration Act of 1350 Fasli as per the Registration Certification No.10 of 1966 issued by the Registrar of Societies, Hyderabad. The Institute of Insurance and Risk Management(IIRM, for short), Hyderabad and the Indian School of Business (ISB, for short) are companies incorporated in 2002 and 1997 respectively under Section 25 of the Companies Act, 1956 as per the Certificates of Incorporation.
4.1. In a common show-cause notice dt. 19/05/2005 issued to the 4 ICFAI entities and a 5th one called the ICFAI University, Raipur, the Department demanded various amounts of service tax with education cess on the fees collected from students in the name of ICFAI UNIVERSITY and accounted for in the books of accounts of the various ICFAI entities during the period from 7/2003 to 3/2005. This show-cause notice which invoked the proviso to Section 73(1) of the Finance Act, 1994 on the alleged ground of suppression and misrepresentation of facts by the ICFAI entities also proposed penalties on them under Sections 76 to 78 of the Act besides demanding interest on service tax under Section 75 of the Act. The show-cause notice alleged that the ICFAI entities were undertaking commercial training or coaching in a variety of areas such as finance, banking, insurance, accounting, law, management, commerce, information technology etc. but not issuing to the students any certificate or diploma or degree recognized by any law for the time being in force. It alleged that the ICFAI entities were not eligible for exemption from payment of service tax under Notification No.10/2003-ST dt. 20/06/2003 and hence liable to pay service tax under Section 65(105)(zzc) of the Finance Act, 1994 read with Section 65(27) of the Act. According to the show-cause notice, a total amount of Rs.35,269.88 lakhs as fees was collected from the students by the informal consortium of ICFAI entities from 7/2003 to 3/2005 and a total amount of Rs.30,84,62,460/- was payable towards service tax and a total amount of Rs.26,30,342/- towards education cess. In the proportion in which the above amount of fees was apportioned and accounted for in the books of accounts of the five ICFAI entities, the above amount of service tax was also apportioned and demanded from them. The demands were contested by the noticees but eventually came to be confirmed against them in Order-in-Original No.8/2006 dt. 29/09/2006. We have not seen any appeal from the ICFAI University, Raipur but the other 4 ICFAI entities are in appeal before us. In this context, it may also be mentioned that the ICFAI University, Raipur ceased to exist with the judgment of the Honble Supreme Court, dt. 11/02/2005, in the case of Prof. Yashpal and another vs. State of Chhattisgarh and others wherein Section 5 (which empowered the State government to incorporate and establish, by Notification in the Gazette, self-financed private universities for higher education) and Section 6 (which permitted such universities to affiliate colleges or other institutions or to set up more campuses than one with prior approval of the State government) of the Chattisgarh Niji Kshetra Viswavidyalaya (Sthapana aur Vinyaman) Adhiniyam, 2002 were struck down as unconstitutional and all Notifications issued by the State government in the Gazette in the purported exercise of power under Section 5 ibid notifying private universities including the ICFAI University, Raipur were also quashed.
4.2. A show-cause notice dt. 19/01/2006 was issued to BIFT demanding service tax with education cess on the gross amount of Rs.2,70,08,524/- collected by them as tuition fees from students for allegedly imparting training/coaching on a commercial basis in the field of management and international business during the period 7/2003 to 9/2005. It also proposed penalties etc. The demand and other proposals were contested by the party. In adjudication of the dispute, the original authority confirmed the demand of service tax and education cess against the assessee, also demanded interest thereon, and imposed penalties. The Order-in-Original was set aside by the Commissioner(Appeals) in an appeal filed by the assessee. Hence the Departments appeal No.ST/365/2007.
4.3. A show-cause notice dt. 20/06/2006 was issued to IIRM for recovery of service tax with education cess under the head commercial training or coaching service on a gross amount of Rs.46,66,900/- collected as fees from PGDI(Postgraduate Diploma in Insurance) students from 7/2004 to 3/2006 and under the head convention service on a gross amount of Rs.55,05,244/- collected for organizing conferences, lectures, seminars etc. during the period from 3/2003 to 3/2006, and for imposing penalties. This show-cause notice was contested by the party. The adjudicating authority set aside the demand raised under convention service but confirmed the demand of service tax with education cess raised under commercial training or coaching service. It also imposed proportionate penalties on IIRM. Aggrieved by the adverse part of the Order-in-Original, the assessee preferred an appeal to the Commissioner(Appeals) and the latter allowed the appeal. Hence the Revenues appeal No.ST/392/2007.
4.4. The appeal of ISB is directed against the order passed by the Commissioner in adjudication of two show-cause notices dt. 27/09/2006 and 17/09/2007 for the periods 7/2003 -- 3/2006 and 4/2006 3/2007 respectively for recovery of service tax with education cess on the fees collected by ISB from students of Postgraduate Programme(PGP) in Management and Executive Education Programme(EEP) during the respective periods, and for imposing penalties. The Commissioner confirmed the demands and imposed penalties.
5. Before proceeding to record the submissions of the parties to the dispute, we would reproduce the relevant provisions of the Finance Act, 1994, which are focal to the dispute.
Section 65(26) commercial training or coaching means any training or coaching provided by a commercial training or coaching centre.
Section 65(27) 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 sports, with or without issuance of a certificate and includes coaching or tutorial classes but does not include pre-school coaching and training centre or any institute or establishment which issues any certificate or diploma or degree or any educational qualification recognized by law for the time being in force.
Section 65(105)(zzc) taxable service means any service provided or to be provided, to any person, by a commercial training or coaching centre in relation to commercial training or coaching;
Explanation.For the removal of doubts, it is hereby declared that the expression commercial training or coaching centre occurring in this sub-clause and in clauses (26), (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.
The Finance Act, 2010 added the above explanation with retrospective effect from 01/07/2003. The purpose of this amendment is discernible from the relevant Budget Instructions on commercial training or coaching service, which read thus: The Finance Bill, 2010 seeks to clarify the legislative intent by redefining the scope of commercial training and coaching service by way of insertion of an explanation. The word commercial means any training or coaching that is provided for a consideration irrespective of the presence or absence any profit motive. The amendment also seeks to explain liability of coaching centres, irrespective of their registration as trust or society. This amendment will have retrospective effect from July, 2003. . It was the above retrospective amendment to Section 65(105)(zzc) of the Finance Act, 1994 that was noted by the Honble Supreme Court in its remand orders. The apex court has required the Tribunal to take fresh decision on the substantive issue (whether the assessees were liable to pay service tax under the head commercial training or coaching service on the fees collected by them from students during the respective periods) and allied issues in the light of the above retrospective amendment of the law.
6. Before us, the learned counsel for the assessees made an attempt, at the bar, to restrict the scope of the apex courts remand orders by submitting that the explanation added to Section 65(105)(zzc) of the Finance Act, 1994 had a bearing only on the expression commercial appearing in clauses 26 and 27 of Section 65 of the Act and therefore the findings recorded on other issues by the Tribunal in its earlier Final Orders in these cases should be treated as final. This argument was vehemently opposed by the learned Special Consultant for the department who pointed out that the remand orders of the apex court had made it clear that all issues that could arise could be urged and the same shall be decided by the Tribunal afresh. He further submitted that the final orders passed by this Bench were set aside by the apex court and therefore nothing contained in those orders survived to be treated as conclusive findings. After considering the rival arguments, we are in full agreement with the view expressed by the learned Special Consultant for the Revenue. As per the directives of the Honble Supreme Court, we have to decide afresh on all the issues on merits. The substantive issue has to be decided by taking into account the aforesaid explanation to Section 65(105)(zzc) of the Finance Act, 1994.
7. Heard both sides. Though, in the appeals of the ICFAI institutions, the territorial jurisdiction of the respondent was challenged, this objection has not been pressed before us. It is not in dispute that all the fees were centrally collected in the name of ICFAI University and deposited in the accounts of ICFAI Society, Hyderabad or ICFAIAN Foundation, Hyderabad. In view of this method of centralized billing and collection of fees, adopted by the ICFAI institutions which were not registered for service tax purposes, we uphold the jurisdiction of the Commissioner of Central Excise, Hyderabad who passed the impugned order. This view is also supported by the Tribunals decision in the case of Nokia Pvt. Ltd. vs. Commissioner [2006(1) STR 233].
8. Other submissions/arguments made by the learned counsel for the assessees are summarized below:
(a) The ICFAI institutions, the ISB, the BIFT and the IIRM are all educational bodies and not commercial training or coaching centres. The ICFAI University, Raipur, the ICFAI University, Dehradun and the ICFAI University, Tripura were established under the respective State Acts solely for the purpose of imparting education. These universities, duly recognized as private universities under the University Grants Commission Act, 1956, offered various academic courses with their own curricula, prescribed syllabi, prepared study materials for the various courses and also published books and other materials which were required to be used by the students as text or reference books. The various courses conducted by these universities were recognized by other universities like the Indira Gandhi National Open University(IGNOU). The degrees awarded by these universities were recognized by the University Grants Commission(UGC) under the UGC Act, 1956. The ICFAI universities also had their own evaluation systems. A student undergoing any course has to secure the minimum percentage of marks in the examinations conducted by these universities, to get a certificate/pass in the examinations. The ICFAI Society, Hyderabad and the ICFAIAN Foundation, Hyderabad are non-profit societies established under the Andhra Pradesh (Telengana Area) Public Societies Registration Act for the purpose of imparting education. The memorandum of association of each of the societies expressly provides so. The ISB, the BIFT and the IIRM were established as not-for-profit companies under Section 25 of the Companies Act. They are exempt under Section 10 of the Income Tax Act, 1961 also. The memorandum and articles of association of each of these companies include establishment & running of educational institutions as the main objective. The ISB has affiliation with the worlds leading business schools viz. Kellog School of Management, Warton School and London Business School. The ISB offered postgraduate programmes in management(PGPs) and also short term programmes for working executives (EEPs). Thus all the assessees are educational bodies solely imparting education to students and hence their activities cannot be brought to levy under the head commercial training or coaching service.
(b) The legislature treats educational institutions/bodies as different from commercial training or coaching centres. This is clear from clause 20 (definition of cab), clause 90a (definition of renting of immovable property) and clause 115 (definition of tour operator) of Section 65 of the Finance Act, 1994. These definitions, which contain references to educational body and commercial training or coaching centre, bring out a clear distinction between the two, indicating that the legislative intent is to treat an educational institution/body imparting skill or knowledge or lessons on any subject or field, differently from a commercial training or coaching centre. [Whartons Law Lexicon, Oxford/Chambers Dictionaries etc. referred to for distinguishing between education and training.] The assessees being educational institutions are not liable to pay service tax under Section 65(105)(zzc). Educational bodies are exempt from the levy.
(c) What is sought to be taxed under the above provision is only the act of coaching or training provided to the students for preparing them for entrance examinations. [Reliance placed on the Tribunals decision in the case of Administrative Staff College of India vs. Commissioner [2009(14) STR 341 (Tri. Bang.] upheld by the Supreme Court in the case Commissioner vs. Administrative Staff College of India [2010(20) STR J117 (SC)]. Reliance also placed on paragraphs 2.2.2. and 2.2.3. of CBECs Circular No.59/8/2003-ST dt. 20/6/2003.]
(d) The Finance Act, 2010 only expanded the scope of Section 65(105)(zzc) by including all activities of coaching and training not recognized by law (irrespective of whether the institution is providing any other course recognized by law) within the tax net. Prior to that, any unrecognized training or coaching given by a commercial training or coaching centre which also offered other courses recognized by law were not subject to levy of service tax under Section 65(105)(zzc). Therefore, the assessees activities of the old period did not attract the levy. [Reliance placed on para 3.3. of CBECs Circular No.334/3/2011 dt. 28/02/2011.]
(e) The question whether the assessees were liable to pay service tax on the fees collected by them should be considered with reference to their core activity which was in the nature of imparting education to the students and not in the nature of commercial training or coaching. The explanation to Section 65(105)(zzc) cannot have any bearing on this question.
(f) It is true that the ICFAI University, Raipur ceased to exist on 11/02/2005 with the judgement of the Honble Supreme Court striking down Sections 5 & 6 of the Chattisgarh Act. But the students of this university were transferred to the ICFAI University, Dehradun and were considered as students of that university. This step was taken as enabled by the Honble Supreme Court through its judgment dt. 11/02/2005 and its clarificatory order dt. 7/9/2005. Therefore, the department cannot claim any benefit on the strength of the fact that the ICFAI University, Raipur ceased to exist on 11/02/2005.
(g) The ISB, the IIRM and the BIFT are, in any case, eligible for the benefit of Notification No.9/2003-ST dt. 20/06/2003 as they would satisfy the definition of vocational training institute. They could not claim this benefit in the earlier proceedings because the emphasis at that time was on their plea that they were outside the levy on account of not being commercial centres.
(h) The demands of service tax and education cess are hit by limitation. The assessees have always maintained the bona fide belief that they were not liable to pay service tax under Section 65(105)(zzc) on their educational activities and therefore they cannot be held to have suppressed or misrepresented any facts or contravened any provision of law with intent to evade payment of tax. Moreover, whenever the assessees were required to furnish any information to the department, they promptly did so. The above bona fide belief of the assessees was also strengthened by certain decisions rendered by this Tribunal in favour of similar institutions, for instance, Great Lakes Institute of Management Ltd. vs. CST, Chennai [2008(10) STR 202 (Tri. Chennai)]. The decisions rendered on the issue by the Tribunal prior to the insertion of the explanation ibid were in favour of the assessees. In these circumstances, the extended period of limitation under the proviso to Section 73(1) of the Finance Act, 1994 was not invocable in these cases. For the same reason, Section 78 of the Act was not to be invoked to impose penalties on the assessees.
9. The submissions/arguments made by the learned Special Consultant for the Revenue are summarized below:
(a) The so-called ICFAI University, in the name of which fees were collected, courses conducted and certificates issued, was an informal consortium of the ICFAI Society, the ICFAIAN Foundation and the three ICFAI Universities, Raipur, Dehradun and Tripura. This consortium was not a legally recognized entity. The off-campus courses were conducted by the ICFAI Society, Hyderabad and the ICFAIAN Foundation, Hyderabad. The numbers of students who took the off-campus courses was 24,308 in 2003-04 and 33,512 in 2004-05 whereas the numbers of students who took in-campus and distance learning courses at the three universities were as small as 25(2003-04) and 17(2004-05) at Raipur; 15(2003-04) and 175(2004-05) at Dehradun; 10 at Tripura. The courses were not in the nature of general or basic education but specialized courses where the focus was on practical application of the knowledge and skills acquired. No degrees or certificates were conferred by any of these universities. Though the ICFAI University, Raipur was authorized to confer degrees/certificates, no degree or certificate was ever conferred by it before it ceased to exist in February 2005. All the degrees and certificates were conferred by the above consortium called ICFAI University which was not a body recognized by law. When the three year courses for which the certificates were issued by the consortium commenced, none of the constituent universities existed. Indeed, even if any degree or certificate had been issued by the ICFAI University, Raipur at any time prior to 11/2/2005 (the date of the apex courts judgement in Prof. Yashpals case), the same would have been rendered ab initio null and void by the judgment of the apex court. The degrees/certificates issued in the name of ICFAI University which was not a legally recognized university cannot be considered to be degrees/certificates recognized by law. But the fact remains that the ICFAI institutions (appellants) were imparting skill or knowledge or lessons on any subject or field other than sports and collecting fees from the students. Their websites also clearly indicate this factual position. For instance, the website of the ICFAI University, Tripura says that it was established in 2004 to impart training in management, science & technology, law and education to students, working executives and professionals in India. The website of the ICFAI University, Dehradun says that it was formed on 8/7/2003 to impart training in management, science & technology, law and education to students, working executives and professionals in India. Therefore, the appellants squarely fall within the meaning of commercial training or coaching centre appearing in Section 65(26) and (27) and retrospectively explained in explanation to Section 65(105)(zzc).
(b) The ISB was also working in the same manner and they are also covered by the definition of commercial training or coaching centre. The PG courses in management, the Executive Educational programmes and the short term courses conducted by ISB were nothing but courses that imparted skills, knowledge or lessons in the field of management and other specialized areas. Fees were collected from the students as consideration for these services. Therefore, these activities would also qualify to be commercial training or coaching service for the levy of service tax in terms of the explanation to Section 65(105)(zzc) ibid. That the diplomas or certificates issued by the ISB were accepted by institutions abroad does not alter ISBs tax liability. As the diplomas/certificates issued by the ISB were not recognized by law, this assessee cannot claim exclusion from Section 65(27) even as it stood prior to the addition of explanation to Section 65(105)(zzc).
(c) The assessees cannot escape tax liability on the premise that they are educational institutions conducting purely educational courses or programmes. The exclusion part of the definition of commercial training or coaching centre under Section 65(27) contains a reference to educational qualification. 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 could claim to be outside the ambit of the said definition. This would imply that any institute or establishment which issues any certificate or diploma or degree or any educational qualification not recognized by law for the time being in force would get covered by the definition of commercial training or coaching centre. It would follow that certain educational institutions can fall under the definition.
(d) The degrees/certificates/diplomas issued by the ISB or by the consortium of the ICFAI institutions were not recognized by statutory authorities such as the UGC, AICTE etc. and hence cannot be said to be recognized by law for the time being in force. [Reliance placed on CBECs Circular No.107/1/2009-ST dt. 28/01/2009].
(e) The ISB cannot claim support from the Tribunals decision in Great Lakes Management Institutes case (supra) as the cited decision was set aside by the apex court.
(f) The plea for exemption under Notification No.9/2003-ST was never raised by the ISB. The benefit cannot be granted at this stage.
(g) The ICFAI institutions never came forward to supply relevant information to the department even for a long period after the investigations commenced in November, 2003. It was only in April-May, 2005 that they submitted full details of the amounts collected by them as fees and other charges from students from 7/2003 to 3/2005. The show-cause notice was issued without delay in 5/2005 itself. In their correspondence with the department, they misrepresented facts by submitting that ICFAI University was conducting various courses while it was not an entity established under, or recognized by, law. During the period of dispute, there was no decision of the CESTAT that could have driven the ICFAI institutions to bona fide belief that they were not liable to pay service tax under the head commercial training or coaching service on the fees collected from students. Therefore, their plea of bona fide belief is untenable and they should be held to have suppressed/misrepresented material facts with intent to evade payment of service tax. The extended period of limitation was rightly invoked in the ICFAI cases inasmuch as they did not get registered, did not file ST-3 returns and did not pay service tax and suppressed/misrepresented material facts for evading this tax liability.
(h) The ISB also behaved more or less in the same manner. A major part of the demand raised on them is within the normal period of limitation. The rest of the demand is also enforceable as the extended period of limitation has been rightly invoked on the basis of suppression of facts found against them.
(i) In the case of CCE, Visakhapatnam vs. Mehta & Co. [2011-TIOL-17-SC-CX], the Honble Supreme Court held that, where the assessee suppressed material facts with intent to evade payment of duty, the department was entitled to issue show-cause notice to them within five years from the date of acquisition of knowledge of such facts by the department. In terms of this ruling of the apex court, the show-cause notices issued in the ICFAI and ISB cases are not hit by limitation. In respect of the ISB, in any case, the demand for the period from 28/09/2005 to 31/03/2006 covered by the first show-cause notice and the demand for the period from 18/09/2006 to 31/03/2007 covered by the second show-cause notice are within the normal period of limitation.
10. The Commissioner(AR) appearing for the appellant in ST/365 & 392/2007 reiterated the grounds of the appeals and also adopted (mutatis mutandis) the above arguments of the learned Special Consultant.
11. The learned counsel for the assessees, in his rejoinder, made the following submissions:
(a) The practical application of knowledge and skills is part of the curriculum and does not take away the basic character of the activity of providing education. In any case, the conduct of specialized courses cannot be considered as training or coaching.
(b) ICFAI University represents the multi-State network of universities established in different States. The degrees/certificates clearly indicated this fact through a footnote. Each University is a separate and independent legal entity. The ICFAI University, Dehradun and the ICFAI University, Tripura jointly named themselves as ICFAI University and never took up any activity on their own.
(c) The submission of the learned Special Consultant that no degrees/certificates were conferred by any of the universities is factually incorrect. Degrees/certificates were conferred in the name of ICFAI University. Had such conferment of degrees/certificates been in violation of any notification issued by the Chattisgarh Government, the UGC would have taken action against ICFAI University. There was no such action by the UGC. In any case, the validity of the degrees/certificates issued by ICFAI University is protected on the principle of de facto recognition. [Reliance placed on the judgment dt. 19/02/2010 passed by the Punjab & Haryana High Court in CWP No.4021 of 2009 (Ms Neelam Devi & another vs. Haryana Nurses Registration Council and others).]
(d) As the students of the ICFAI University, Raipur were absorbed as students of the ICFAI University, Dehradun, in terms of the apex courts judgment dt. 11/02/2005 as clarified by Order dt. 7/9/2005, in any case, the core activity of imparting education remained unaffected.
(e) There is nothing exceptional about the centralized collection of fees and transfer of the same to the accounts of the different universities or about maintenance of common facilities for the benefit of all the universities.
12. We have given careful consideration to the submissions. The substantive issue which has arisen before us in these de novo proceedings is whether the assessees can claim exemption from service tax liability under Section 65(105)(zzc) read with the definition of commercial training or coaching under Section 65(26) and the definition of commercial training or coaching centre under Section 65(27) of the Finance Act, 1994 (as this provision stood during the period of dispute) in respect of the fees/charges collected by them from the students who underwent various courses offered by the assessees during the period of dispute.
13. The above issue has got to be examined on the facts of these cases in the light of the explanation added by the Finance Act, 2010 to Section 65(105)(zzc) of the Finance Act, 1994 with retrospective effect from 01/07/2003. As per this explanation, the expression commercial training or coaching centre appearing in Section 65(26) and (27) of the Finance Act, 1994 shall include ---
* any centre or institute, by whatever name called, ? where training or coaching is imparted for consideration, with or without profit motive, ? 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.
Certain aspects which, before the above amendment, were material to consideration of the question whether a given centre or institute would fit in the definition of commercial training or coaching centre under Section 65(27) and whether its activities would fit in the definition of commercial training or coaching under Section 65(26) have been rendered immaterial by the amendment. Whether or not the centre or institute is registered as a trust or a society or a similar organization under any law is immaterial now. The name of the centre or institute is immaterial. Whether the activity of the centre or institute is with or without profit motive is also immaterial. Upon the above amendment, what matters is whether the centre or institute has imparted training or coaching for a consideration. If it has done so, it will get covered by the definition of commercial training or coaching centre and its activity will get covered by the definition of commercial training or coaching. The consideration for training or coaching per se determines the commercial character of the activity. To the same effect is the Budget instruction noted in para (5) of this order. What is reflected in the amendment seems to be a conceptual change with regard to the term commercial used in Section 65(26) and (27). The change of law, which is substantial, has come about with retrospective effect from 1/7/2003. We must now proceed to determine whether the ICFAI entities, the ISB, the BIFT and the IIRM had been imparting training or coaching to their students for a consideration during the respective periods of dispute.
14. It has been argued on behalf of the assessees that they are educational institutions and were imparting education, and not training or coaching, to the students. Per contra, it has been argued on behalf of the Revenue that education necessarily includes the process of imparting knowledge or lessons on any subject and hence the same would get covered within the ambit of the expression training or coaching appearing under clauses (26), (27) and (105)(zzc) of Section 65 of the Finance Act, 1994. In this connection, the learned Special Consultant has relied on P. Ramanatha Aiyers THE MAJOR LAW LEXICON wherein some connotations of the word education have been provided. The learned counsel has referred to WHARTONS LAW LEXICON. It cannot be disputed that the act of imparting skill or knowledge or lessons on any subject or field (other than sports) is the stated purpose of commercial training or coaching vide Section 65(27) of the Act. Both the law lexicons cited before us present various shades of meaning of education. According to one meaning appearing in MAJOR LAW LEXICON, education means the act or process of imparting or acquiring particular knowledge or skills and it is the result produced by instruction, training or study. (This meaning is seen culled out from Padmanav Dehury vs. State of Orissa [AIR 1999 Orissa 99].) WHARTONS LAW LEXICON quotes Swamy Vivekananda: The end of all education, all training, should be man-making. The end and aim of all training is to make the man grow. The training by which the current and expression of will are brought under control and become fruitful is called education. As rightly submitted by the learned Special Consultant, education can be seen as the result of study, instruction, training, coaching etc. and the websites of at least two ICFAI varsities have been shown to acknowledge this. Therefore a line cannot be drawn to separate education from training or coaching. It is also pertinent to note that Section 65(27) as it stood during the period of dispute excludes institutes/establishments which issue any certificate or diploma or degree or any educational qualification recognized by law for the time being in force. The converse of this would be that institutes/establishments which do not issue any certificate or diploma or degree or any educational qualification recognized by law for the time being in force as well as institutes/establishments which issue certificates/diplomas /degrees/educational qualifications not recognized by law stand included in the definition of commercial training or coaching centre under Section 65(27) of the Act. Institutes and establishments issuing educational qualifications can certainly be called educational institutions. But the ICFAI entities before us were imparting lessons or skills or knowledge in various subjects to students by collecting fees and other charges but they did not issue to them any certificate, diploma, degree or other educational qualification recognized by law for the time being in force on account of which they were not covered by the exclusion clause of Section 65(27) and remained within the definition of commercial training or coaching centre. Institutions which * are established by, or under, or in accordance with, any law to impart education;
* offer one or more courses of study with specific curriculum for each course and specific syllabus for each subject;
* conduct examinations periodically and evaluate them;
* organize extracurricular activities to develop skills in arts, sports etc;
* create various fora to help the students imbibe social and democratic values;
* issue certificates or diplomas or degrees recognized by law, to the successful students;
are generally perceived as educational institutions. In our view, only such institutions were covered by the exclusion clause of the definition of commercial training or coaching centre under Section 65(27) of the Finance Act, 1994 as this provision stood during the period of dispute.
15. Any certificate/diploma/degree issued in the name of ICFAI UNIVERSITY as a consortium or conglomerate of the ICFAI institutions cannot be held to have been issued by any of these institutions and also cannot be considered to be a certificate/diploma/degree recognized by law inasmuch as the so-called ICFAI UNIVERSITY has not been shown to be a legally constituted body authorized by law to issue the same. We have, thus, found great force in the submissions made by the learned Special Consultant. As regards other assessees, it has not been established that the degrees/certificates/diplomas issued by them to their students during the relevant period were recognized by law. Acceptance of any such degree/certificate/diploma by any varsity or other institution 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.
16. It was argued by he learned counsel that the ICFAI Universities, Dehradun and Tripura, were established under the respective State Acts and recognized by the UGC and should ipso facto be considered to be establishments authorized to issue certificates, degrees etc. Though it is true that these universities were, by UGCs notification, included in the list of private/self-financed universities under Section 2(f) of the UGC Act, there is no evidence of any of them having issued any certificate, diploma, degree or other educational qualification to the students from whom they collected fees and other charges during the period of dispute. It was not even shown that these so-called universities were authorized, by or under the State Acts, to issue certificates/ diplomas/degrees/other educational qualifications to the students. It was claimed that the certificates, degrees, etc. were issued to the students by these universities in the name of ICFAI UNIVERSITY. We have already rejected this claim as untenable, given the fact that what was called ICFAI UNIVERSITY was a legally unrecognized consortium or conglomerate of the ICFAI societies and universities, with no legal sanction to issue such certificates, degrees etc. Therefore, none of the so-called universities can claim immunity to levy of service tax under Section 65(105)(zzc) of the Finance Act, 1994 on the ground of being covered by the exclusion clause of the definition of commercial training or coaching centre under Section 65(27) of the Act.
17. For the reasons already stated, we hold that the assessees were providing to their students training or coaching for a consideration and would ipso facto fall within the ambit of commercial training or coaching centre envisaged in the explanation to Section 65(105)(zzc) of the Finance Act, 1994. As this explanation has retrospective effect from 01/07/2003, the activities undertaken by all the assessees during the periods of dispute would get covered within the meaning of the phrase training or coaching imparted for consideration occurring in the text of the explanation. In other words, the explanation to Section 65(105)(zzc) of the Act has very wide scope to encompass the activities of the assessees and render them exigible to service tax under Section 65(105)(zzc) of the Act. In the result, the assessees have no case on merits.
18. We have also considered the decisions cited by the learned counsel, such as Administrative Staff College of India (supra). All those decisions were rendered before the crucial retrospective amendment of Section 65(105)(zzc) of the Finance Act, 1994 and, hence, are of no precedential value. The same is the situation with regard to the various circulars relied on by the counsel.
19. The learned counsel representing ISB, BIFT and IIRM has (without prejudice to his submissions on the substantive issue) raised an alternative plea by claiming the benefit of exemption under Notification No.9/2003-ST dt. 20/06/2003 which benefit is available to a vocational training institute as defined in the Notification. This plea was, admittedly, not raised at any stage before, even though the case of the assessees travelled upto the apex court. It is interesting to note that the learned counsel who sought to narrow down the scope of the apex courts remand orders, nevertheless, wanted us to consider the above plea also. The dichotomy of arguments notwithstanding, we are of the view that the alternative plea can be considered in these proceedings in terms of the remand orders. As it is a virgin plea which has got to be substantiated by the parties concerned, the same will have to be examined by the adjudicating authorities concerned.
20. We have also examined the plea of limitation raised by the assessees/appellants. These appellants had not disclosed the relevant facts and materials to the department during the periods of dispute. They had not taken steps to obtain registration with the department, nor to file ST-3 returns of the fees/charges collected from the students, nor to pay service tax. It was only during the course of investigations by the department that these appellants disclosed the relevant facts and, that too, under compulsion and in a piecemeal manner. This state of affairs has been clearly brought out through the learned Special Consultants submissions recorded in para 9(f) of this order in respect of the ICFAI cases. We have seen more or less the same state of affairs in respect of other assessees also. The show-cause notices and the relied-upon documents loudly disclose the suppression of the facts by these parties whose intent to evade payment of service tax is evident from the records. In the case of Mehta & Co.(supra), the Honble Supreme Court held that the extended period of 5 years prescribed under the proviso to Section 11A(1) of the Central Excise Act (which provision is pari materia with the proviso to Section 73(1) of the Finance Act, 1994) could be reckoned from the date of acquisition of knowledge by the department. The ratio of the decision is squarely applicable to the present cases.
No final decision of this Tribunal or any High Court or the Supreme Court in support of the assessees views with regard to commercial training or coaching service defined under Section 65(105)(zzc) of the Finance Act, 1994 has been shown to have existed during the period of dispute. Therefore there is no substance in their plea of bona fide belief based on decisions.
Therefore, we hold that the proviso to Section 73(1) of the Finance Act, 1994 was rightly invoked in these cases. In any case, a major part of the demand on ISB is within the normal period and, in the case of other assessees also, a considerable part of the demand is within the normal period.
21. On the very grounds sustained in support of invocation of the extended period of limitation in these cases, it has to be held that Section 78 of the Finance Act, 1994 was also rightly invoked to impose penalties on the assessees. However, in our view, the penalties imposed under Sections 76 and 77 are liable to be set aside in the facts and circumstances of these cases.
22. To summarize our findings --
(i) The liability of the assessees to pay service tax under Section 65(105)(zzc) (read with its explanation) of the Finance Act, 1994 on the fees/charges collected from their students during the respective periods of dispute is affirmed;
(ii) The extended period of limitation was rightly invoked in these cases and, therefore, no part of the demand of service tax on any of the assessees can be held to be time-barred;
(iii) Section 78 of the Finance Act, 1994 was rightly invoked in these cases, but the penalties imposed on the assessees under Sections 76 and 77 of the Act are liable to be set aside;
(iv) The alternative claim of the ISB, the BIFT and the IIRM for exemption under Notification No.9/2003-ST dt.20/06/2003 is liable to be considered on merits by the adjudicating authorities concerned. Each of these assessees should be given a reasonable opportunity of being heard on this issue. Needless to say that, in the event of the issue being held against the assessees, they would be liable to pay the service tax(with education cess) as already quantified by the adjudicating authorities as also to pay interest thereon under Section 75 of the Act besides the penalties under Section 78 of the Act. No penalty shall be imposed on these assessees under Sections 76 and 77 of the Act.
23. In the result, it is ordered as follows:-
(a) Appeals, ST/32, 39, 40 & 46/2007 are disposed of by sustaining the demand of service tax with education cess raised under Section 73(1), sustaining the demand of interest raised under Section 75, sustaining the penalties imposed under Section 78 and setting aside the penalties imposed under Sections 76 & 77 of the Finance Act, 1994.
(b) Appeals, ST/365 & 392/2007 and ST/194/2008 are disposed of by way of remand in terms of para 22(iv) of this order.
(Pronounced on ) (M. VEERAIYAN) MEMBER (TECHNICAL) ( P.G. CHACKO ) MEMBER (JUDICIAL) Nr 36