Abacus training to children is recreational training cannot fall under “Commercial Training or Coaching Service”

PJ/Case Laws/2011-12/1455

Case: K. K. ACADEMY PVT. LTD VS COMMISSIONER OF SERVICE TAX, CHENNAI

Citation: 2011 (24) S.T.R. 702 (Tri- Chennai)

Issue:- Abacus training to children is recreational training cannot fall under “Commercial Training or Coaching Service”.

Abacus training to Teachers allows self employment or forgaining vocation – exempted from service tax not falling under “Commercial Training or Coaching Service”.

Brief Facts:- Appellant-company is engaged in imparting training to children in the age group of 6-13 years in the name and style as "Aloha India" [hereinafter referred as "Aloha"]. The Appellant through its various franchisees conducts a course called "Mental Arithmetic" for children. The course has a 8 level structure and each level is of 3 months duration with 4 classes per month. Classes are conducted once a week for 2 hours, generally during the weekend. Aloha imparts training through 'Abacus' which is an ancient Chinese tool still widely used in China in place of calculator. This coaching would result in overall brain development and would make children gain self-confidence. Aloha is affiliated to Aloha Mental Arithmetic, SDN BI-1D, Malaysia and Certificates are issued by the parent body.

Demand of service tax was raised against the appellant in respect of "Franchisee Services" for imparting training through "Abacus" using training method for which the appellants are the franchisee holders. The second part of the demand relates to imparting training through Abacus to students in different centres run by the appellants themselves under “Commercial Training or Coaching Service”. The third part of the demand relate to the training given by the appellant to the teachers, who in turn after being get employed or open separates center to impart training through Abacus to student.

Demand of duty was confirmed and penalties were also imposed. Appellant is now before the Tribunal.

Appellant’s Contention:- Appellants stated that with regard to amount received for franchisee services the Appellant have paid service tax but the same was paid after the lapse time. Appellant are not per se disputing the tax liability on Franchisee service but are seeking the reduction in the penalty amount.

As regard Abacus training to students falling under “Commercial Training or Coaching Service”, Appellant contended that such training has been held to be recreational training by the Tribunal in Fast Arithmetic’s vs. Asst. Commr. of C. Ex & ST, Manglore [2010(17) S.T.R. 158]. As per this decision, no Service tax is payable for imparting Abacus training since recreational training is covered under the Notification No. 9/2003-S.T., dated 20-6- 2003 and Notification No. 24/2004-S.T., dated 10-9-2004.

As regards the third category of training to the teachers, appellant stated that such training is in the nature of "Vocational Training", which is also exempted under the Notifications cited above.

Reasoning of Judgment:- The Tribunal was of the view that for the franchisee services rendered by appellants, they are liable to pay service tax and they are also not disputing their tax liability. As such, the demand relating to the franchisee services was confirmed. The Tribunal ordered that the amount already paid be adjusted against the demand confirmed by us.

As regards penalty, considering the fact that only Rs. 3.5 lakhs was paid after a delay, the penalty amount was reduced to Rs. 3.5 lakhs under Section 78 of the Finance Act, 1994, setting aside the balance amount.

As regards Abacus training imparted to the students, the Tribunal found that the issue stands settled by the Bangalore Tribunal in the case of Fast Arithmetic v. Asst. Comm. of C. Ex & S.T., Mangalore. Hence, following the ratio of the said decision, it was held that Abacus training to be recreational training and therefore, also held that the same comes under the exempted category of services. Consequently, the impugned demand in respect of such training is set aside along with the penalty amount imposed in respect of such training.

As regards the Abacus training imparted to teachers, the Tribunal found that such training enables such teachers to either get employment in a franchisee imparting similar training or to open their own training centres and thereby get self-employed. Either way, the training received by them prepares them to get employment/self-employment and such training, therefore would come under vocational training. Since vocational training comes under the exempted category of services, the demand confirmed in respect of Abacus training to teachers is also set aside along with the penalty imposed in respect of the same.

Decision:- Appeals allowed accordingly.

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PJ/Case Laws/2011-12/1455

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