Whether exemption under notification 12/03-ST was applicable in respect of study materials sold by coaching centre ?

PJ/Case Law/2013-14/1943

Case:-CADD CENTRE TRAINING SERVICES (P) LTD Vs COMMISSIONER OF CENTRAL EXCISE, CHENNAI-IV

Citation:-2013-TIOL-1539-CESTAT-MAD

Brieffacts:- The applicant was a provider of the services of commercial coaching and training in the fields of design, multimedia, architectural, engineering, mechanical design analysis, construction & management etc. They provided such training through their own centres and through their franchisees. In respect of franchise charges, they have been paying service tax under the franchise service.

While providing commercial coaching and training, they were selling certain text books to the trainees. Further, it was one of conditions of franchise agreement that the franchisee shall conduct training using training materials supplied by the applicant and the applicant was selling such material to the franchisees. The applicant had not paid service tax on the materials sold directly to trainees in their own centres or to the franchisees.

Revenue was of the view that the consideration received for sale of training material would form part of the value of the services rendered by the applicant. Revenue was of the view that exemption under Notification 12/03-ST in relation to goods sold in the course of providing services will be applicable only for standard text books sold and the text books in question were prepared by the applicant and tailor-made for the training classes to be imparted either by them or by their franchisees and therefore the said exemption could not be claimed. Based on such reasoning, a show case notice was issued for recovery of service tax not paid for the period 2005-06 to Sept 09 and after adjudication, an amount of Rs.2,33,49,899/- is confirmed against the applicant along with interest and penalty.

Appellant’s contention:- The appellant submitted that exemption under notification 12/03-ST was applicable in respect of any materials sold and such exemption notification issued by government could not be restricted through instructions issued by CBEC to sale of standard text books. He further submitted that they had been in fact selling their text books to any person who was interested in buying such text books and there were genuine sales to persons other than those to whom they were providing services. He relied on the order of Cerebral Learning Solutions Pvt. Ltd. Vs CCE Indore - (2013-TIOL-834-CESTAT-DEL)wherein waiver of pre-deposit of dues was granted in similar context.

Respondent’s contention:- The respondent submitted that the said books were of a type that could be used only in training classes to be provided by the applicant and their franchisees. He drew the attention of the Bench to the clause in the franchise agreement to the condition that franchisee should conduct training classes only using material sold by the applicant. According to him, this was a case of diversion of value of services to value of text books because the VAT rate on text books was very negligible as compared to rate of service tax. He relied on the following decisions in support of his argument:

1)Soni classes Vs CCE Jaipur - 2013 (30) STR 92 (Tri.-Del.) = (2012-TIOL-2041-
CESTAT-DEL)

2) Fiitjee Ltd. Vs CST Delhi - 2012 (25) STR 24 (Tri.-Del.) = (2011-TIOL-2024-CESTAT-DEL)

Reasoning of judgment:- In the case of Soni Classes (supra), the Tribunal came to the conclusion that the sale of books was not bonafide transaction based on various evidences which were available in that case. The case of Fiitjee Ltd. (supra) is a stay order. There are few other decisions to the effect that sale of study materials used by coaching classes is eligible for exemption under Notification 12/03-ST as in the case of M/s. Cerebral Learning Solutions Pvt. Ltd. (supra). Prima facie, we adopt the reasoning given in the case of Cerebral Learning Solutions (supra) and grant waiver of pre-deposit of dues arising from the impugned order for admission of appeal. There shall be stay on collection of such dues during pendency of appeal.

Decision:- Stay application allowed.

Comment:- The gist of this case is that circulars cannot in any way restrict the exemption granted by any notification. In the present case, it was contended that exemption under notification 12/2003 would not be applicable in the case of study materials supplied during the course of commercial coaching as they were held to be customised and not standard text books. However, the decision of Cerebral Learning Solutions Pvt. Ltd. was relied upon and stay application was allowed.

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PJ/Case Law/2013-14/1943

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