Whether providing courses which result in award of diplomas or degrees recognized under the law leviable to service tax?

Case:- M/s CENTRE FOR ENTREPRENEURSHIP DEVELOPMENT Vs COMMISSIONER OF CENTRAL EXCISE, BHOPAL

Citation:- 2014-TIOL-394-CESTAT-DEL

Brieffacts:-The facts leading to this appeal and stay application, are, in brief, as under.

The appellant were an undertaking of the State Government of Madhya Pradesh, Public Financial Institutions and lead banks of the State. According to the appellant, this organization was set up with the sole objective of up-lifting socio economic conditions of the people below poverty line and weaker sections of the society by the way of imparting to them skill development as well as entrepreneurship so that they can earn their livelihood on their own through meaningful employment and for this purpose, the appellant institution conducts various livelihood development and training programmes. According to them, they undertook various training programmes under the welfare scheme of the Central Government and State Government like Prime Minister Rozgar Yojana (PMRY), Prime Minister Employment Generation Programme (PMEGP), Mass Employment Generation through Science & Technology (MEGSET), Entrepreneurship Awareness Camps (EACs), Entrepreneurship Development Orientation Programmes (EDOPs), Swayam Siddha project for upliftment and development of women in the rural areas, Rani Durgawati Swarozgar Yojana (RDSY), Management Development Programmes/Development Orientation Programmes (MDPs/DOPs), CM Gharelu Kamkaji Mahila Yojana (CMGKMY), National Health Rural Mission (NRHM) etc. According to the appellant in addition to the above activities, they were also associated with -

(a)   Computer training through franchisee network,

(b)   Employment generation through manpower supply to various organizations,

(c)   Data digitization for various Government Departments,

(d)   Providing education in collaboration with a University ; and

(e)   Renting a certain portion of premises owned by them.

A show cause notice dated 17/10/08 was issued to the appellant for demand of total service tax of Rs.4,44,39,518/- alongwith interest from them in respect of various taxable services including commercial coaching and training service alleged to had been provided by them during 01/7/13 to 31/3/08, for appropriation of an amount of Rs.34,05,492/- already paid by them and also for imposition of penalty on them under Section 76, 77 and 78 of the Finance Act, 1994.

The above show cause notice was adjudicated by Commissioner of Central Excise, Bhopal vide order-in-original dated 24/1/13 by which the entire service tax demand as raised in the show cause notice was confirmed alongwith interest and an amount of Rs.34,05,492/- already paid was appropriated against this demand and beside this, penalty of Rs.4,44,39,518/- was imposed on the appellant institution under Section 78 of the Finance Act, 1994, penalty of Rs. 10,000/- was imposed on them-under Section 77 and another penalty of Rs.100/- per day upto 17/4/06 and @ Rs.200/- per day or 2% of such tax, whichever was higher, from 18/4/06 under Section 76 of the Finance Act, 1994. The service tax demand was confirmed by invoking proviso to Section 78 of the Finance Act, 1994 by holding that the appellant had evaded the service tax by resorting to fraud, willful misstatement and suppression of fact and on the same ground, penalty under Section 78 of the Finance Act, 1994 equal to the service tax demand confirmed had been imposed. Against this order of the Commissioner, this appeal had been filed alongwith stay application.

Appellant’scontentions:-The learned Counsel for the appellant, pleaded that bulk of the service tax demand was in respect of commercial coaching and training service, that during the period of dispute under Section 65 (105) (zzc) of the Finance Act, 1994, "commercial coaching and training" service was defined as service provided to any person by a "commercial training or coaching centre" in relation to commercial training or coaching and under Section 65 (27) of the Finance Act, 1994, "commercial coaching or training centre" was defined as 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 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 enforce, that the appellant institution also conducts courses of diploma in computer application (DCA), Bachelor of Computer Application (BCA) and Post Graduate Diploma in Computer Application (PGDCA) in collaboration with Bhoj University of Madhya Pradesh and these degrees were recognized by law, that these courses were organized in collaboration with Bhoj university at a subsidized cost for the benefit of financially weak students who cannot afford to study for such courses in non-Government institution, that since the appellant institution conducts courses which result in award of degree or diploma recognized under the law, they go out of the definition of "commercial training or coaching centre, as given in Section 65 (27) and, hence, the entire service tax demand confirmed by treating the appellant institution as "commercial training or coaching centre" was not sustainable, that in this regard, he also relies upon the Board's Circular No. 59/8/03 dated 20th June, 2003, wherein it had been clarified that when some institutes or colleges apart from imparting education for obtaining recognized degrees, diplomas or certificates also impart training for competitive examinations, various entrance tests etc. such institutions or an establishments which issue a certificate, diploma or degree recognized by the law were outside the purview of commercial coaching or training centre and, therefore, even if such institutes or establishments provide training for competitive examination etc. such services would be outside the scope of service tax. Also as was clear from para 3 of the impugned order, this plea had been made before the Commissioner, no finding had been given, that the Tribunal in the case of Apitco Ltd. vs. CST, Hyderabad reported in 2010 (20) S.T.R. 475 (Tri. - Bang.) = (2010-TIOL-1564-CESTAT-BANG) had heldthat no taxable services were rendered by implementing Government schemes as implementing agency by utilizing the grants in aid received from the Government and ratio of this judgment of the Tribunal was also squarely applicable to the facts of this case. Also, no business support service had been provided by the appellant as all the activities of the appellant institution were in respect of Government and implementing various Government projects, and in any case the training provided to employees of the Government department was in the nature of skill development of the employees of the Government and was not the service in relation to support of business or commerce. The appellant had paid the service tax in respect of the franchisee service as well as on renting of immovable property and in any case, the appellant being an institution run by the State Government/financial institutions and lead bank of the States, there was no question evasion of service tax by resorting to fraud, wilful misstatement, suppression of facts, etc. and, hence, bulk of the duty demand was time barred and penalty under Section 78 would not be imposable and that in view of the above, the amount of Rs.34,05,492/- already paid by the appellant was sufficient for hearing of the matter and the requirement of pre-deposit of balance amount of service tax demand, interest thereon and penalty may be waived for hearing of the appeal and recovery thereof may be stayed.

Respondent’s contentions:-The learned Jt. CDR, opposed the stay application by reiterating the findings of the Commissioner that various training programmes conducted by them were "commercial coaching and training" service taxable under Section 65 (105) (zzc) read with Section 65 (27) and accordingly the grants received from the Government by the appellant institution would had to be treated as the gross amount charged by the appellant institution for this service. The service tax demand of Rs.4,15,52,918/- was on this basis, the details of which were given in Annexure A to the show cause notice. According to the appellant, the grants received from the Government for various programmes like PMRY, EAC, EDP, RDSY, MDS/DOP etc. had been treated by the Department as the value of the taxable service provided by them and service tax had been charged on the same.
Beside this, according to the department, the appellant institution had provided -

(a)    Business support service by data digitization for various government departments, and

(b) Renting of immovable property service by renting certain portion of the premises owned by them and also the service of management or business consultant service and business franchisee service.

Thus, the respondent pleaded that the amount already deposited by the appellant was not sufficient to safeguard the interests of the Revenue. He, therefore, pleaded that this was not the case for waiver from the requirement of pre-deposit.

Reasoning of judgment:-The bulk of the service tax demand of Rs.4,15,52,918/- was in respect of the appellant's activities in relation to Prime Minister Rozgar Youjana (PMRY), Entrepreneurship Awareness Camps (EACs), Skill Development Programmes (EDPs), Rani Durgawati Swarozgar Yojana (RDSY), Self Help Groups (SHGs), Entrepreneurship Development Programmes (EDPs), Management Development Programmes/Development Orientation Programmes (MDPs/DOPs) which were sought to be subjected to service tax by treating the activities as commercial coaching or training service. However, it was not denied that the appellant institution was also conducting courses in collaboration with Bhoj University which result in award of degrees/diploma, like Diploma in Computer Application (DCA), Bachelor of Computer Application (BCA) and Post Graduate Diploma in Computer Application (PGDCA) which were recognized under the law. During the period of dispute in terms of Section 65 (105) (zzc) of the Finance Act, 1994 commercial coaching training service was defined as service provided to any person by a commercial training or coaching centre in relation to commercial training or coaching and under Section 65 (27) of the Finance Act, 1994, "commercial coaching or training centre" was defined as 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 certificate and includes coaching or tutorial classes, but it does not include pre-school coaching and training centres 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. Since the appellant institute provides courses which result in the award of diplomas or degrees, as mentioned above, which were recognized under the law, the appellant institute would not be covered by the definition of "commercial training or coaching centre" and, therefore, we were of the prima facie view that any training programmes conducted or organized by the appellant would not attract service tax under Section 65 (105) (zzc) readwith Section 65 (27) ibid. Therefore, the service tax demand in respect of the appellant's alleged activities as commercial coaching or training centres was not sustainable. The bulk of this service tax demand was in respect of this activity. As regards the business support service, this was alleged to had been provided by the appellant to various Government Departments by data digitization. In terms of Section 65 (104C), the expression "support service to business or commerce" means, services provided in relation to business or commerce and includes evaluation of prospective customers, tele-marketing, processing of purchase orders and fulfillment services, information and tracking of delivery schedules, managing distribution and logistics, customer relationship management services, accounting and processing of transactions, operational assistance for marketing, formulation of customer service and pricing policies, infrastructure support services and other transaction processing. The expression "infrastructure support services" in terms of explanation to Section 65 (104C) includes providing office alongwith office utilities, lounge, reception with competent personnel to handle messages, secretarial services, internet and telecom services, pantry and security. The impugned order does not discuss at all as to how the data digitization or any other activities of the appellant were covered by the definition of infrastructure support services. In our prima facie view, the activity of data digitization for various Government department would not be covered by the definition of support services of business or commerce as the data digitization service for various Government departments cannot be treated as the service in relation to business or commerce.

As regards the services of renting of immovable property and franchisee service, the service tax on the same had admittedly being paid by the appellant.

Moreover, we were also of the view that it would be absurd to allege that an institution run by the State Government and which was associated in implementation of various welfare schemes of the centre and State Government like Prime Minister Rozgar Youjana (PMRY), Prime MinisterEmployment Generation Programme (PMEGP), Mass Employment Generation through Science & Technology (MEGSET), Swayam Siddha project for upliftment and development of women in the rural areas, Rani Durgawati Swarozgar Yojana (RDSY), CM Gharelu Kamkaji Mahila Yojana (CMGKMY) etc. by organizing various training programmes to improve the skills of poorer sections of the society, of having evaded service tax by taking recourse to fraud, wilful misstatement, suppression of facts etc. On this point, the approach of the department was absurd and, therefore, neither longer limitation period would be invokable not penalty under Section 78 would be attracted. Therefore, in any case, bulk of the service tax demand would be time barred.

In view of the above discussion, we hold that the amount of Rs.34,05,492/- already paid by the appellant was sufficient for hearing of the matter and the requirement of pre-deposit of balance amount of service tax demand, interest thereon and penalty was waived for hearing of the appeal and recovery thereof was stayed till the disposal of the appeal. The stay application stands disposed of, as above.

Decision:- Stay application allowed.

Comment:- The analogy drawn from the case is that issuance of a certificate, diploma or degree recognized by the law in the course of providing various courses is outside the purview of taxable service of commercial coaching or training centre and are not leviable to service tax. It was also viewed that the activities performed for government departments like data digitization cannot be leviable to service tax under BSS. Moreover, as the services were provided to the government institutions for implementation of various schemes for weaker sections of the society, no malafide intention could be attributable so as to invoke larger period of limitation.

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