?Whether sale of books is service? ?Whether provisions of hostel facility and sale of books are to be combined with provisions of commercial training orcoaching service as bundled service?

PJ/Case Law/2019-2020/3597

M/s Major Kalshi Classes Pvt. Ltd. Final Order No. 70147-70148/2020 dated 05.02.2020
Issue:

Whether sale of books is service?
Whether provisions of hostel facility and sale of books are to be combined with provisions of commercial training orcoaching service as bundled service?
Whether service tax was exempted on hostel facility?

Brief Facts:The appellants were engaged in providing ‘Commercial Training or coaching Service’. In addition to providing coaching, they were also selling text books published by M/s MKC publication. For the facility of some of the service recipients, the appellants were also providing hostel facility.

Appellant’s Contention:The appellant provides the below contentions
1.The appellant has submitted that the books and forms sold were sale of goods and that the books were published by M/sMKC Publication and they were also available to anybody forpurchase and it was not compulsory that they would be available to only those service recipients who were receiving commercial training or coaching service. He has submitted that the said books were available to be sold to anybody on Flipkart. He has further submitted that they issued independentinvoices towards sale of books and the sale of books and forms was maintained separately in the books of account. Hence no service tax was payable on sale of books.

2.The appellant submitted that hostel facility was independent activity and that it was not mandatory for every service recipientof commercial training or coaching service to avail hostel facility. Also they had submitted a list of students who did not avail hostel facility but availed the facility of training or coaching service. Further, they submitted a list of students who availed only hostel facility but did not received coaching service and therefore, it is clear thatcommercial training and coaching and availability of hostel areindependent of each other and the receipt of the same aremaintained separately in the books of account. They chargedRs.15,000/- for a period of six month to the students who preferto stay in the hostel. Further NotificationNo.31/2011 dated 25 April, 2011 exempted short term accommodation where tariff rate of room was less thanRs.1,000/- per day and that the appellant had charged less thanRs.100/- per day and therefore, service tax was not payable. He further submitted that for the period after 01 July, 2012 as perSerial No. 18 of Notification No.25/2012-ST dated 20 June,2012, if a place is rented out for residential purpose and thetariff is below Rs.1,000/- per day then the same was exempted.It was further submitted that hostel was provided for less thanRs.100/- per day and therefore, the same was admissible forsaid exemption.

3. In so far as bundling of the service is concerned, it is submitted that there are provisions in said Section 66F of Finance Act, 1994 indicating that only suchservice can be bundled wherein an element of provisions of oneservice is combined with an element of provision of any otherservice. They submit that commercial training or coachingservices was independent of provision of hostel facility. Furtherevery service recipient of commercial training or coaching wasnot required to avail hostel facility. There were many studentswho were availing hostel facility but were not receiving service ofcommercial training or coaching and therefore, they cannot bebundled.

Reasoning of Judgement:The tribunal has provided the following judgements with respect to the above mentioned points
1.Relying on decision of Tribunal in the case of Rubic’s Rostrum Coaching Pvt. Ltd. (Supra), it was held that sale of bookswas not taxable activity and therefore, there was no service tax leviable on the sales value of books.

2. It was clarified by CBEC that if large number ofservice receivers of such bundle of services reasonably expectsuch services to be provided as a package then such a packagewould be treated as naturally bundled. Revenue has not broughtany evidence on record that large number of service receiversreasonable expect every provider of commercial training orcoaching service to provide hostel facility. The CBEC has also included that if the majority of serviceprovider in a particular area of business provide similar bundle ofservices then they should be bundled. Revenue has not broughtforward any evidence that majority of service providers in thefield of commercial coaching or training service provided hostelfacility. In terms of the criteria stated in the manner ofdetermining if the services are bundled as clarified by CBEC it is not possible to bundle service ofprovisions of hostel facility with commercial training or coaching. It was held that the provisions ofcommercial training or coaching service and provisions of hostelcannot be bundled under the provisions of Section 66F of theFinance Act, 1994.

3.The hostel facility is provided for less than Rs.100/- perday and therefore, it is entitled for exemption under NotificationNo.31/2011 dated 25 April, 2011 and Serial No.18 of NotificationNo.25/2012-ST. Therefore, the confirmation of servicetax on hostel charges was set aside.

Comment:-As we have entered the GST era and it has been 3 years, similar issues of bundling of service may arise as well. And in fact there are issues like printing services of books which are being a point dispute whether to be treated as composite supply or not. Hope this judgement be of help in deriving to conclusions.
Prepared By- CA Akanksha Bohra

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PJ/Case Law/2019-2020/3597

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