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PJ/CASE LAW/2015-16/2770

Whether service tax is payable for training provided to employees of concerns who had purchased software from appellant?

Case:-BENTLY SYSTEM INDIA PVT. LTD. VERSUS COMMISSIONER OF C. EX. & S.T., DDELHI

Citation:-  2015 (37) S.T.R 463 (Del) 

Brief Facts:-The appellant herein is registered with the Service Tax Commissionerate for providing online information and database access or retrieval services; management, maintenance or repair services; information technology software services; and management or business consultancy services. The dispute in the present case is whether service tax is payable on consideration received for training provided to employees of concerns/companies who had purchased the software developed and sold by the appellant. The dispute pertains to the period 2004-05 to 2007-08.

Appellant Contentions:-Learned counsel for the appellant has drawn our attention to the order passed in the case of Commissioner of C. Ex., Chandigarh v. Punjab Communication Ltd. reported in [2012 (25) S.T.R. 89 (Tri.-Del.)], wherein it was observed that training provided to the employees of concerns who had purchased computers, cannot be treated as commercial training or coaching centre services. Reliance is also placed on the decision of Tribunal, Bangalore Bench in Wipro Limited v. Commissioner of Income Tax [2010 (20) S.T.R. 62 (Tri.-Bangalore)], wherein Tribunal observed that the appellant did not, prima facie, fall under the category of "Management Consultants" but was covered in the category of "IT Services". Another decision of Delhi Tribunal in Ruchi Infotech Ltd. v. Commissioner of Central Excise, Indore [2010 (20) S.T.R. 797 (Tri.-Del.)] is relied upon.

Respondent contentions:-The contention of the respondent revenue is that this training is covered under Section 65(26) and amounts to "commercial training or coaching" provided by "commercial training or coaching centre", as defined in Section 65(27) of the Finance Act, 1994 and applicable with effect from 1-7-2003. In Section 65(27), "commercial training or coaching centre" means an institute or establishment providing commercial training or coaching for imparting skills, knowledge or lessons on any subject or field other than sports with or without certificate.

Reasoning of Judgment:-Tribunal, in the impugned order, has observed that the appellant does not have a prima facie case and the activities of training were covered under the head "Commercial Training and Coaching Centre Services". Accordingly, the application for waiver of pre-deposit or grant of stay to this extent was rejected. We are informed that in terms of the order passed by the Tribunal, the appellant will also have to deposit Rs. 53,25,568/- towards penalty. It is pointed out that the interest is payable @18%.
Looking at the nature of the dispute, the quantum involved and the fact that penalty is equal to the amount of tax; we are inclined to modify the order passed by the Tribunal and direct complete waiver of payment of interest and penalty. The direction to deposit the entire principal tax amount is partly modified with a direction to the appellant to deposit Rs. 40, 00,000/- within a period of four weeks. We refrain from giving detailed reasons, but record that the issues raised do merit consideration. The plea of the appellant is that they had supplied and were paid consideration for the software sold. The appellant it is stated was not a commercial training or coaching institute but had developed and had sold software and as a term also trained the employees.

Decision:-Appeal disposed off.

Comment:-The analogy of the case is that since the case involved was arguable, pre-deposit ordered by the Tribunal was modified. The appellant had developed and sold the software and as a term also trained the employees. The appellant is not commercial training and coaching centre. Accordingly, in view of decisions relied upon by the appellant, stay order was modified.
 
Prepared By:- Anash Kachaliya

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PRADEEP JAIN, F.C.A.

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