Whether Service tax liability arise on total amount of fees charged from students when assessee retain only 80% of total amount?

PJ/CASE LAW/2015-16/2962

Case:- KUNAL IT SERVICES PVT. LTD. Versus COMMISSIONER OF C. EX., PUNE-III

Citation:- 2015 (40) S.T.R. 560 (Tri. - Mumbai)

Brief facts:- This appeal is directed against Order-in-Appeal No: PIII/VM/54/10 dated 22-3-2010 passed by the Commissioner of Central Excise (Appeals), Pune - III.
The relevant facts that arise for consideration is, that the appellant is a franchisee of M/s. Aptech Ltd. and are engaged in imparting training in computer-based multimedia and animation under the brand name “Arena Multimedia” in terms of an agreement entered into with M/s. Aptech Ltd. On perusal of the said agreement, it transpired that the course fee was required to be collected by the appellant and deposit the same in an account maintained by M/s. Aptech Ltd. Appellant received 80% of the fees collected by them and were discharging appropriate service tax liability under the head “Commercial Coaching or Training Service”. Revenue authorities entertained the notion that appellant is required to discharge service tax liability on the full amount of the fees received. Show cause notice was issued demanding differential service tax liability, interest thereof and proposal for imposition of penalty. The adjudicating authority as well as^-the first appellate authority came to a conclusion that service tax liability arises on the appellant.

Appellant’s contention:-Learned consultant appearing on behalf of the appellant submitted that the tax demanded by the lower authorities is incorrect inasmuch as the amount on which the tax demanded is not an amount received by the appellant as consideration for the training imparted by them and will not be covered under commercial coaching or training classes. He would submit that both the lower authorities did not appreciate the facts properly. It is his submission that the amount received by the appellant, which is 80% of the fees collected, appellant discharged the tax liability on the amount.

Respondent’s contention:- Learner Departmental Representative reffered the agreement entered by the appellant with M/s. Aptech Ltd. He submitted that the appellant has collected entire fees from the prospective students, hence the amount has to be considered as the gross amount received for the services rendered to the students under the category of ‘Commercial Coaching or Training Centre’.

Reasoning of judgment:- On careful consideration of submissions made by both sides, they find that the issue is whether appellant is required to discharge service tax liability on an amount which represents 20% of the gross amount charged as fees from the students and this amount is retained by M/s. Aptech Ltd.
Undisputedly, the appellant are discharging service tax liability on the amount which is parted to them by M/s. Aptech Ltd. It is also undisputed that the appellant is the service provider and the students are the service recipient.
Theyfind that there is no dispute as to the fact that the students issue the cheques for the payment of fees in the name of M/s. Aptech Ltd. It is on record that appellant is not receiving any amount from the students directly. The provisions of Section 67 of the Finance Act, 1994 envisage for considering the gross value for discharge of service tax liability. The said section specifically provides that the gross value which is charged for the services has to be considered for payment of service tax liability. In the case in hand, the amount received by the appellant for the provision of services under the category of ‘Commercial Coaching or Training Services’ is the 80% of the amount paid by the students, as students make 100% of the payment directly in the name of M/s. Aptech Ltd. If that be so, appellant has correctly discharged the service tax liability on an amount received by him for the services rendered under the category of ‘Commercial Coaching or Training Services’.
In view of the foregoing and in the facts and circumstances of this case, they find that the impugned orders are unsustainable and liable to be set aside and they do so. Impugned order is set aside and the appeal is allowed with consequential relief, if any.

Decision:-Appeal allowed.

Comment:- The crux of the case is that Assessee is a franchisee of Aptech Ltd. engaged in imparting training in computer-based multimedia and animation. Assessee is service provider and students are service recipient. Cheques for payment of fees issued in name of Aptech Ltd. and assessee is not receiving any amount from students directly. Section 67 of Finance Act, 1994 specifically provides for gross value charged for services to be considered for payment of Service Tax liability. Amount received by assessee for provision of services amounting to 80% of amount paid by students. Assessee correctly discharged Service Tax liability on amount received for services.

Prepared by:- Monika Tak

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PJ/CASE LAW/2015-16/2962

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