Commercial Training and Coaching Service

PJ/CASE STUDY/2012-13/17

04 August 2012

CASE STUDY

Introduction:

Commercial Training and Coaching Service- the study material formed part and parcel of the coaching services and cannot be segregated. Therefore amount realized from the sale of study material was only reimbursement of expenditure for composite service, which includes study material. So Assessee was not entitled to benefit of Notification No. 12/2003-S.T. for goods and materials sold by them to recipient of service
Career launcher India Ltd versus Commissioner of Service Tax, Delhi [2012 (26) S.T.R. 55 (Tri – Del.)

Relevant Legal Provisions:

Notification No. 12/2003-Service Tax Dated 20.06.2003
In exercise of the powers conferred by section 93 of the Finance Act, 1994 (32 of 1994), the Central Government, being satisfied that it is necessary in the public interest so to do, hereby exempts so much of the value of all the taxable services, as is equal to the value of goods and materials sold by the service provider to the recipient of service, from the service tax leviable thereon under section (66) of the said Act, subject to condition that there is documentary proof specifically indicating the value of the said goods and materials.
2. This notification shall come into force on the 1st day of July, 2003."

Brief Facts:

Þ      The Appellants are providing commercial training and coaching service and are registered with Service Tax Department. They carry out part of their operations through third parties under a franchise agreement. All the revenue is collected by the franchises and the same is deposited in Bank account of the appellants. During the course of Audit in December, 2005, it was found that M/s. CLIL have shown income as sale of study material but did not pay service tax on it. As per para 2.9.1 of Board's Circular No. 59/8/2003, dated 20-6-2003 exemption on cost of material sold will apply only to the sale value of standard text book, which are priced and any study material or written text will not qualify for exemption under Notification No. 12/2003-S.T. and their value will be subjected to service tax. On perusal of sample copies of study material obtained from the assessee, it was found that no printed price was shown on the material. On being asked, taxpayer stated that they affixed a sticker of price at time of sale. Thereafter, two show-cause notices were issued to the appellants vide DL-11/ST/R-16/1AR/CL/128/07/12487, dated 5-9-2008 for the period 1-7-2003 to 31-3-2008 and DL-11/ST/R-16/1AR/CL/128/07/1194 dated 6-2-2009 for the period 1-4- 2008 to 30-9-2008 respectively. These show-cause notices were contested by the appellants. Commissioner of Service Tax passed the impugned order in both show-cause notices which is under appeal before Tribunal.

Þ      In the Impugned order of Commissioner has confirmed the demand of Service Tax amounting to Rs. 7, 10, 06,706/- along with interest payable under Section 75 of the Finance Act, 1994. Penalty of Rs. 1000 under Section 77 and Rs. 7,10,06,706/- was also imposed on the appellant under Section 78 of the Finance Act, 1994.

Appellant’s Contention:

Þ      Appellants claim that they are entitled for exemption provided under Notification No. 12/2003-S.T., dated 20-3-2003 as they satisfy all the conditions provided therein. They submit that value of books sold by them was separately shown in the invoices issued to students. Appellants further state that activity of sale of goods is subject of State levy and leviable to VAT and under VAT provisions of various States, books are exempted. They also submit that demand is hit by limitation as no extended period can be invoked as there is not suppression of facts.
Þ      The Appellants seeks support from Tribunal's Stay Order in Chate Coaching Classes Pvt. Ltd. v. Commissioner of Central Excise, Aurangabad- 2008(9) S.T.R. 207 (Tri. Mum) in support of their application as this order is on the same issue. Learned counsel for Appellant also submitted various case laws mentioned as under :-
(i)          Associated Cement Companies Ltd. v. C.C. - 2001 (128) E.L.T. 21 (S.C.).
(ii)         CIT v. Elecon Engineering - 1974 (96) ITR 672 (Guj.),
(iii)        Scientific Engineering House Pvt. Ltd. v. CIT - AIR 1986 SC 338.
(iv)        CC (Gen), New Delhi v. Gujarat Perstorp Electronics - 2005 (186) E.L.T. 532 (S.C.).

           They further submit after taking into consideration all the above decision that text and material supplied by them to their student will fall into the category of “goods” and will be subject to Vat and not Service Tax.

Respondent Contention

Þ      Respondent submits that study materials on which exemption under Notification No. 12/2003 dated 20-6-2003 is being claimed by appellants have no price tag and are integral part of services rendered and study materials are not the text books. These materials are integrated to performance of service of coaching. He submits that question of applicability of exemption under Notification No. 12/2003 has been examined by CESTAT in Final Order No. ST/26-28/11, dated 25-1-2011 in appeal of M/s. Sayaji Hotel Ltd. [2011 (24) S.T.R. 177 (Tribunal)], wherein it was held that such contracts are service contracts and no sale is involved in such transaction, therefore, segregation of value made in the invoice as taxable and nontaxable is just a play to evade service tax due on rendering of service. He, further, states that adjudicating authority has noted that even the price was not printed, no sale was intended by the appellants. He also relies on Stay Order passed in case of Cerebral Learning Solutions Pvt. Ltd. v. C.C.E., Indore - 2009 (15) S.T.R. 343 (Tri.-Del.), in which pre-deposit was ordered by the Principal Bench, Delhi.
Þ      Learned DR refers to Misc. Order No. ST/30/10 dated 5-4-2010 and states that a question raised during the arguments was whether books claimed to be sold by the applicant can be termed as Textbooks. He submits that expert opinion from Department of Higher Education, Government of India and NCERT, New Delhi supports the view that books are not textbooks. Learned Counsel for applicants raises the objection on the expert opinion and states that in para 31 of the Order-in-Original, Commissioner has held whether textbooks are standard textbooks or not is not the issue involved in the case.

Issue Involved:

The issue involved in this case was that-

Whether the assessee was entitled to benefit of Notification No. 12/2003-ST for books and material sold by them to the students?
Whether the study material formed part and parcel of the coaching services and cannot be segregated?

Order of the Tribunal: -
Þ      The Tribunal find considerable force in the findings of the commissioner that the amount realized from so called sale of their study material is nothing but reimbursement of expenditure for recipient of service and it can be termed as composite service, which in itself includes study material also.
Þ      Tribunal find that ratio of CESTAT's decision in Sayaji Hotel v. Commissioner of Central Excise (supra) is applicable to the instant case as said decision is in respect of Exemption Notification No. 12/2003. Appellants claim support from Chute Coaching Classes v. Commissioner of Central Excise (supra), but we find that in 2009 this Bench has taken a different view while passing Stay Order in Cerebral Learning Solutions Pvt. Ltd. (supra).
Þ      The Tribunal find that the appellants have not been able to prove prima facie case. Appellants have also not claimed the plea of financial hardship. Tribunal, therefore, order pre-deposit of 30% of Service Tax amount demanded in impugned order within a period of six weeks from today. On deposit of this amount ,there shall be stay of recovery in respect of balance amount of the Service Tax, interest and penalties during the pendency of appeal

Decision:
The Application rejected.
Conclusion:

On the books price have to be mentioned and it should not be integral part of the service. Merely value of the book separately mentioned in the invoice does not amount to eligible for notification no.12/2003

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PJ/CASE STUDY/2012-13/17
04 August 2012

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