By TIOL News Service

MUMBAI, JAN 07, 2014: A total Service Tax demand of Rs.5,34,65,199/- along with interest and penalty has been confirmed by the CCE, Pune-III against the applicant. The major demand is under the head ‘Commercial Training or Coaching'.

While seeking a Stay, the applicant submitted before the CESTAT that they had started MBA Course in 2003 with the approval from AICTE vide letter dt. 11.5.2004; the approval was renewed on year to year basis and hence the demand is not sustainable. It is further submitted that in view of the decision of Supreme Court in the case of Association ofManagement of Private Colleges Vs. All India Council for Technical Education & Others dt. 25.4.2013, to start management courses, approval from the AICTE is not required and, therefore,the demand on the ground that the conditions imposed by the All India Council for Technical Education to start courses are not fulfilled cannot survive. Furthermore, prior to insertion of Explanation to Section 65(105)(zzc) by the Finance Act 2010, which is effective from 1.7.2003, there are decisions by the Tribunal where it has been held that charitable institution are not liable for service tax. The applicant is charitable institution without any profit motive and, therefore, they were under the bonafide belief that applicant is not liable to service tax and so demand beyond the normal period is not sustainable.

In respect of the demand of Rs.19,50,393/- which is confirmed on the ground that applicant provided BAS, it is submitted that applicant has conducted certain examinations for insurance companies who are the members of society and, therefore, it is not a service provided to any client so as to be charged to Service Tax. In respect of the Renting of Immovable Property service the contention is that only convention hall is given for holding convention and this service is under challenge before Supreme Court and so demand is hit by limitation. Financial hardship is also pleaded.

The Revenue representative submitted that applicant applied to the AICTE who granted permission to start management courses on the condition that the institution must have Affiliation to a University for the management courses before making admission and in the absence of such Affiliation, the letter of approval would be treated as withdrawn;that the UGC vide letter dated 26.10.2010 declined the request of the applicant for recognition as deemed university. In response to the enquiry made by the Revenue, the applicant vide letters dated 16.02.2006, 21.02.2006 & 01.10.2006 informed that the MBA course is recognized by University of Pune and they are affiliated to the Pune University. It was further submitted that the applicant's CA had pointed out in March, 2010 that MBA courses conducted by the applicant are not approved or affiliated to University hence the income/fee received on this account is chargeable to service tax. Further, the Deputy Commissioner of Service Tax Cell had written to the applicant on 18.02.2006 that for payment of service tax, non-profit making institution is not relevant and applicants are liable to service tax in respect of commercial training or coaching activity undertaken.

Revenue also relied upon the notice issued to Shri. K.C.Mishra, Director of the applicant institution whereby explanation has been called (by applicant) from the Director in respect of irregularities related to MBA programme.In this regard, the applicants also reported the matter to the police by lodging FIR against the Director. In the FIR the allegation against director was that the MBA programme has started without requisite permission and without affiliation from the university. It is also specifically mentioned in the FIR that MBA course is not affiliated to University and the applicants had charged fee from the students and students are asking for refund. The contention of Revenue is that in view of this, it is clear that appellant had started course of MBA programme without approval or without taking affiliation to university as per the condition under which the applicants were allowed to start the MBA programme and thus the applicants were regularly mis-representing to the Revenue that the course is affiliated to Pune University. Therefore, it is a clear case of suppression of facts with intent to evade payment of service tax.

The Bench inter alia observed -

+ The applicant had not affiliated to any university till today. The courses are not recognized by any university or by the UGC. Therefore the activity undertaken by applicant comes under the scope of commercial training and coaching service.

+ Disclosure that the programme is affiliated and recognized by University of Pune is clearly suppression of facts. The fact on record by way of three letters written by the applicant to the Revenue whereby it has been disclosed that course is recognized by Pune University is clear suppression.

+ In respect of the demand on renting of immovable property the law has been amended with retrospective effect.

In fine, the Bench held that prima facie the applicant had not made out a case for total waiver of the adjudged dues. Holding so, the CESTAT directed the applicant to make a pre-deposit of 50% of the demand confirmed and report compliance.

(See 2014-TIOL-32-CESTAT-MUM)