By TIOL News Service

AHMEDABAD, OCT 26, 2015: THE appellant, proprietor of M/s The Institute of Professional Studies, was registered with service tax department from February 2001 under the category of 'Chartered Accountant Service' The appellant was also providing Commercial Coaching to the students appearing for the CA Examination

On 0172003, "Commercial Training or Coaching Service" was introduced in the Service Tax net On 01122009, a search was conducted at the premises of the appellant, on the basis of intelligence, that the appellant was engaged in running "Commercial Coaching Classes" for the students of Chartered Accountant examination and providing coaching for different Chartered Accountant courses like Common Proficiency Test (CPT), IPCC to the students but not paying service tax, even though his annual turnover is above the small service provider exemption limit

A SCN dated 02072012 was issued proposing demand of service tax amounting to Rs 57,03,113/- alongwith interest for the period from 0142007 to 31032011 and to impose penalty and also to appropriate an amount of Rs 26,57,344/- paid during investigation

The adjudicating authority confirmed the demand

Before the CESTAT, the appellant submitted that the services rendered by them is covered within the scope of exemption Notification No 24/2004-ST dated 10092004 as Vocational Training Institute It is further submitted that the demand was raised by clubbing the income of appellant's relatives, such as, father, mother, wife, brothers etc, as fees of coaching classes, who are all separate income tax assessees Inasmuch as since incomes of the relatives were clubbed with the appellant's income without issuing any show cause notice to their relatives, the demand of tax is liable to be set-aside on this ground alone; there is no basis forthe demand as the same was quantified partly on the basis of the computer printout, ledger and partly by clubbing the incomes of relatives and the taxable value taken into consideration, which is highest of these documents in each year

Reliance is placed on the decision in Pasha Educational Training Inst - 2009-TIOL-288-CESTAT-BANG in support of non-payment of tax as well as bona fide belief so that extended period cannot be invoked Cum-duty benefits and benefit of reduced penalties are also sought since they had deposited tax along with interest during investigation

The AR justified the order of the adjudicating authority and in the matter of limitation submitted that the appellant is a Chartered Accountant and knowingly and wilfully did not pay the tax and therefore, extended period and imposition of various penalties are warranted

The Bench inter alia observed –

+ In the present case, the appellant had provided the coaching to the students to appear in the examination conducted by The Institute of Chartered Accountants of India It can not be considered that the appellant's institute is providing any coaching to seek employment or undertake self-employment after this coaching After the coaching provided by the appellant, the students are not seeking employment but they are appearing in examination conducted by Institute of Chartered Accountants of India We agree with the submission of the learned Authorised Representative for the Revenue that there are several coaching centres in the country for admission of joint entrance examination for Engineering & Medical, UPSC, SSC etc which can not be treated as vocational training institute

+ In the present case, the appellant's institute is not recognised for imparting coaching by the Institute of Chartered Accountants India and, therefore, the said case law [Pasha Educational Training Inst (supra)] would not applicable in the facts of this case So, the appellant is not eligible for the benefit of exemption notification as vocational training institute

+ It is evident from the record that the appellant had admitted the tax liability by taking into consideration of the income of himself and his two students namely Shri Shailesh Arun Ghule and Shri Fenil M Gandhi So, there is no force in the submission of the Learned Advocate, in respect of the clubbing of income of the appellant with the said two students

+ On perusal of the Income Tax return of Ms Yashvina Jayantilal Kapadia, we find that the assessee had declared income from house property… The Income Tax return of Ms Sameeta Jay Charia, for the assessment year 2010-11 had shown fees from coaching classes as income She has also paid income tax on such income Ms Purvi Vijay Charia in her Income Tax return for the assessment year 2009-10 had shown income from Stitching and Design The income tax assessee had paid tax on the income shown in the Income Tax return under the Income Tax Act There is no material available on record that the Central Excise Officers had made any inquiry of the property shown in the income tax returns and from the Income Tax Department in respect of such Income Tax returns Hence, we are unable to accept the clubbing of the income of the other relatives of the appellant as fees on the basis of the Income Tax returns

+ It is a serious infirmity in the present proceeding that the Revenue considered the income of the other relatives as taxable service on the basis of their Bank Account and Income Tax returns, but, no notice was issued to them, which is a gross violation of principle of natural justice

+ It is noticed that the taxable value was determined on the basis of three sources (a) Fees collected (as per computer print out Pages taken out at the time of search) (b) Fees collected (as per details provided by the appellant vide Annexure 'A', 'B' and 'C' (fees receipt ledger) letter dated 04052012 and (c) Fees collected/ income (by clubbing the income shown in the income tax return of the 13 persons/firm) The highest amount, among all these three sources in each year had taken on year-wise taxable value for determining demand of tax We find that there is no definite stand taken by department for a particular source and documents for determining taxable value In our considered view, service tax cannot be levied in such manner, on the basis of pick and choose method of the documents, which is totally inconsistent, misconceived and irrational

+ The extended period of limitation is correctly invoked as appellant had disclosed the tax liability during investigation and voluntarily paid the tax with interest and therefore, penalty imposed under Section 78 of the Act was also considered sufficient

Conclusion:

++ The demand of service tax alongwith interest against the appellant by clubbing the income of Shri Jay Ajit Charia, Shri Jai Ajit Charia (HUF), Shri Shailesh Arun Ghule (student), Shri Fenil M Gandhi (student) and imposition of penalty under Section 78 are upheld and the balance amount of demand of tax alongwith interest and penalties are set-aside

++ Adjudicating Authority is directed to quantify the demand of tax after extending the cum-tax benefit within thirty days and extend the option to pay penalty @ 25% of the tax within 30 days, as per Section 78 of the Act

The appeal was disposed of

(See 2015-TIOL-2284-CESTAT-AHM)