ST - Appellants imparting training for various national entrance tests which are integrated to their intermediate courses - predominant nature is imparting formal education - excluded from tax net: CESTAT
By TIOL News Service
HYDERABAD, MAY 14, 2018: THE appellants are a registered Society under the provisions of the Registration of Societies Act, 1860, and operating for educational purposes and are registered as 'Charitable Institution'.
They are imparting education through three types of Institutions as follows:-
(a) Junior Colleges which are wholly established by the appellants themselves.
(b) Junior Colleges (associated with the appellants Society) and established by various other Societies.
(c) Coaching Centers – These centers were established in locations inside and outside the State of Andhra Pradesh in order to prepare students so as to enable them to appear for various competitive exams but for the period concerned in these appeals 2011 to 2015, these coaching centers were not functionable.
Show cause notices were issued demanding of service tax on the ground that the certificate of marks is issued by the Board of Intermediate Education (BIE) and not by appellant; as appellants are not issuing any certificates to the students they cannot claim exemption; coaching for the intermediate education and for National Entrance Examination are distinct activities and coaching for such entrance examinations does not lead to issue of any certificate recognized by law; appellant on one hand are coaching and training students for various examinations like EAMCET, IIT etc and on the other hand charging much higher fees than what has been stipulated by the Intermediate Board; the exclusion in the definition of Commercial Training and Coaching Center have been deleted and Notification No. 33/2011-ST grants an exception which is not applicable to appellant and from 01.07.2012 the activity rendered by the appellant is covered under the definition of service and the said services does not fall under any entry in the Negative List or mega exemption notification.
The adjudicating authority after following due process of law confirmed the demands raised along with interest and also imposed penalties.
Subsequently, a corrigendum was issued on the basis of details of the fees collected by the appellant under various Head indicated in the balance sheet and fee deductions were allowed by the adjudicating authority. It is against these deductions, Revenue is in appeal while the appeals of the appellants are against the confirmation of demand.
Inter alia it is submitted that the fees collected by the appellant cannot be artificially split and part of the same be allowed for exemption from service tax and another portion subjected to service tax in view of the apex court decision in Larsen & Toubro Ltd. - 2015-TIOL-187-SC-ST .
After considering the elaborate submissions made by both sides, the Bench addressed the issue individual year-wise thus -
+ Mere perusal of the said documents (T rolls and mark sheet as is given to various students)would indicate that the appellants Society is recognized by the Board of Intermediate Education, Andhra Pradesh and are issuing mark sheets jointly signed by the Principal and Controller of the Examinations, Board of Intermediate Education, A.P.
+ In our considered view, the said mark sheets issued by the appellants jointly with the signature of Controller of Examination has to be considered as the certificate which is recognized by any law for the time being in force.
FOR THE PERIOD 2011-2012
++ The effect of the amendment (w.e.f 01.05.2011 to the definition of 'commercial training or coaching center) was that while even an institution/establishment providing formal education came to be categorized as a 'commercial training or coaching centre', the non-leviability of service tax on 'coaching or training' leading to grant of a certificate / diploma / degree or educational qualification recognized by any law continued by way of the exemption notification.
++ For applicability of the exemption, post 1.5.2011, plain reading of the notification is that the 'coaching or training' should lead to issue of a certificate / degree / diploma or educational qualification recognized by law. It is significant that, post 1.5.2011, even the controversy relating to 'issue of certificate / degree etc.' is settled in favour of the appellant as the notification clearly provided that the coaching or training should 'lead' to issue of a certificate etc.
++ It is settled law that if the plain meaning of the exemption notification covers the assessee, the benefit should be allowed.
++ Reading of prospectus and other materials indicate that the training / coaching provided by the appellants in the Intermediate Colleges are composite and an integrated course, whereby the students become eligible for intermediate qualification and simultaneously become prepared for taking the entrance examinations. Such a course cannot be artificially split as intermediate and entrance coaching and more particularly demanding service tax on even the intermediate coaching citing inability to split the course fee. The demand raised on the appellants is thus in total disregard to the consistent principle of the Government not to subject formal education to service tax.
++ Even if courses can be artificially split as intermediate and entrance coaching, the essential character flows from the intermediate training and hence the appellants are eligible for the exemption under Notification No. 33/2011-ST with effect from 01.05.2011.
FOR THE PERIOD 2012-2013
++ Section 66D of the Finance Act specifies the list of services that are not taxable. The relevant portion of Section 66D of the Act is reproduced below for ready reference:
Negative list of services
66D. The negative list shall comprise of the following services, namely: -
'services by way of-
(i) pre-school education and education up to higher secondary school or equivalent;
(ii) education as a part of a curriculum for obtaining a qualification recognized bv any law for the time being in force;
(iii) education as a part of an approved vocational education course;
++ In the instant case, the primary activity of the Appellant is to impart intermediate education. The Appellants are imparting training for various national entrance tests which are integrated to their intermediate courses as prescribed by the Board. Therefore, the predominant nature of the service will be imparting formal education which stands excluded from service tax net.
FOR THE PERIOD 2013-2014
++ Submissions made for the period 2012-2013 will squarely be applicable for this period also.
FOR THE PERIOD 2014-2015
++ The exemption provided under Mega Exemption was subject to Section 66D of the Finance Act, 1994. It is submitted that the amendments brought in the Mega exemption from time to time did not have any impact on the Entry 9 in Negative List under Section 66D of the Finance Act, 1994 is an acceptable proposition.
++ Therefore, essentially any activity by an 'education institution' as defined with reference to Section 66D of the Finance Act, 1994 was outside the purview of service tax and the Appellants are squarely covered in the ambit of the same, accordingly demand of service tax under any category fails.
The impugned orders were set aside and the appeals were allowed with consequential relief. Consequently, the Revenue appeal was rejected.
(See 2018-TIOL-1504-CESTAT-HYD)
