By TIOL News Service

HYDERABAD, OCT 08, 2018: THE petitioner assails the Order-in-Original dated November 2016 passed by the CCE requiring it to pay Rs.53,94,36,220/- (after granting cum-tax benefits) towards service tax in relation to its "commercial coaching services", with interest and penalties.

The petitioner academy applied for service tax registration on 01.06.2011 and requisite documents for that purpose were submitted on 06.07.2011. Meanwhile, the Superintendent issued summons dated 20.07.2011 to the petitioner calling upon it to furnish certain information. On 27.07.2011, the petitioner academy requested the Superintendent not to initiate proceedings as it had already applied for registration on 01.06.2011. By a letter dated 18.11.2011/25.11.2011, the Superintendent requested the petitioner to pay service tax and file its returns. Upon registration, the petitioner academy filed a 'NIL' return on 18.08.2012, for the period October 2011 to March 2012 and where under it claimed exemption under Service Tax Notification No. 33/2011-ST dated 25.04.2011. Later, the petitioner surrendered its registration under letter dated 21.08.2012 on the ground that it did not have to pay service tax in terms of the afore stated Notification dated 25.04.2011.

The DGCEI issued a demand notice dated 17.04.2015 calling upon the petitioner to pay service tax of Rs.60,19,70,994/- in relation to the coaching fees of Rs.522,89,65,907/- collected by it from 01.10.2009 to 31.03.2015.

This show-cause notice was issued on the premise that the petitioner academy provided the taxable service of 'commercial coaching or training services'.

The petitioner submitted that it had not imparted coaching for BITSAT, VIT, NEET, etc., as alleged in the show-cause notice, but had only imparted education in Intermediate curriculum, in addition to making available study material for students appearing for the competitive examinations referred to in the show-cause notice.

However, the adjudicating authority confirmed the demand to the extent as indicated along with interest and penalty.

The petitioner is before the High Court and challenges the order on merits as well as on the ground of limitation. It is also contended that although an appellate remedy was available to it, as the said order was without jurisdiction/authority of law, it was invoking the extraordinary jurisdiction of this Court under Article 226 of the Constitution. Moreover, an appeal was not an efficacious remedy as it was onerous, requiring pre-deposit of 7.5%, i.e., Rs.4,04,57,777/-, for maintaining it.

The Revenue filed a counter submission and justified the demand.

The High Court noted that it would adjudicate this writ petition as the issue of limitation had been raised which would go to the root of the matter. (See Bhatinda District Cooperative Milk P Ltd.- 2007-TIOL-176-SC-CT.

Reproducing in extenso the allegations in the SCN and the findings of the adjudicating authority, the High Court observed -

On Merits:

+ The MoU dated 01.04.2009 recorded that the petitioner academy was a coaching centre for +2 level or Intermediate courses, giving coaching for All India entrance examinations along with Intermediate examinations and the petitioner academy approached the society to forward its students to write examinations and as the society had recognition from the Board of Intermediate, Andhra Pradesh, it agreed to forward its students to the petitioner academy.

+ The service rendered even by a Commercial Training or Coaching Centre gets exempted if such coaching or education leads to issue of a Certificate or Educational Qualification which is recognized by the law.

+ Neither M/s NRI Education Society is providing education to intermediate students nor does M/s NRI Academy provide coaching. Only the recognized junior colleges belonging to M/s NRI Education Society, managed by M/s NRI Academy, impart education in intermediate curriculum. NRIA have not been organizing any campuses or conducting any separate classes for coaching in competitive examinations. Their activity is confined only to managing junior colleges imparting formal education in intermediate curriculum under a MOU with M/s NRI Education Society.

+ It is, however, to be noted that in terms of Notification No. 10/2003 -Service Tax dated 20.06.2003, the exemption thereunder is not applicable in the event the person undergoing the course or curriculum paid for the commercial training or coaching services directly to the commercial training or coaching centre.

+ It is not in dispute that the petitioner academy, being the commercial coaching centre, itself received fees directly from the students forwarded to it by the society. Therefore, the exemption provided under the said Notification could not have been claimed by it even if it imparted coaching leading to grant of an educational qualification.

+ As regards the exemption under the later Notification No. 33/2011-ST dated 25.04.2011, the same was to be applied to coaching or training which led to grant of a certificate/diploma/degree or any educational qualification recognized by law. It had no application to a case where commercial coaching or training did not result in grant of a certificate/diploma/degree or educational qualification recognized by law.

+ Perusal of the statement of A.Rajendra Prasad recorded under Section 14 of the Act of 1944 reflects that he admitted in clear terms that the students of Intermediate colleges of the society who took coaching in the classes conducted by the petitioner academy paid separately to the petitioner academy as well as to the society.

+ He (Manager of the petitioner academy) also admitted that the petitioner academy and the society were separate legal entities engaged in separate activities, i.e., the petitioner academy was providing commercial coaching services while the society was providing education services to Intermediate students for which both of them collected separate fees.

+ The issue, therefore, is whether the coaching provided by the petitioner academy to Intermediate students for appearing at entrance exams could be assessed to service tax separately when fees was allegedly received by the petitioner academy cumulatively, not only for such coaching activity but also for imparting education towards Intermediate curriculum.

+ Insofar as the Notifications are concerned, it may be noted that the first Notification No.10/2003-ST dated 20.06.2003 specifically stated that the exemption thereunder would not be applicable if charges for the services of commercial training or coaching were paid by the person undergoing the course directly to the commercial training or coaching centre. It is an admitted fact that the petitioner academy directly received the coaching fees from the students. Therefore, it could not have claimed the benefit of this exemption in view of the proviso therein, as already stated supra.

+ Insofar as Notification No. 33/2011-ST dated 25.04.2011 is concerned, the exemption granted thereunder is for coaching or training leading to grant of a certificate or diploma or degree or any educational qualification which is recognized by any law for the time being in force.

+ As the fee received for imparting coaching in Intermediate curriculum is separate and was claimed by the society alone, such fee would be liable to exemption under this Notification and not the coaching fee received by the petitioner academy which was for the specialized coaching imparted by it to the students for undertaking entrance examinations.

+ Therefore, neither of the Notifications applied to the petitioner academy. Similarly, Section 66D of the Act of 1994 does not come to the rescue of the petitioner academy as the entry therein exempts pre-school education or higher secondary education or education as a part of the curriculum for obtaining a qualification and it has no application to coaching for entrance exams.

+ The argument that the authorities could not dissect the coaching imparted by the petitioner academy for Intermediate curriculum and the entrance examinations, as the matrix was interlocked due to the fact that the content was the same, cannot be accepted. There may be no possibility of dissecting such coaching but the inescapable fact remains that the fees paid by the students for the two were distinct and separate as the society and the petitioner academy collected fees separately. The material placed on record also indicates the manner in which the fee was collected for specialized coaching as opposed to the fee collected from a student for just the Intermediate curriculum. The details so collected were sufficient for the authorities to undertake such dissection of the fees charged by the petitioner academy and the society.

Limitation:

+ The sheet-anchor of the petitioner academy's case is that the department could not have invoked the extended period of limitation as it obtained registration in the year 2012 and filed a 'nil' return claiming the benefit of exemption under the Notification No. 33/2011-ST dated 25.04.2011 and therefore, the authorities are presumed to be aware of its activities and cannot claim ignorance or attribute suppression to it.

+ However, as rightly pointed out by counsel for the Revenue, the mere factum of filing a 'nil' return, followed by cancellation of the registration, speaks more of the premeditated acts of the petitioner academy and do not disclose any bonafides on its part. The full facts were never presented to the department whereby the petitioner academy could claim such benefit in the context of the limitation period. The actual transaction between the petitioner academy and the society only came to light after investigation by the authorities and, therefore, the authorities were justified in invoking the extended period of five years limitation.

+ The convoluted scheme in the form of the MoU dated 01.04.2009 adopted by the petitioner academy and the society, two separate legal entities, manned by one single individual, essentially seems to have been directed at avoiding tax liability but in effect, it amounted to evasion of tax, which is per se illegal. The manner in which the petitioner academy and the society went about the transaction manifests in no uncertain terms that the intention was to evade tax. Further, the desperate ploy of the petitioner academy in its reply affidavit to completely disown its coaching activity for entrance exams clearly highlights its lack of bonafides and its real intention. That being so, the question of giving it the benefit of the normal limitation period would not arise.

+ The Commissioner opined that when there was no separate receipt towards each head and what was collected was fees alone, the petitioner academy could not thereafter claim deductibles from such fees by showing such self-serving and unauthenticated expenditure. The amounts claimed towards expenditure under various heads by the petitioner academy cannot be tested by this Court and, therefore, even if they are liable to be excluded from the amount received towards the taxable services, such an exercise would not fall within the realm of this writ petition.

Conclusion:

++ Court finds that invocation of the extended period of limitation was justified on facts. The coaching services rendered by the petitioner academy were taxable under the service tax regime and were not covered by the exemptions, be it under the Notifications or the Act of 1994. As regards the alleged inclusion of non-includables in the taxable services, the same is beyond the purview of a writ petition involving factual verification which this Court cannot under take.

++ Challenge to the Order-in-Original dated 29.11.2016, therefore, fails.

The writ petition was dismissed.

In passing: It is learnt that against this order the petitioners have filed a SLP and the same has been admitted by the Supreme Court [Ref. CA 009977/2018]

(See 2018-TIOL-2100-HC-AP-ST)