[2009] 22 STT 176 (BOM.)
HIGH COURT OF BOMBAY
Suzlon Infrastructure Ltd.
v.
Union of India
FERDINO I REBELLO AND J.H. BHATIA, JJ.
WRIT PETITION NO. 4317 OF 2009
MAY 2, 2009
Section 86 of the Finance Act, 1994 - Appellate Tribunal - Appeals to - Whether an application for rectification will be maintainable even when a reference is made to a Third Member - Held, yes - In an appeal preferred by petitioner, there was a difference of opinion in orders passed by two Members and consequential questions were framed for determination of a Third Member - When matter came up for hearing before Third Member petitioner informed him that a rectification application was filed for passing a supplementary order and formulating revised questions, if needed - Third Member indicated that he had no jurisdiction to hear such an application; and that he would only dispose of difference of opinion - Petitioner’s case was that there had been findings on some of submissions and in respect of some others, both Members had not recorded their findings, thus, result was that points which were relevant for disposal of appeal were left unanswered - Revenue’s case was that as issue was before a Third Member, there was no order and, consequently, such application was premature - Whether rectification application filed by petitioner was to be heard according to law on all points raised to decide whether submissions in context of issues raised in appeal were required to be answered, if they were relevant points for determining controversy in appeal and, till such time, Third Member was to be directed not to proceed to answer points raised - Held, yes [Paras 20, 23 and 24]
FACTS
In an appeal preferred by the petitioner, there was a difference of opinion in the orders passed by two Members and consequential questions were framed for determination of a Third Member. When the matter came up for hearing before the Third Member, the petitioner informed him that a rectification application dated 21-1-2009, was filed for passing a supplementary order and formulating revised questions, if needed. The Third Member indicated that he had no jurisdiction to hear such an application, and that he would only dispose of the difference of opinion. The petitioner’s case was that before the Tribunal it had raised the submissions that there had been findings on some of the submissions and in respect of some others, both the Members had not recorded their findings; that at the time of hearing the appeal, the Bench did not fix the points for determination which resulted in only some of the submissions advanced at the bar and raised in the appeal memo being considered without answering other submissions and/or points which were relevant for disposal of the appeal. The consequence was that what had been referred to the Third Member were only the points on which the Members had differed. The Third Member considering his jurisdiction, would only decide the said points. The result would be that though there were other relevant points for determination and having not been answered, the petitioner would either apply for rectification and/or file an appeal to contend that the points raised had not been answered. Revenue’s case that as the issue was before a Third Member, there was no order and consequential application was premature and, thus, the Court should not exercise its extraordinary jurisdiction.
HELD
Considering the language of section 35C(2) of the Central Excise Act, as also the relevant provisions of section 129C of the Customs Act, and in terms of section 129C(5) on difference of opinion on any point, the points have to be decided according to the opinion of the majority. If the Members are equally divided, they should state the point/points on which they differ and make a reference to the President who shall either hear the points by himself or refer the case for hearing on point or points by one or more Members of the Appellate Tribunal and such point or points shall be decided according to the opinion of the majority of the Members of the Appellate Tribunal, who have heard the case including those who first heard it. [Para 9]
Under section 35(2) of the Central Excise Act, there is power in the Tribunal to rectify any mistake apparent on the record and amend any order passed by it under sub-section (1) within the specified time-frame. It is, thus, clear that the order passed is different from the points for determination. Points for determination, thus, arise from orders passed by the Appellate Tribunal which are not enforceable because of difference of opinion on points arising from the orders. These points finally shall be decided according to the opinion of the majority of the Members of the Tribunal who have heard the case including those who have first heard it. The final order would be based on the opinion of the Third Member who answers the point of difference referred to him as that would constitute the majority opinion. The Third Member does not pass any order. Such member only answers the points referred. The power to rectify under section 35C(2) is related to the order. [Para 10]
The issue, therefore, is whether during the pendency of the application before the Third Member, is it open to an aggrieved party to apply for rectification? The difference of opinion can only arise when there are differing opinions in judgments or orders of Members. Said difference of opinions would not constitute a decision. Under section 35C, power is to amend an order to rectify any mistake apparent from the record. The Members of the Tribunal can only pass orders. If they differ in their opinion, nevertheless, those orders would not cease to be orders. Those orders, however, cannot be enforced as there is no enforceable order. Under section 129C(5), what has to be referred is difference of opinion on points amongst Members. On the points being answered by the Third Member, the points would stand answered in terms of the majority opinion of the Judges constituting the earlier Bench and the Member to whom the matter was referred, though a final order may be required to be formally passed. In such an event, one of the two judgments would be the decision of the Tribunal and be the operative or enforceable judgment in terms of the points answered by the Third Member. An application for rectification would, therefore, be maintainable even when a reference is made to a Member. Apart from the language of the provisions, it would be a more constructive and purposeful method of answering the issue. Holding otherwise, and accepting the stand of the revenue, would be to delay the proceedings and might also again lead to other points being referred once again. [Para 17]
Whether a Court or Tribunal has suo motu or inherent or implied power for procedural review if the same has not been specifically conferred, is also to be considered. The issue is no longer res integra having been concluded by the judgment of the Supreme Court in Grindlays Bank v. Central Government Industrial Tribunal 1980 (Supp.) SCC 420. Thus, there is inherent or incidental power for procedural review in Courts and Tribunals to do justice. [Para 18]
The Bench is bound to refer the points of difference for determination and get answered the said points by a Third Member. The points for determination would be those points which are relevant for the purpose of deciding the controversy and, if decided, would have the effect of determining the controversy in the appeal. For that purpose, while hearing and deciding an appeal, the Tribunal is bound to frame points for determination which are relevant for deciding the issue in controversy in the appeal. Once the points for determination are fixed, the Members are bound to answer the points so framed. It is only on the points on which there is a difference of opinion, that there is a need to refer to a Third Member those points for determination. It is in that context while disposing of appeals that the Tribunal is bound to fix points for determination and answer the same. [Para 19]
In the instant case, there were several points which had not been answered. Each of those points, if answered and if both the Members had concurred, could have resulted in the appeal being allowed or dismissed. In that situation the points in difference having already referred perhaps would have become immaterial and even not required to be referred to a Third Member. If there was an unambiguity on other points, the appeal could be allowed or dismissed. [Para 20]
Therefore, once there be two orders, it is not possible to say that they are merely opinions. These are two distinct judgments on account of difference in answer to the points raised, as the Members differ in the reliefs to be granted and, as such, it is not a final decision. It was, therefore, not possible to accept the contention as raised on behalf of the revenue that those being merely opinions, the application for rectification was not maintainable. Such an application would be maintainable. [Para 21]
Apart from that, it is the cardinal duty of the Court or the Tribunal to do complete justice between the parties subject to its jurisdiction in order to avoid multiplicity of proceedings. The Court or the Tribunal, in such case, has an inherent jurisdiction to decide an application for rectification so that the real controversy in issue is decided and/or referred, if there be any difference of opinion amongst the Members, to a Third Member. The power to do procedural justice inheres in every Court or Tribunal as noted by the Supreme Court. The Court or the Tribunal deciding an appeal has to frame points for determination which would be relevant for answering the controversy in appeal. Once points are framed, each point has to be answered by the Tribunal. [Para 22]
For the aforesaid reasons, the application dated 21-1-2009, filed by the petitioner was to be heard according to law on all the points raised and which had been referred to in the earlier part of the order. It was for them to decide whether the submissions in the context of the issues raised in the appeal were required to be answered, if they were relevant points for determining the controversy in the appeal. [Para 23]
Till such time, the Third Member was to be directed not to proceed to answer the points raised. [Para 24]
CASE REVIEW
Subramaniam Chettiar v. Muthuswamy [1941] 192 IC 225 (para 17); Grindlays Bank v. Central Government Industrial Tribunal 1980 (Supp.) SCC 420 and J.K. Synthetics Ltd. v. Collector of Central Excise 1996 (86) ELT 472 (SC) (para 18) followed.
CASES REFERRED TO
CIT v. Shri Ram Memorial Foundation [1991] 190 ITR 334/57 Taxman 170 (Delhi) (para 11), Colourtex v. Union of India 2006 (199) ELT 200 (Guj.) (para 12), Jt. CIT (TDS) v. Jindal Tractbel Power Co. Ltd. [1999] 240 ITR 189 (Kar.) (para 13), Mangalore Chems. & Fert. Ltd. v. Collector of Central Excise 1998 (98) ELT 490 (Trib. - Delhi) (para 14), M.M. Rubber Co. Ltd. v. Union of India 2007 (210) ELT 670 (Mad.) (para 15), CWT v. Pramilaben Chunibhai [1999] 239 ITR 36/[1998] 101 Taxman 326 (Guj.) (para 16), J.K. Iron & Steel Co. Ltd. v. CIT [1963] 49 ITR 304 (All.) (para 16), Subramaniam Chettiar v. Muthuswamy [1941] 192 IC 225 (para 16), Grindlays Bank v. Central Government Industrial Tribunal 1980 (Supp.) SCC 420 (para 18) and J.K. Synthetics Ltd. v. Collector of Central Excise 1996 (86) ELT 472 (SC) (para 18).
V. Sreedharan and Prakash Shah for the Appellant. P.S. Jetley and Ms. Rutuja Ambekar for the Respondent.
[2009] 22 STT 201 (NEW DELHI - CESTAT)
CESTAT, NEW DELHI BENCH
Microsoft Corporation (I) (P.) Ltd.
v.
Commissioner of Service Tax, New Delhi
DR. C. SATAPATHY, TECHNICAL MEMBER
AND D.N. PANDA, JUDICIAL MEMBER
STAY ORDER NO. ST/276/2009
APPLICATION NO. ST/STAY/2721/2008
IN APPEAL NO. ST/866/2008
JULY 31, 2009
Rule 3 of the Export of Services Rules, 2005 - Export of taxable service - Stay order - Period 19-4-2006 to 31-12-2006 - In terms of a Market Development Agreement, a company of Singapore, i.e., MO, appointed assessee to provide various technical support services including marketing of products in different territories and to identify services to be provided by MO to assessee - Both MO and assessee were wholly owned subsidiaries of a company of USA - Assessee claimed that services provided by it in terms of aforesaid agreement fell within purview of export of services, for which it was not liable to pay service tax - Adjudicating authority rejecting said claim of assessee, held that it was liable to pay service tax under category of ‘Business auxiliary services’ - Whether since end user of service being located in India and need of such consumers being met by assessee for and on behalf of its foreign principal, such services appeared to have been provided in India and there appeared to be no export of service - Held, yes - Whether prima facie, assessee had not brought out its case for total waiver of pre-deposit and, therefore, assessee was to be directed to deposit a part of demand - Held, yes [Stay Partly granted] [Paras 24, 32 and 33]
Circulars & Notifications : Board’s Circulars No. 111/05/2009-ST, dated 24-2-2009, No. 70/90/03/ST, dated 17-12-2003, No. 81/02/05, dated 7-10-2005
FACTS
In terms of a market development agreement a company of Singapore, i.e., MO, appointed the assessee to provide various technical support services including marketing of its products in Bhutan, India, Maldives, etc., and to identify the services to be provided by the MO to the assessee. Both MO and the assessee were wholly-owned subsidiaries of the holding company, i.e., Microsoft Corporation of Washington ‘MSFT’. Under the said agreement, assessee provided different types of services. Those were (i) Product support services and consulting services, (ii) marketing of microsoft products, (iii) REG services, and (iv) other inter-company services. The assessee claimed that the said services provided by it fell in the category of export services for which it was not liable to pay service tax. It also claimed that the income earned on account of maintenance and repair of software was not chargeable to service tax in its hands. The adjudicating authority held that as per the agreement, business support was provided by the assessee to the Singapore concern; and that such services were provided in India and were never provided outside India for which there was no export of services within the meaning of rule 3(1)(iii). He further held that no doubt, for the period 1-6-2007 onwards, the criterion of providing of services outside India being omitted from the law, the condition of services provided from India and used outside India still remained in force and this did not grant immunity to the assessee from taxation in respect of business auxiliary services provided by it. The adjudicating authority, therefore, confirmed demand of service tax under the category of ‘Business auxiliary services’ during the period from 19-4-2006 to 31-12-2006. The adjudicating authority also held that the income earned on account of maintenance and repair of software was chargeable to service tax during the period from 9-7-2004 to 6-10-2005 in the hands of the assessee.
On application :
HELD
The Export of Services Rules were enacted in terms of rule-making power under section 94, read with section 93, of the Finance Act, 1994. Rule 3(2) of the said Rules defines the event of occasioning export. This sub-rule has undergone amendment from time to time. [Para 17]
In essence, there is no ambiguity that the Legislature intended that service is said to have been exported if the same is consumed outside India. Definition of the term ‘export’ is nothing new to the fiscal legislation. The well-tested and experienced Customs Act, 1962 has defined such term by section 2(18) thereof to mean “taking out of India to a place outside India”. Therefore, in no uncertain terms ‘export of service’ shall mean that outcome of service should have been consumed outside India. However, in the instant case, it did not seem to be so as the consumers of services provided were in India only and even the contents of the agreement established in substance that ultimate consumption of service was in India and the assessee was an intermediary to connect its foreign principal to the end user of service who were consumers in India. [Para 18]
The Supreme Court in the case of All India Federation of Tax Practitioners v. Union of India [2007] 10 STT 166 held that Economics hold the view that there is no distinction between the consumption of goods and consumption of services as both satisfy the human needs. [Para 19]
Record revealed that the assessee as well as MO were subsidiaries of Microsoft Corporation, USA. The assessee for the first time informed the authority vide letter dated 7-2-2009, that the recipient of service provided by it was ‘MO’ and no such information was given to the authority prior to that date. All the letters submitted by the assessee to the revenue showed that services were provided by the assessee to Microsoft Corporation, USA. But no such agreement was brought on record by the assessee in the course of hearing. Services provided by the assessee established nexus of services provided with the recipient consumers/clients/customers in India, all along, and the assessee facilitated and ensured as well as established destination of service to be in India. [Para 22]
Prima facie, it was evident that the ultimate outcome of provision of services reached to the consumers in India and that were ultimately meant to be consumed in India. Accordingly, destination based consumption of service ended with performance of service in India and that satisfied the performance based service tax concept as held by the Apex Court in All India Federation of Tax Practitioners’ case (supra). In the said judgment, the Supreme Court has held that services fall into two categories, namely, property based services and performance based services. Such fundamental concept brings the service performed in India to the fold of law relating to service tax under the Act. Therefore, place of performance of service is decisive for determining event of taxability as well as incidence of tax. The assessee had performed service in India for ultimate consumption thereof in India by its clients/customers in India. The service was destined to exhaust in India and extinct soon after performance thereof. Post performance liability only remained to be discharged by foreign principal through the assessee in India. Thus, the beneficiaries of services were located in India for ultimate consumption of the service provided in India. Accordingly, prima facie, the interpretation of law by the CBEC in its circulars dated 24-2-2009, ran counter to the ratio laid down by the Apex Court in All India Federation of Tax Practitioners’ case (supra). Further, service tax is a VAT which, in turn, is destination based consumption tax. [Para 23]
In the instant case, the services provided by the assessee were only to the benefit of the consumers of Indian territory and the same were provided for and on behalf of the holding company in USA as well as the subsidiary company in Singapore. The end user of service being located in India and need of such consumers being met by the assessee for and on behalf of its foreign principal, such services appeared to have been provided in India and there appeared to be no export of service. The foreign principal acted through its agent, i.e., assessee. The principal was not the beneficiary. A service provider acting directly or indirectly through its agent is not the beneficiary of service so provided while providing of service is its contractual obligation under terms of contract with clients/customers. Therefore, in the instant case, no service had occasioned to move out of India to a place outside India following well tested meaning of the term ‘export’ under section 2(18) of the Customs Act. Remuneration for the service provided by the assessee was linked with expenses incurred in terms of articles of the sample agreement. Further to provide service, expenses were incurred in India in terms of the agreement for which the assessee got reimbursements and a percentage thereof was paid to it as its remuneration. Thus, expenditure met in India had generated service potentiality in India. [Para 24]
A reading of the letters filed by the assessee and also a reading of the agreement showed that the assessee was acting on behalf of the foreign principal in India as subsidiary of the foreign holding company. It had acted as an agent of the foreign principal to result in provision of services in India with the technical assistance of the holding-company and the subsidiary-company abroad. The service provided in India was consumed without reverting back to foreign principals for consumption abroad. Ultimate outcome of service having been exhausted in India, there was no export of such services since efforts in India generated service recipients in India only. The foreign principals discharged post service contractual obligations. Even the assessee’s plea that the Board’s circular dated 24-2-2009, clarified that the benefits of the service accrued outside India, did not appear to be of any help to the assessee since benefit of the services had accrued to the consumers in India for the service provided to the consumers thereat to fulfil contractual obligation of the foreign holding company as well as the subsidiary-company of Singapore. The benefit of service terminated in India only, without travelling abroad. The performance based service provided in India in terms of the agreement dated 1-7-2005 had resulted in provision of service to the consumers in India. Therefore, even the circular did not explain the position of law as claimed by the assessee to its advantage. [Para 25]
The circular holds that location of service receiver is a relevant factor to decide export of service under rule 3(1)(iii). This does not rule out that when ultimate outcome of service is consumed in India, the service exhausts or extinct thereat without being capable of exported, losing its utility. Performance of service being decisive for taxation and to decide taxable event and incidence of tax, export of service pleaded by the assessee was inconceivable. [Para 26]
The Business auxiliary service provided by a service provider in terms of section 65(105)(zzb) is taxable for the rationale that the principal to whom the marketing support is given by the service provider, ultimately makes available goods or services to the consumers in India. Similarly, marketing support provided to the foreign principal as an agent thereof also results in either ultimate supply of goods or provision of services to the consumers of India only and service reaches its destination in India to the intended consumer of the goods or services. Therefore, whether service is directly provided by a foreign principal in India or foreign principal providing service in India through its agents in India makes no difference under service tax law when service tax is a VAT and that too destination based consumption tax as per the Apex Court judgment in All India Federation of Tax Practitioners’ case (supra). Had the service been provided to the foreign principal not resulting in ultimate supply of goods or provision of service to the consumer in India, such services might have assumed the character or nature of export of service following tested principles of customs law in India. But instant case was a departure to that principle. The assessee was an intermediary meant to provide well-defined services to its clients/customers in India with the technical assistance of foreign principal. To provide service in India, the assessee was supported by technical assistance of the foreign principal and the assessee as well as the Singapore concern were subsidiaries of the holding-company in USA being centrally governed. Service tax law does not appear to have brought any anomalous situation to the concept of service provided in India for its ultimate consumption thereat. [Para 27]
In respect of maintenance contract, the assessee relied on Circular Nos. 70/90/03/ST, dated 17-12-2003 and 81/02/05 dated 7-10-2005. According to the assessee, these circulars clarified what is maintenance/repairs of computer software. When the software does not fall within purview of goods, maintenance thereof cannot be said to be repair and maintenance. But such view survived for limited period from 17-12-2003 to 6-10-2005 when Circular No. 81/02/05 was issued. By Circular No. 81/02/05, software was made liable to service tax. The assessee’s plea was that it was eligible to the benefit of circulars during relevant period before issuance of show-cause notice. Therefore, there could not be any realization of the demand so far as maintenance and repair service of software was concerned. This aspect had received due consideration of the Tribunal in the course of hearing of stay application to work out interim modality. [Para 30]
The adjudicating authority had examined the issues by a reasoned and speaking order. There were no materials brought out by the assessee to distinguish its case as export. [Para 31]
Prima facie, the assessee had not brought out its case for total waiver of pre-deposit during pendency of appeal. The balance of convenience did not tilt in favour of the assessee. There was no case made out to show that irreparable injury or undue hardship would be caused to the assessee if no full waiver was granted. Neither materials were produced nor was financial hardship pleaded in the course of hearing. Rather, the revenue would be prejudiced if realization of demand was stayed. [Para 32]
Therefore, taking into consideration the various aspects and also the limitation aspect pleaded by the assessee involving Rs. 30 crores and refund plea to the extent of Rs. 20 crores raised in the course of hearing, as an interim measure to work out the modality for protection of interest of revenue, following decision of the Apex Court in Asstt. Collector of Central Excise v. Dunlop India Ltd. AIR 1985 SC 330, the assessee was to be directed to make pre-deposit of a part of the demand. Subject to such compliance, realisation of balance demand would be stayed till disposal of appeal. [Para 33]
CASE REVIEW
All India Federation of Tax Practitioners v. Union of India [2007] 10 STT 166 (SC) (para 19) and Asstt. Collector of Central Excise v. Dunlop India Ltd. AIR 1985 SC 330 (para 33) followed.
CASES REFERRED TO
All India Federation of Tax Practitioners v. Union of India [2007] 10 STT 166 (SC) (para 9), ABS India Ltd. v. CST [2008] 17 STT 223 (Bang. - CESTAT) (para 11), Blue Star Ltd. v. CCE [2009] 18 STT 34 (Bang. - CESTAT) (para 11), Gap International Sourcing India (P.) Ltd. v. CST [Appeal No. ST/819 of 2008, dated 21-1-2009] (para 11), Shilpa Color Lab v. CCE [Stay Order No. 870/2006, dated 25-8-2006] (para 13), Excel Fin Cap Ltd. v. CCE [Stay Order No. 389/2007 dated 1-5-2007] (para 13), Polar Industries Ltd. v. CCE 1999 (114) ELT 783 (SC) (para 13), Lenovo (India) (P.) Ltd. v. CCE (Appeals-II) [2009] 21 STT 134 (Bang. - CESTAT) (para 28), Wardha Coal Transport (P.) Ltd. v. Union of India [Writ Petition No. 390 of 2009, dated 14-1-2009] (para 31), Empire Industries Ltd. v. Union of India 1985 (20) ELT 179 (SC) (para 31), Vijay Prakash D. Mehta v. Collector of Customs (Preventive) [1988] 4 SCC 402 (para 32), Benara Valves Ltd. v.CCE 2006 (204) ELT 513 (SC) (para 32), Silliguri Municipality v. Amalendu Das AIR 1984 SC 653 (para 32), Samarias Trading Co. (P.) Ltd. v. S. Samuel AIR 1985 SC 61 (para 32), Asstt. Collector of Central Excise v. Dunlop India Ltd. AIR 1985 SC 330 (para 32) and Ravi Gupta v. Commissioner of Sales Tax 2009 (237) ELT 3 (SC) (para 32).
N. Venkatraman, Muttu Venkatraman, Achin Goel and Nikhil Suri for the Appellant. Prabhat Kumar and S.K. Panda for the Respondent.
[2009] 22 STT 189 (BANG. - CESTAT)
CESTAT, BANGALORE BENCH
Indian School of Business
v.
Commissioner of Customs & Central Excise
Hyderabad-IV Commissionerate
T.K. JAYARAMAN, TECHNICAL MEMBER
AND M.V. RAVINDRAN, JUDICIAL MEMBER
FINAL ORDER NO. 642/2008
IN APPEAL NO. ST/194/2008
MARCH 16, 2009
Section 65(27) of the Finance Act, 1994 - Commercial training or coaching centre - Period 1-7-2003 to 31-3-2007 - Whether all institutions imparting knowledge and conducting courses at fairly higher level such as post graduate level for fees, cannot be termed as ‘commercial training or coaching centre’ and subjected to service tax and it is immaterial whether degrees offered by such institutions are recognized by law or not - Held, yes [Para 7.2]
Circulars and Notifications : Circular No. 86/4/2006-ST, dated 1-11-2006, Circular No. 59/8/2003-ST, dated 20-6-2003
FACTS
The assessee, a non-profit company, was offering several courses on management like Post Graduate Programme in Management and Executive Education Programme. As per the memorandum and articles of association, the main objects of the assessee included, inter alia, promoting education and the advancement of knowledge in various disciplines, especially in the area of management. It was also registered under section 12 of the Income-tax Act, 1961 as a charitable institution, and thereby making its income non-taxable. It had also been recognized under section 80G of the 1961 Act enabling donors to get 50 per cent tax exemption. It also enjoyed exemption under section 10(23C)(vi) of the 1961 Act from payment of income-tax. The assessee was receiving fees for the expenses incurred, from the participants. The Commissioner confirmed the demand of service tax on the assessee under ‘Commercial training or coaching centre’ on the ground that it was a ‘commercial concern’ and it was providing commercial training or coaching services.
On appeal :
HELD
In the instant case, the Commissioner had come to the conclusion that the assessee had imparted commercial training or coaching and it would fall within the category of the taxable service of ‘commercial training or coaching’. Throughout his order, he had emphasized the point that the assessee was collecting huge fees from the participants in order to conduct the courses. He had also stated that the fact that the assessee was registered under section 12 of the 1961 Act as charitable institution and enjoyed exemption from certain provisions of the 1961 Act, did not matter much. He had stated that the income generated was only in the form of profits and those profits remained ultimately with the assessee only and did not pass on to the general public or used for promoting education for general public. He had stated that the assessee had failed to show that its main or prominent activity remained charitable and, hence, it fell outside the scope of ‘Commercial training or coaching centre’. He had mentioned that the assessee would not come within the excluded category, as it did not confer any degree recognized by law. [Para 7]
The Tribunal in various cases had distinguished between commercial coaching or training and also education. It was held that education is a process, which is actually the development of human personality. The meaning of commercial training or coaching is rather narrow. The Tribunal had held that in order to qualify as a commercial concern, there should definitely be a profit motive. In the instant case, the assessee was a non-profit company and even if the profit arose, it was utilized only in the furtherance of the objectives of the institution. Moreover, the income-tax exemption had been given. The assessee had also been registered as a charitable institution. In fact, in Circular No. 86/4/2006-ST, dated 1-11-2006, the Board has clarified in the context of applicability of service tax on IITs and IIMs under ‘Manpower recruitment’ or ‘Supply agency service’ stating that a commercial concern is an institution that is primarily engaged in commercial activities having profit as primary aim. It was stated that the principal activity of the institutions like IITs or IIMs is to impart education without any object of making profits and they cannot be called as ‘commercial concern’. Similarly, in the instant case also, the assessee was actually a non-profit company. The primary aim of the assessee was only management education, research, etc., and it did not appear that the primary aim was profit. A higher institute imparting education in management, by no stretch of imagination as can be called, a commercial training or coaching institute. [Para 7.1]
On going through the definition of ‘commercial training or coaching centre’ in terms of the statutory provisions, it appears that the said provisions can be applied only in respect of the institutions which are commercial in nature. To decide whether the objective of the institution is commercial, one has to only go through the memorandum of association and articles of association and find out. In the instant case, as per the memorandum and articles of association of the assessee, the main objects included promoting education and advancement of knowledge in various disciplines, especially in the areas of management providing support, maintenance, giving grants or subsidies to schools, colleges, universities, institutions, etc., promoting education and advancement of knowledge to graduate or undergraduate courses, diploma courses, etc., and providing learning, understanding and guidance in all areas, branches, disciplines and in matters including administration, advertising, publicity, management, marketing, manufacturing, etc., by itself through its branches, whether in India or abroad. Further, the assessee’s institution had affiliations with three of the world leading business schools, viz., Kellogg School of Management, Wharton School and the London Business School making it as one of its kind in Asia. They offer Post Graduate Programme in Management and Executive Education Programme. On a proper understanding of commercial coaching or training, it could not be said that the courses imparted by these institutions are on the same footing as of coaching or training imparted by tutorial colleges or institutions preparing students for imparting certain skills or preparing for examination for getting higher marks, which stand entirely on a different footing. On an interpretation of the term ‘commercial training or coaching’ as given in the Finance Act, it is clear that all the institutions imparting knowledge and conducting courses at fairly higher level such as post graduate level, cannot be just termed as ‘commercial training or coaching centre’ and subjected to service tax under this category. It is immaterial whether the degrees offered by them are recognized by law or not. So long as the nature of the activity is not considered as commercial training or coaching, it would not fall under the taxable category. [Para 7.2]
Moreover, the fact that the assessee got concession or exemption under the various provisions of the 1961 Act was not without any significance. It was indicating that the primary objective of the assessee was not commercial at all. The term ‘commercial’ has also been interpreted in the Board’s Circular No. 59/8/2003-ST, dated 20-6-2003 which had not been deleted. Therefore, it could not be accepted as claimed by the revenue that any institution can be considered as coming under the category of ‘Commercial training or coaching centre’ so long as they impart the training for fees. [Para 7.3]
Therefore, the impugned order was not justified and was to be set aside. [Para 7.4]
CASES REFERRED TO
Magnus Society Hyderabad v. CC&CE [2008] 18 STT 193 (Bang. - CESTAT) (para 5.1), ASCI v. CC&CE [2008] [Appeal No. ST/27/2007, dated 11-8-2008] (para 5.1), C-DAC v. CC&CE (Appeals-II) [Appeal No. ST/43/2007, dated 21-10-2008] (para 5.1), ICFAI v. CCE 2008 TIOL 2036 (Bang. - CESTAT) (para 5.1), Great Lakes Institute of Management Ltd. v. CST [Appeal No. S/163/2007, dated 2-1-2008] (para 5.1), Ahmedabad Management Association v. CST [Appeal No. ST/118/2007, dated 27-11-2008] (para 5.1), Board of Cricket Centrol in India v. CCE [2006] 3 STT 59 (Mum. - CESTAT) (para 5.5), Institute of Banking Personnel Selection v. CST [2007] 10 STT 489 (Mum. - CESTAT) (para 5.5), CCE v. Mahabir International [2008] 15 STT 487 (Kol. - CESTAT) (para 5.5), Great Lakes Institute of Management Ltd. v. CST [2008] 12 STT 296 (Chennai - CESTAT) (para 5.5), CCE v. Employ Me [2007] 6 STT 159 (Bang. - CESTAT) (para 5.5),CCE v. Murugappa Chettiar Research Centre 1998 (100) ELT 439 (New Delhi - Trib.) (para 5.5), Pushpam Pharmaceuticals v. CCE 1995 (78) ELT 401 (SC) (para 5.12), Mentha & Allied Products Ltd. v. CCE 2004 (167) ELT 494 (SC) (para 5.12), Cosmic Dye Chemical v. CCE 1995 (75) ELT 721 (para 5.12) and Jaiprakash Industries Ltd. v. CCE 2002 (146) ELT 481 (SC) (para 5.12).
G. Shiva Dass for the Appellant. S.K. Choudhary for the Respondent.
