No Service Tax on Permitting Students to use Factory Premises for Research Work

Fertilisers & Chemicals Travnacore Ltd Vs C.C.,C.E.& S.T- Cochin-CCE (CESTAT Bangalore)

The present appeal is directed against the impugned order dt. 30/10/2007 passed by the Commissioner (Appeals) whereby the Commissioner (Appeals) has upheld the Order-in-Original but dropped the penalty under Section 76 and imposed penalty under Section 78.

2.  Briefly the facts of the present case are that the appellants are service providers in the category of transport of goods by road, Mandap keeper and engineering consultancy services, having centralized registration. On scrutiny of the records of the appellant, it was noticed that they were collecting certain amounts from trainees / students who undertook project works in their institution. It was observed that the amount collected were in relation to the project work and the service rendered by the appellant appeared to fall under the category of ‘Commercial Training or Coaching’ services which was a taxable service. It was revealed that an amount of Rs.34,65,010/- collected from the students / trainees during 2003-04 to 2005-06 was liable to service tax. The Department also levelled allegation of suppression with intent to evade payment of service tax against the assessee. On these allegations, a show- cause notice dt. 21/08/2006 was issued to the appellant and by following the due process, the original authority confirmed the demand vide order dt. 20/11/2006. Aggrieved by the said order, the appellant filed appeal before the Commissioner (Appeals) who confirmed the demand for Rs.3,30,768/- along with equal penalty under Section 78.

3. Heard both sides and perused records.

4. Learned counsel for the appellant submitted that the impugned order is not sustainable in law as the same has been passed without properly appreciating the facts and circumstances of the case. He further submitted that the Revenue authorities have failed to appreciate the facts that the students of various educational institutions approached the appellant in connection with the practical work or project work to be undertaken by them as a part of their academic curriculum and that the only facility provided to them was permitting them to visit the appellant’s premises and access the appellant’s plant and other premises for their project work. He also submitted that the entire research, collection of data are done by such students themselves and the appellant company has no obligation whatsoever to impart any formal training or coaching to the said students except to monitor their movements inside the company premises. He further submitted that the activity of the appellant does not fall in the definition of ‘commercial training or coaching services’. Learned counsel further referred to the definition as contained in Section 65(105)(zzc) of the Finance Act, 1994 which provides that any service provided to any person, by a commercial training or coaching centre in relation to commercial training or coaching. The learned counsel also referred to Section 65(26) which provides the definition of commercial Training or Coaching. It is his further submission that if we consider the provisions as contained in Section 65(105)(zzc) and Section 65(26) and Section 65(27), then it is clear that the levy is only when a person is providing commercial training or coaching for imparting skill or knowledge or lessons whereas in this case, the said coaching and training has not been provided and only a very limited access is given to the students who visited the company premises or their project work.

5. On the other hand, the learned AR defended the impugned order.

6. After considering the submissions of both sides and perusal of material on record and the provisions of service tax, we feel that in order to appreciate the controversy in the case, it is pertinent to refer the provision as contained in Section 65(105)(zzc) of the Finance Act, 1994 and other sections which are reproduced herein below:-

Section 65(105)(zzc) ‘Taxable Service’ means any service provided to any person, by a commercial training or coaching centre in relation to commercial training or coaching.

Section 65(26): ‘Commercial Training or Coaching’ means any training or coaching provided by a commercial training or coaching center,

Section 65(27): ‘Commercial Training or Coaching Center’ means any institute or establishment providing commercial training or coaching for imparting skill or knowledge or lessons on any subject or field other than the sports, with or without issuance of a certificate and includes coaching or tutorial classes but does not include preschool coaching and training centre or any institute or establishment which issues any certificate or diploma or degree or any educational qualification recognised by law for the time being in force;

7. Further we find that in the present case, permitting the students to use the factory premises for their research work as a part of their academic curriculum will not make the receipt of the appellant as consideration for services rendered under the category of commercial raining or coaching’ as the scope of the said service is specific and requires satisfaction of the ingredients contain in Section 65(105(zzc) read with Section 65(26) and Section 65(27) as cited supra. Further it is not the case of the Department that the appellant is conducting any training programmes for the students and the only case of the Department is that he appellant is permitting the students to visit the plant and to do their own research. Further we find that the findings recorded by the commissioner (Appeals) is contrary to the specific provisions of the Act for classification as ‘Commercial Training or Coaching’. Consequently, we are f the considered view at the impugned order is not sustainable in law and therefore the same is set aside by allowing the appeal of the appellant.