Major Kalshi Classes Pvt. Ltd. Vs Commissioner, Central Excise (CESTAT Allahabad)
(i) Whether sale of books is service.
(ii) Whether provisions of hostel facility and sale of books are to be combined with provisions of commercial training or coaching service as bundled service.
(iii) Whether service tax was exempted on hostel facility.
We take issue one by one.
(a). We note that it was not compulsory that books cannot be sold to any other person than the one who was receiving the commercial training or coaching service. We note that the books were published by M/s MKC Publication and were available on flipkart for purchase by anybody. We also note that separate invoice were issued for sale of books and cash receipts out of sale on books were separately maintained in the book of account. We do not appreciate the contention of the Revenue that the books are rendering 800% profit and therefore, the profits should be clubbed with provision of commercial training or coaching service because Revenue did not provided any information as to how they have come to a conclusion that there was 800% profit. Further the value of the books cannot be ascertained on the basis of the cost of paper used and cost of printing. Further, we note that separate invoice were issued for book and anybody could have purchased the books. Therefore, by relying on decision of this Tribunal in the case of Rubic’s Rostrum Coaching Pvt. Ltd. (Supra), we hold that sale of books was not taxable activity and therefore, there was no service tax leviable on the sales value of books.
(b). The learned Commissioner (Appeal) has reproduced Para 9.2.4. of “Taxation of Services: An Education Guide” and the same is reproduced in the precedent paragraph. On careful reading of the said vision of Central Board of Excise & Customs it is clear that it was clarified by CBEC that if large number of service receivers of such bundle of services reasonably expect such services to be provided as a package then such a package would be treated as naturally bundled. Revenue has not brought any evidence on record that large number of service receivers reasonable expect every provider of commercial training or coaching service to provide hostel facility. The Central Board of Excise & Customs has also included that if the majority of service provider in a particular area of business provide similar bundle of services then they should be bundled. Revenue has not brought forward any evidence that majority of service providers in the field of commercial coaching or training service provided hostel facility. In terms of the criteria stated in the manner of determining if the services are bundled as clarified by Central Board of Excise & Customs it is not possible to bundle service of provisions of hostel facility with commercial training or coaching in the present case. We, therefore, hold that the provisions of commercial training or coaching service and provisions of hostel cannot be bundled under the provisions of Section 66F of the Finance Act, 1994.
(c) The hostel facility is provided for less than Rs.100/- per day and therefore, it is entitled for exemption under Notification No.31/2011 dated 25 April, 2011 and Serial No.18 of Notification No.25/2012-ST. Therefore, we set aside confirmation of service tax on hostel charges.
FULL TEXT OF THE CESTAT JUDGEMENT
Above stated two appeals are taken together for decision since they are arising out of common impugned Order-In-Appeal No.61-62/ST/Alld./2019 dated 30 March, 2019. One appeal is filed by the service provider and another appeal is filed by the Director of the service provider.
2. Brief facts of the case are that appellants were engaged in providing ‘Commercial Training or Coaching Service’. They were providing coaching services for recruitment to National Defence Academy, Combined Defence Service and Service Selection Board etc. The appellants in addition to providing coaching were also selling text books published by M/s MKC publication. For the facility of some of the service recipients, the appellants were also providing hostel facility. On 01 February, 2017 business premises of the appellant was searched by the officers of Revenue and they have also recorded statements of Shri Saurabh Singh, Director the other appellant. Between 01 February, 2017 and 03 October, 2017 appellant deposited service tax amounting to Rs.72,68,569/- for the period from 01 April, 2012 to 31 March, 2017 along with interest of Rs.27,98,931/- and penalty at the rate of 15% to the tune of Rs.10,90,285/- in terms of Second proviso to Sub-section (1) of Section 78 of the Finance Act, 1994. During the period from 2012-13 to 2015-16, as per balance sheet and P & L Accounts appellant collected towards tuition fee Rs.4,04,34,904/-. In addition appellant received Rs.3,25,64,500/- towards sale of books and forms. During the same period hostel charges recovered by the appellant were Rs.2,62,51,328/-. On 20 November, 2017 appellants were issued with a show cause notice with a proposal to consider all the receipts by appellant towards tuition fee, sale of books & forms and hostel charges in terms of Section 66F of Finance Act, 1994 as bundled service for the period from 2012-13 to 2016-17 with computation of total consideration by appellant to be around Rs.10 crores and with demand of service tax of Rs.1,30,52,226/- with proposal for penalties and proposal for personal penalty on Shri Saurabh Singh, Director and the other appellant. The appellant submitted to the Original Authority that for the period of show cause notice, the service tax payable on account of collection of tuition fee for providing commercial training and coaching service workout to Rs.45,70,670/- and the same was covered by around Rs.72 lakhs paid by the appellant before issue of show cause notice and the same was paid along with interest and 15% penalty. The appellant further submitted that sale of books was not covered by service and that provision of hostel facility was not naturally bundled with provision of commercial training or coaching service. On 26 October, 2018 Order-in-Original was passed where demand of service tax of Rs.1,30,52,226/- was confirmed and various penalties were imposed and Shri Saurabh Singh was imposed with penalty of Rs.1 lakh. The said demand included demand on legal charges and provisions of taxies. Aggrieved by the said order, appellant preferred appeal before Commissioner (Appeals). The learned Commissioner (Appeals) has decided the said appeal through impugned Order-in-Appeal dated 30 March, 2019. The submissions of appellant before Commissioner Appeals are summarized in Para 2.4 of the impugned order. The same is reproduced below:-
“2.4 Aggrieved with the impugned Order, the appellant has filed the present appeal, mainly on the grounds that (i) Show Cause Notice dated 20.11.2017 was not required to be issued to the extent of demand of Service Tax of Rs.45,70,670/-, as they had deposited Rs.45,70,670/-alongwith interest of Rs.27,98,931/- and 15% penalty of Rs.10,90,285/- on the tuition fee, before issuance of the Show Cause Notice; (ii) hostel service cannot be bundled with coaching service in terms of 66F of the Act and no Service Tax was leviable on hostel rent received from the students; (iii) sale of books was sale of goods & as such, distinguishable from service and thus, no Service Tax was leviable on sale/trading of goods; (iv) they were not liable to pay Service tax on legal service, as the payments were made to the consultants and not to the advocates; (v) demand of Service Tax of Rs.2,93,738/- on amount of Rs.23,76,520/-during 2013-14 on account of alleged difference in books of accounts, is not sustainable, (vi) they were not liable to pay Service tax for availing taxi service, as the taxis were non air-conditioned, and thus, exempted under clause 23(b) of Notification No.25/2012 dated 20.06.2012. (vii) they were eligible for cum-tax value benefit, (viii) extended period of limitation was not invocable and (ix) imposition of penalties under Sections 77(1)(a), 77(1)(e), 77(2) & 78 of the Act, was unjustified.”
3. The learned Commissioner (Appeals) through the impugned has held that around Rs.45 lakhs deposited by appellant could not be considered under proviso to Sub-section (1) of Section 73 since appellants had not deposited entire demand of service tax of around Rs. 1.30 crore. Therefore, he rejected the contention of the appellant that there was no need to issue show cause notice in respect of service tax on tuition fee collected towards providing commercial training or coaching service. The learned Commissioner (Appeals) has reproduced Para 9.2.4 of the “Taxation of Services: An Education Guide” issued by Central Board of Excise & Customs. The same is reproduced below:-
“9.2.4 Manner of determining if the services are bundled in the ordinary course of business
Whether services are bundled in the ordinary course of business would depend upon the normal or frequent practices followed in the area of business to which services relate. Such normal and frequent practices adopted in a business can be ascertained from several indicators some of which are listed below:-
