Case Law Details
Sophisticated Instrumentation Vs C.C.E. & S.T.-Vadodara-I (CESTAT Ahmedabad)
The CESTAT, Ahmedabad in the case of M/s. Sophisticated Instrumentation v. C.C.E & S.T.-Vadodara-I [Service Tax Appeal No. 11477 of 2013 dated September 22, 2023], allowed the appeal and ruled that the assessee is a charitable trust and not covered under the definition of commercial training or coaching center as per Section 65(27) of the Finance Act, 1994 and thus invocation of an extended period of limitation by five years is not justified.
Facts:
M/s. Sophisticated Instrumentation (“the Appellant”) is a charitable trust, managed by Charutar Vidya Mangal (“Parent Organization”), a non-profit organization functioning as a Public Charitable Trust. The Appellant received income, through a grant from the Department of Science and Technology, Government of India or fees paid by the Parent Organization for providing training facilities to the students of the Institute of Science and Technology for advance studies and research and students of Parent Organization. However, students do not incur any fees for training.
The Commissioner of Central Excise and Service Tax (“the Respondent”) raised a demand for payment of service tax on the amount received as revenue in lieu of service rendered by the Appellant during the financial year 2006-2007. The Commissioners (Appeal) vide order OIA-PJ/461/VDR-I/2012-13 dated February 25, 2013 (“the Impugned Order”) confirmed the demand of Rs. 2,73,022/- stating that the income earned by the Appellant falls within the purview of Commercial Training or Coaching Services (“CTCS”).
Aggrieved by the Impugned Order, the Appellant filed the appeal before the CESTAT, Ahmedabad.
Issue:
Whether the extended period of limitation can be invoked on the ground that the assessee was unaware of the chargeability of service tax with respect to specific income earned?
Held:
The CESTAT, Ahmedabad in Service Tax Appeal No. 11477 of 2013 held as under:
- Observed that, the definition of CTCS as defined under Section 65(27) of the Finance Act, 1994 was silent on the nature of institute which is covered under the definition of CTCS specifically with respect to Appellant being a charitable trust, which was cleared by adding the explanation vide Finance Act, 2010 stating that any kind of organization providing coaching service or imparting training and deriving income through these activities would fall under the head of CTCS, thus service tax could be levied on such organisations w.e.f. July 1, 2003.
- Opined that, the appellant was under the bona fide belief that they were not covered under the head of CTCS, thus were not required to pay service tax.
- Held that, the appellant has not willfully suppressed any fact to evade payment of service tax. Therefore, the extended period of limitation of five years could not be invoked in this case, hence appeal is allowed on the ground of limitation.
Relevant Provisions:
Clause 27 of Section 65 of the Finance Act, 1994
“(27) “commercial training or coaching centre” 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.”
Section 76 of the Finance Act, 1994
“(b) in sub-clause (zzc), the following Explanation shall be inserted and shall be deemed to have been inserted with effect from the 1st day of July, 2003, namely:—
‘Explanation.—For the removal of doubts, it is hereby declared that the expression “commercial training or coaching centre” occurring in this sub-clause and in clauses (26), (27) and (90a) shall include any centre or institute, by whatever name called, where training or coaching is imparted for consideration, whether or not such centre or institute is registered as a trust or a society or similar other organisation under any law for the time being in force and carrying on its activity with or without profit motive and the expression “commercial training or coaching” shall be construed accordingly”
FULL TEXT OF THE CESTAT AHMEDABAD ORDER
This appeal has been filed against demand of service tax under the head of “Commercial Training or Coaching Service”. The demand pertains to the period 2006-2007 under the head of Commercial Training or Coaching Centers in respect of a total income Rs. 2,73,022/- received by them.
2. Learned counsel for the appellant pointed out that the appellants are run and managed by Charutar Vidya Mandal, a non profit organization registered as public charitable trust under Public Charitable Trust Act, 1950. The appellants are sponsored by department of Science and Technology, Government of India and are recognized by Charutar Vidya Mandal and Sardar Patel University. It was argued that the appellants are not coaching classes but provide facilities to the students of institute of Science and Technology for advance studies and Research and students of Charutar Vidya Mandal by providing training. The students do not pay any fee to the appellants however a certain fee is paid by Charutar Vidya Mandal. Learned counsel pointed out that the vide the Finance Act, 2010, an explanation was inserted for removal of doubts retrospectively w.e.f. 01.07.2003 in the definition of Taxable Service of “Commercial Training or Coaching Centre”. The said explanation stated that even not profit organization shall be included within scope of the service “commercial training or coaching centre service”. In the background learned counsel pointed that invocation of extended period is not justified.
3. Learned Authorized Representative relies on the impugned order.
4. We have considered the rival submissions. We find that the Commercial Training and Coaching Centre has been defined under clause 27 of Section 65 as follows:
“(27) “Commercial training or coaching centre” means any institute or establishment fees 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 pre- school coaching and training centre or any institute or issues any certificate or diploma or degree or any educational qualification La recognised by law for the time being in force;”
Vide Finance Act, 2010, the following explanation was added:
“Explanation. For the removal of doubts, it is hereby declared that the expression “commercial training or coaching centre” occurring in this sub-clause and in clauses (26), (27) and (90a) shall include any centre or institute, by whatever name called, where training or coaching is imparted for consideration, whether or not such centre or institute is registered as a trust or a society or similar other organisation under any law for the time being in force and carrying on its activity with or without profit motive and the expression “commercial training or coaching” shall be construed accordingly;”
From the above, it is apparent that prior to 2010, there was a confusion regarding the nature of institute which are covered under the definition of Commercial Training or Coaching Centre. In the instant case, the appellant happen to be a charitable trust and held a belief that they are not a „Commercial‟ Training or Coaching Centre and therefore, did not discharge the service tax. In these circumstances, invocation of extended period of limitation is not justified. The impugned order is, therefore, set aside and appeal is allowed on the ground of limitation.
(Pronounced in the open court on 22.09.2023)
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