Since the training courses conducted by IIPM do not result in award of any certificate/ Diploma/ Degree or any other educational qualification recognized by the law being in force, the activity will fall under the category of Section 65 (105) (zzc) of the Act and is a taxable service liable to payment of Service Tax.
There is no scope to exclude “Academic Courses”, conducted by IIPM from the purview of Service tax levy. The exclusion provided in Section 65 (27) is available to any institute or establishments which issues any certificate or any educational qualification recognized by law for the time being in force. But it is an admitted position that the certificates and degrees awarded by IIPM and also by IMI, Europe do not enjoy the recognition from AICTE or UGC. These facts have been declared by IIPM in their prospectus and advertisements and such facts have been admitted by the Dean of IIPM in his statements before the investigating authorities. Therefore, IIPM clearly falls under the definition of Commercial Training or Coaching Centre as defined in law Section 65 (27) and the services rendered by them are liable to Service Tax, and we hold accordingly.
FULL TEXT OF THE CESTAT ORDER IS AS FOLLOWS:-
1. The present appeal is filed by the Revenue against the Order-in-Original No. 17-49/2012 dated 27/01/2012 passed by the Commissioner of Service Tax, Delhi. Vide the impugned order the Ld. Adjudicating Authority dropped most of the Service Tax demand raised by Revenue on the respondent, Indian Institute of Planning and Management (IIPM). He however confirmed the demand of Service Tax along with interest and penalties to the extent of Rs. 8,08,000/- on the respondent. Aggrieved by the same, Revenue is in appeal before us.
2. The facts relevant to the case are briefly summarized below:-
IIPM is engaged in conducting management courses leading to the award of Certificate of Associate Fellow in Indian Institute of Planning and Management (AFIIPM), Fellow Indian Institute of Planning and Management (FIIPM) of IIPM and also MBA, BBA Degrees of International Management Institute (IMI), Europe. Head Office and Institutes are situated in New Delhi with various branch offices and institutions in other places. Intelligence was received by DGCEI that IIPM was not paying Service Tax on the fees collected for the various academic courses like MBA, BBA, FIIPM, AFIIPM and also various training courses being organized by them. Accordingly, investigation was undertaken by DGCEI, Chennai Unit. After collecting relevant documents and recording the statements of various persons connected with IIPM Show Cause Notice dated 10/02/2006 was issued and after the due process of adjudication the impugned order came to be passed. It is pertinent to record that the respondent was not registered centrally under the provisions of Finance Act, 1994; hence show cause notices demanding Service Tax were answerable to various Jurisdictional Service Tax Authorities. The Commissioner, Service Tax, Delhi adjudicated the matter as a Common Adjudicating Authority nominated by CBEC vide Order No. 2/2007 dated 06/09/2006. Revenue has filed the present appeal contending that the Ld. Adjudicating Authority has erred in dropping the bulk of the demand of Service Tax made in the show cause notice.
3. The allegations raised in the Show Cause Notice are summarized below:-
i. The investigation undertaken by the DGCEI has concluded that IIPM were charging huge amounts of about Rs. 5 Lakhs per student in the case of MBA-2 Years Courses and around Rs. 8 Lakhs to 9 Lakhs per student in respect of BBA-3 Years courses. These facts have been deposed by Shri Shouvick Duta, Dean, IIPM.
ii.The academic courses conducted by IIPM are not approved by All India Council of Technical Education (AICTE) which is under Ministry of Human Resources Development. The Institute is also not affiliated to any University or recognized by UGC or any State or Central Act and they are not following any of the regulations of AICTE, UGC etc. These facts have been declared by IIPM in their prospectus as well as advertisement routinely released in newspaper.
iii. In view of the above, since the training courses conducted by IIPM do not result in award of any certificate/ Diploma/ Degree or any other educational qualification recognized by the law being in force, the activity will fall under the category of Section 65 (105) (zzc) of the Act and is a taxable service liable to payment of Service Tax.
4. The findings of the Adjudicating Authority leading to the dropping of demand are summarized below:-
i. The Adjudicating Authority referred to the legal provisions i.e. Section 65 (105) (zzc) of the Act and found that some of the courses conducted by the IIPM in the form of purely training programs intended for providing skill or knowledge in the respective fields are covered within the above statutory definitions and are liable to payment of Service Tax. Accordingly, he has confirmed the demand of Service Tax to the extent of Rs. 8,08,000/-.
ii. He has considered the training programs leading to the award of Certificate such as AFIIPM, FIIPM of IIPM as well as MBA and BBA degrees of IMI, Europe as academic programs. After referring to definitions of the Commercial Training or Coaching under Section 65 (26) of the Act, he has concluded that such programs are by way of academic education and are distinct from the ambit of Commercial Training or Coaching. Accordingly, he has dropped the demand of Service Tax on the fees collected by IIPM towards such courses.
5. With this background we heard Shri Amresh Jain, Ld. DR for the revenue as well Shri Amit Singh, Ld. Advocate appearing for the respondent.
6. The Ld. DR submitted the arguments of Revenue which are summarized below:-
i. The Adjudicating Authority has erred in making a distinction between academic courses and Commercial Training or coaching. The statute provides for a specific definition for both Commercial Training or Coaching [Section (65) (26)] as well as Commercial Training or Coaching Centre [Section (65) (27)]. Only those centers which are covered under the exclusions provided in Section 65 (27) will fall outside the Service Tax ambit. Evidently, the activity of IIPM is in a field other than sports, or pre-school coaching. The Certificates/ diploma/ degree issued by IIPM are not recognized by law since they do not have the approval of AICTE or UGC. IIPM is also not affiliated to any University. Consequently, the exclusion provided in the statutory definition is not applicable to IIPM.
ii. The adjudicating authority has classified the course run by IIPM under the category of academic education and has excluded the same from the ambit of Service Tax. This view is totally erroneous in as much as the statutory definition does not provide for such exclusion.
iii. Referring to the meaning of the term „Education‟ as listed in WIKIPEDIA, he argued that the term „Education‟ has a very wide meaning and includes all modes of learning. He submitted that any kind of learning through any course conducted by any institute which is not covered by exclusions in Section 65 (27) will be liable to Service Tax. Since the degrees awarded by IIPM for its academic courses are not recognized by law, Service Tax is liable to be paid on such fees recovered.
iv. He also relied on the Tribunal decision in the case of M/s Unitech Southcity Educational Charitable Trust and others V/s CST (Adj.), New Delhi vide Final Order No. 55907-55911/2017 dated 17/08/2017 wherein the Tribunal has upheld the demand for Service Tax in respect of courses run by the appellant in that case which resulted in award of degree by the University in U.K.
7. He also filed written submissions dated 08/03/2018 in which he has mainly contended as follows:-
7.1 The Adjudicating Authority has erred in making a distinction between “Academic Education” vis-a-viz “Training or Coaching”-
The adjudicating authority erred in citing the situation of a secondary school or a degree college to make such distinction and observing that such an institution is engaged in providing „academic education’, thus, not liable to service tax, even when they do not confer any degree, diploma or certificate, therefore, could have been chargeable to service as they do not fall under the exclusion clause. However, the adjudicating authority while making such observation erred in not considering that such school or college is attached/affiliated to any of various Central or State Education Boards or Universities or Deemed Universities, recognized by the law, and their students are awarded such degrees, diplomas or certificates, recognized by law, issued by such Board or University. Such school or college follows the curriculum, instructions, guidelines, regulations etc. of the Board or the University to which it is affiliated or attached. Therefore, it is quite clear that such institutions were not liable to service tax only by virtue of exclusion clause prevailing at the relevant time in section 65(105) (zzc) of the Act, ibid. In Board’s letter F. No. 334/1/2010-TRU dated 26.02.2010 in para 6.1 it has been clearly stated that the schools, institutes, colleges, universities providing courses that lead to award of recognized diplomas, degrees and sports education were kept out of tax net. As such, it cannot be argued that „academic education‟ is distinct from „training‟ or „coaching‟ and that, since, these institutions were imparting „academic education‟, they were not liable to service tax.
7.2 Erroneous import of words “Education” and “Academic” by Adjudicating Authority-
The legislative intent of the taxing entry has been clearly brought out in the legal provisions contained in Section 65 (105) (zzc) read with Section 65 (26) and Section 65 (27) of Finance Act, 1994, where under, definition of „Commercial training and Coaching‟ is clearly stipulated. In such a scenario, as per the rules of interpretation, there was no need for Adjudicating Authority to import words like “Education” & “Academic”.
Even otherwise as per Wikipedia, Education has been defined as follows:-
Education is the process of facilitating learning, or the acquisition of knowledge, skills, values, beliefs, and habits. Educational methods include storytelling, discussion, teaching training and directed research. Education frequently takes place under the guidance of educators, but learners may also educate themselves”.
The above clearly shows that acquisition of knowledge or skills through training or coaching clearly falls within the follicles of the taxing entry. The only exceptions provided are sports and the training or coaching which results in grant of certificate or diploma or degree recognized by law.
7.3 The activity of the respondent does not fall under any exception or exemption:-
It may be seen that the only exception/exemption which the Finance Act provides are as follows:-
(a) Commercial training and coaching in the field of
(b) Commercial training and coaching resulting in grant of certificate or diploma or degree which is recognized by law.
(c) Commercial training and coaching which are vocational in nature.
The activity of the respondent does not fall in any of the above and hence, would be charged to service tax. The Revenue also relies on the Final Order No. ST/A/55907-55911-CU[DB] dated 17.08.2017 .
8. Shri Amit Singh, Ld. Advocate appearing for the respondent on the strength of his written submission, submitted as follows:-
i. He justified the impugned order in which Service Tax demand has been substantially dropped by the Ld. Adjudicating Authority.
ii. He referred to the statutory definition Section 65 (26) and argued that the term “Commercial Training or Coaching” refers to courses other than academic courses. He argued that most of the courses conducted by IIPM are in the nature of academic courses leading to various certificates/ degrees.
Such courses cannot be brought within the definition of Commercial Training or Coaching as has been rightly held by the Adjudicating Authority.
iii. The activity of imparting education is not subject to Service Tax. He has referred to Supreme Court decisions and submitted that in construing the fiscal statutes and in determining the liability of a subject to tax, one must have regard to the strict letter of the law.
iv. He relied on the decision of the Hon’ble High Court, Delhi in the case of Delhi Music Society V/s Director General of Income Tax in Writ Petition (C) No. 4726/2011 dated 16/12/2011. In the above case, the Hon’ble High Court considered the status of the petitioner with reference to Section 10 (23) C of the Income Tax Act. The Hon’ble High Court held that even though the petitioner was not an Institution recognized by UGC for imparting formal education, they cannot be considered as Coaching or Training Institute. The petitioner was held to be an Educational Institution. On similar lines he submitted that IIPM is to be considered as an Academic Educational Institution and not covered within the definition of “Commercial Coaching or Training Centre”.
v. Referring to the case law of United Southcity (supra) relied upon by the Ld. DR, he submitted that even going by the said case law, the demand is required to be restricted to that falling within the normal time limit.
vi. He also argued that the levy of Service Tax on Commercial Coaching or Training Services was not free from doubt and hence there is no justification for invoking the extended time limit.
9. We have carefully considered the submissions made by both sides. Our findings and conclusions are given below.
10. The statutory definitions which are relevant for the purpose of present dispute are reproduced below for ready reference.
Sections 65(26) and 65(27) of the Finance Act, 1994 defines commercial training or coaching as follows :-
(26) ”commercial training or coaching” means any training or coaching provided by a commercial training or coaching centre;‟
(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 but does not include pre-school coaching and training centre or any institute or establishment which issues any certificate or diploma or degree or any educational qualification recognized by law for the time being in force.‟
The taxable service was defined in Section 65(105)(zzc) as follows :-
(zzc) any service provided or to be provided to any person, by a commercial training or coaching centre in relation to commercial training or coaching.”
An explanation was inserted in sub-clause (zzc) vide Finance Act, 2010 retrospectively with effect from 1-7-2003 which read as follows :-
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;
11. The issues pertaining to interpretation of „commercial training or coaching‟, taxable service specified in Section 65(105)(zzc) of the Finance Act, 1994, Section 65(26) defining „commercial training or coaching‟ and Section 65(27) defining „commercial training or coaching centre‟ were referred to a Larger Bench of this Tribunal and the Larger Bench in the Great Lakes Institute of Management Ltd. 2013 (32) STR 305 (Tri.-LB) examined these issues at length after considering the various decisions on the matter and the circulars issued in this regard by the C.B.E. & C. and answered the reference as follows :-
“25. On the aforesaid analysis, we answer the reference as follows :
(i) The taxable service of “commercial training or coaching” occurs when any institute or establishment is engaged in the activity of imparting skill, knowledge or lessons on any subject or field (excluding sports), irrespective of whether such imparting of skill, knowledge or lessons is in respect of particular discipline or a broad spectrum of disciplines/academic areas; irrespective of the nomenclature or description of the institute or establishment, as a coaching or training centre or an educational institution; regardless of whether an institute or establishment is incorporated by or registered under any law; and irrespective of distinctions on the basis of curriculum, course content, teaching methodology, course duration or otherwise. Activities of imparting skills, knowledge, lessons on any subject or field or when provided by any entity, institution or establishment which is excluded by a specific and legislated exclusionary clause would alone be outside the fold of the taxable activity.”
12. If we apply the above ratio to the facts of the case before us, we are led to the conclusion that there is no scope to exclude “Academic Courses”, conducted by IIPM from the purview of Service tax levy. The exclusion provided in Section 65 (27) is available to any institute or establishments which issues any certificate or any educational qualification recognized by law for the time being in force. But it is an admitted position that the certificates and degrees awarded by IIPM and also by IMI, Europe do not enjoy the recognition from AICTE or UGC. These facts have been declared by IIPM in their prospectus and advertisements and such facts have been admitted by the Dean of IIPM in his statements before the investigating authorities. Therefore, IIPM clearly falls under the definition of Commercial Training or Coaching Centre as defined in law Section 65 (27) and the services rendered by them are liable to Service Tax, and we hold accordingly. In respect of the few management courses conducted by IIPM which are categorized by the Adjudicating Authority himself as other than academic, Service Tax demand has already been confirmed in the impugned order.
13. The Ld. Advocate appearing for the respondent has relied on the decision of the Hon’ble Delhi High Court in the case of Delhi Music Society (supra). He has argued that even though the respondent is an Educational Institution, they cannot be considered as Coaching or Training Centre. After perusing the decision of the Hon’ble Delhi High Court, we note that the decision has been rendered in the context of Section 10 (23) of the Income Tax Act. In Section 65 (27) of the Finance Act, 1994, there is a specific definition for the term Commercial Training or Coaching Centre. As discussed Supra, we are of the view that the activities of the respondents fall under the above definition. Consequently, the Hon’ble Delhi High Court’s decision, which is on different facts is distinguishable and cannot be applied to the facts of the present case.
14. The next issue for consideration is whether extended period of time could be invoked in the present case for confirmation of Service Tax demand. Revenue has relied on the Tribunal decision in the case of Unitech Southcity Educational Charitable Trust and others. In the said decision the appellant in that case was held to be liable for payment of Service Tax under the category of “Commercial Training or Coaching Centre” for the reason that the courses being run lead to a Degree by the Foreign University but the demand was restricted to normal time limit. The reason cited in the order for such restriction is the retrospective amendment carried out by the Finance Act, 2010 in the definition of Section 65 (27) wherein an “Explanation” was inserted w.e.f. 01/07/2003. The Explanation is relevant only in respect of a “Commercial Training or Coaching Centre” which is registered as an Organization carrying out activity without profit motive.
In the facts of the present case this aspect of IIPM is not in debate. This plea has neither been taken before the Adjudicating Authority nor before us. Consequently, we are of the view that the case of M/s Unitech Southcity Educational Charitable Trust and others is distinguishable to this extent from the facts of the present case.
15. It is on record that IIPM neither took registration nor registered themselves with Department up to 22/07/2005. On the said day the registration was taken only at Bangalore even though IIPM has Institutes in many other places. They also did not pay any Service Tax or file ST-3 Returns even though the tax on Commercial Training or Coaching Centre was levied w.e.f. 01/07/2003. Since they have failed to obtain registration or file returns or even intimate the Department of the activities undertaken, the Department is fully justified in issuing show cause notice to demand of Service Tax along with interest by invoking the extended period of time.
16. In view of the above discussions we find that Adjudicating Authority has erred in dropping the demand of the Service Tax by considering the activities as falling outside the scope of Commercial Training or Coaching Centre. For the reasons set out above we conclude that the impugned order is not sustainable. We set aside the impugned order to the extent of dropping of Service Tax demand and uphold the entire demand of Service Tax raised in the show cause notice dated 10/02/2006. Such demand will be payable along with interest under Section 75. IIPM will also be liable to pay penalty equal to the Service Tax demanded under Section 78 as well as under Section 77 of the Finance Act, 1994. Since penalty under Section 78 is upheld, we do not impose penalty under Section 76.
[Order Pronounced in the open court on 20/03/2018]