Courses approved by industries department is not leviable to service tax

SRM Institute of Hotel Management Vs Commissioner of GST & Central Excise (CESTAT Chennai)

CESTAT Chennai held that the fees collected for the course approved by the Industries Department is not leviable to service tax under Commercial Training and Coaching Services. Accordingly, matter remanded back to for denovo consideration.

Facts- The appellant M/s. SRM Institute of Hotel Management and Catering Technology is engaged in conduct of training courses in the field of Hotel and Catering Management and are awarding certificates to the trainees on completion of said courses. The degree/diploma course for Hotel and Catering Management conducted by the appellant is not a course recognised by any statutory authority and the same does not lead to award of any diploma or degree recognised by the Government.

As the courses imparted by the appellant are neither approved by any statutory authority, nor affiliated to any university, it appeared that the appellant is providing Commercial Training and Coaching Services. They had not discharged the service tax on the income received from such services during the period from April 2008 to March 2012.Show Cause Notice was issued invoking the extended period proposing to demand Service Tax along with interest and also to impose penalty. After due process of law, the original authority confirmed the demand along with interest and also imposed penalties. Aggrieved by such order, the appellant is now before the Tribunal.

Conclusion- We are not able to understand whether separate fees are collected from students for this course. The order is not clear as to the details of demand in regard to this course. The appellant has not been able to show as to what portion of the demand is covered by the fees collected for the course approved by the Industries Department. We find that this issue also requires to be remanded.

From the above discussions, we set aside the impugned order and remand the matter to the adjudicating authority for denovo. The appellant shall be given sufficient opportunity to furnish details and for personal hearing. All issues are left open. In the result, the appeal is allowed by way of remand.

FULL TEXT OF THE CESTAT CHENNAI ORDER

The Appeal is filed against the order passed by the adjudicating authority confirming the demand of Service Tax under the category of “Commercial Training or Coaching Services”.

2. Brief facts are that according to the Department, the appellant M/s. SRM Institute of Hotel Management and Catering Technology is engaged in conduct of training courses in the field of Hotel and Catering Management and are awarding certificates to the trainees on completion of said courses. The degree/diploma course for Hotel and Catering Management conducted by the appellant is not a course recognised by any statutory authority and the same does not lead to award of any diploma or degree recognised by the Government. Section 65(26) of the Finance Act, 1944 defines Commercial Training or Coaching Service, as ‘any training or coaching provided by a commercial training or coaching centre’. Further, Section 65(27) of the Finance Act, 1994 defines Commercial Training and Coaching Centre as ‘any institute or establishment providing commercial training or coaching for imparting skill or knowledge or lessons on any subject in any field other than sports, with or without issuance of certificate and includes coaching or tutorial classes but does not include pre-school coaching or diploma or degree or any educational qualification recognised by law for the time being in force’. Section 65(105)(zzc) of the Finance Act, 1994 defines the taxable service as ‘any service provided to any person by any commercial training or coaching centre in relation to commercial training or coaching’.

3. In view of the above provisions, as the courses imparted by the appellant are neither approved by any statutory authority, nor affiliated to any university, it appeared that the appellant is providing Commercial Training and Coaching Services. They had not discharged the service tax on the income received from such services during the period from April 2008 to March 2012. Show Cause Notice was issued invoking the extended period proposing to demand Service Tax along with interest and also to impose penalty. After due process of law, the original authority confirmed the demand along with interest and also imposed penalties. Aggrieved by such order, the appellant is now before the Tribunal.

4. On behalf of the appellant, Shri V. Prasanna Krishnan, Consultant appeared and argued the matter. It is submitted by the learned Consultant that the appellant, namely, SRM Institute of Hotel Management is a separate wing of SRM Arts and Science College, which is a unit of M/s. Valliammai Society, a registered non-profit society. The appellant made representation before the adjudicating authority that the appellant is not an identifiable entity for demand of service tax. The society is a charitable institution. The courses taught by SRM Arts & Science College include courses in Hotel and Catering Management which is a course recognized by the University of Madras. The Arts & Science College has an affiliation to the University of Madras and the said University confers degrees and diplomas to successful candidates passing from the college. Though these facts were presented before the adjudicating authority, these submissions have been totally ignored and the appellant, viz., SRM Institute of Hotel Management has been held as an independent entity imparting the course of Hotel and Catering Management which is factually wrong.

5. To support the above arguments, the learned Consultant has produced the copy of the certificate of registration of the Valliammai Society dated 24.07.1981. Later, the SRM Deemed University was formed by a trust deed executed on 30.07.2001. The family members and founders of the society had decided to make some of the institutions which were under the aegis of the Valliammai Society to continue under the Valliammai Society itself. Some institutions were included under SRM Deemed University. The Art and Science College which was imparting the Hotel and Catering Management course continued to operate under Valliammai Society and continued to be affiliated with the University of Madras. The documents with regard to payment of fees, the pass list of the students produced along with the appeal memorandum where referred by the learned Consultant to submit that the degree certificate of Bachelor of Science in Hotel and Catering Management is awarded to the successful students by the University of Madras. It is submitted by the learned Consultant that the Department has erroneously raised the demand alleging that SRM Institute of Hotel Management is conducting the course of Hotel and Catering Management and that it is not affiliated to any University and is an unapproved course.

6. The learned Consultant referred to the decision of the Tribunal in the appellant’s own case for the period from July 2003 to March 2008, wherein the very same issue of demand of Service Tax for rendering commercial coaching and training services for imparting Hotel and Catering Management course was decided by the Tribunal. The Tribunal remanded the matter for denovo adjudication. The same is still pending for denovo consideration by the adjudicating authority.

7. The second issue is a small amount of demand with regard to Arts and Craft course imparted by the appellant. It is submitted by the learned Consultant that this one year course is conducted as per the approval and recognition of the Industries Department of State of Tamil Nadu. As per letter dated 03.09.2009, the appellant has been given permission by the Department of Industries, Tamil Nadu to conduct the said course which includes practical and theory classes. This course is also thus a recognised course as the certificates are issued by the Industries Department of the State of Tamil Nadu. The demands therefore cannot sustain. The learned Consultant prayed that the appeal may be allowed.

8. The learned AR supported the finding in impugned order.

9. Heard both sides.

10. The demand has been raised under the category of ‘commercial coaching and training services’ alleging that the appellant is imparting courses which are not approved and recognised by any University/Board. The relevant provisions have already been noticed in para 1 of this order.

11. It is the case of the appellant that they are not imparting the impugned Hotel and Catering Management course and that it is the Arts and Science College which is functioning under the aegis of Valliammai Society that is imparting the said course. It is also submitted that the Arts and Science College is affiliated to Madras University. The documents enclosed along with the appeal book show that the Bachelor degree in Hotel and Catering Management is awarded by the University of Madras. The appellant has also produced the attendance list of students, list of the students who passed which were forwarded to University. In page 152 to 156 of the appeal book, the fees collected from the students for the B. SC., Hotel and Catering Management course is enclosed.

12. In para 4 of the Show Cause Notice dated 11.12.2012, the Department has put forward the details of the income received for rendering Commercial Training and Coaching Services. It is seen from the said table reproduced below that the income received by the appellant (SRMIHM) is subject to levy of Service Tax:-

13. The appellant has strongly argued that they are not conducted the impugned Hotel and Catering Management course and that it is the Arts & Science College that is imparting the course and collecting the fees. It is not clear whether the income of the appellant as shown in the above table is derived from collection of fees for conduct of the course. The Department has not been able to adduce any such evidence. The appellant though contends that they are not imparting the course of Hotel and Catering Management has not been able to adduce any evidence as to the income shown in the table is derived from business other than commercial training and coaching services. The details of document as to whether the fees is collected by the appellant or the Arts & Science College is not clear. So also it is argued by the appellant that SRM Deemed University was formed and some of the institutions including the appellant, are now under the aegis of the Deemed University. It is not clear as to whether appellant is now part of the Deemed University and is imparting any course or providing any facility of internship only. The facts as to how the demand has been raised on the income of the appellant is not clear. We are therefore of the considered opinion that the matter requires to be remanded.

14. The very same issue was considered by the Tribunal in the appellant’s own case for the previous period from July 2003 to March 2008 vide Final Order No.40446-40447/2018 dated 04.01.2018 and the matter was remanded due to lack of clarity. The relevant discussions or as under:

“7. In regard to demand made in respect of diploma course, the Ld. Consultant has submitted that the course being the vocational course, the appellants are eligible for exemption as per the Notification No. 9/2003. Relevant portion of the Notification is reproduced as under:-

Notification No. 9/2003 – Service Tax dated 20.06.2003

In exercise of the powers conferred by section 93 of the Finance Act, 1994 (32 of 1994), the Central Government, being satisfied that it is necessary in the public interest so to do, hereby exempts the taxable services provided in relation to commercial training or coaching, by, –

1. a vocational training institute;

2. a computer training institute; or

3. a recreational training institute;

to any person, from the whole of the service tax leviable thereon under sub-section (2) of section 66 of the said Act.

Explanation.- For the purposes of this notification,-

1. “vocational training institute” means a commercial training or coaching centre which provides vocational coaching or training that impart skills to enable the trainee to seek employment or undertake self-employment, directly after such training or coaching;

2. “computer training institute” means a commercial training or coaching centre which provides coaching or training relating to computer software or hardware;

3. “recreational training institute” means a commercial training or coaching centre which provides coaching or training relating to recreational activities such as dance, singing, martial arts, hobbies.

4. This notification shall come into force on the 1st day of July, 2003 and shall remain in force upto and inclusive of the 29^th day of February, 2004.

8. The Tribunal in similar set of facts, in the case of Ashu export Promoters Pvt. Ltd. (supra) had held that the exemption is eligible. Similar view was taken in the case of IILM Film and Media School (supra). In the appellant’s own case for a different period the demand of service tax on diploma course was set aside vide Final Order No. 43463 – 43464/2017 dated 22.12.2017. The relevant portion of the Final order is reproduced as under:-

“4. We note that the scope of the term “vocational” has been a subject matter of decision in various cases. We refer to Ashu Exports Promoters Pvt. Ltd. Vs. CST – 2012 (25) STR 359 (Tri.-Del.),

 Wigan & Leigh Colege India Ltd. Vs. Joint Commissioner of Service Tax – 2007 (8) STR 475 (Tri.-Bang.). We also note that in similar set of facts the Tribunal in the case of Canan School of Catering and Hotel Management Vs. CST, Chennai, vide Final Order No. 43214/2017 dated 20.12.2017, held as under:-

“6. The only dispute is applicability of the Notification No. 9/2003 as amended. We note that the original authority examined the scope of exemption in the context of amendment carried out in 2010. In 2010 amendment statutorily changed the scope of exemption, restricting the same specifically to the work and trade as recognized by the Apprentice Act, 1961. We note that the present dispute relates to the period which is before 2010. While we hold that the appellants are engaged in providing Commercial Training or Coaching, the courses offered are of such nature which is recognized ad vocational courses in a particular area of specialization. It is also a fact that these are not academic courses like PGDM/MBA which were examined by the Tribunal in Great Lakes Institute of Management Ltd. – 2013 (32) STR 305 (Tri.-LB) and Sadhana Educational & People Dev. Services Ltd. – 2014 (33) STR 575 (Tri.-Mum.). The Ld. AR relied on these decisions.

7. The scope of term vocational training institute which is redefined only in 2010. On plain reading of exemption it is seen that those courses which provide such skills to the trainee to seek employment directly after such training or coaching shall be excluded from tax liability. We are of the considered opinion that the present courses are covered by such exemption in the said notification. We also note that the amendment carried out by Notification 3/2010 is clearly prospective as explained in the budget papers for the year 2010-­11. Even otherwise, we note that the courses cannot be considered equivalent to a general academic course so as to exclude from the exemption. Accordingly the impugned order is set aside and the appeal is allowed.

5. In view of the above discussions, we find no merit in the impugned orders. Accordingly, the same are set aside. Appeals are allowed.

Following the same, we are of the view that the demand in respect of diploma course cannot sustain and the same requires to be set aside, which we hereby do.

9. In the result, the impugned order is set aside and the demand in respect of Degree Course is remanded to the adjudicating authority, who shall conduct denovo adjudication of this issue after giving chance to the appellant for personal hearing. The demand in respect of diploma course is set aside. The appeal is partly remanded and partly allowed in above terms.”

15. The learned Consultant has submitted that part of the demand of service tax is on the fees collected for one year course of Arts and Crafts conducted by the appellant. This course is conducted by appellant as per permission and approval of the Industries Department of State of Tamil Nadu and that therefore the demand cannot sustain. The learned consultant has adverted to the documents in regard to the permission granted by the Department of Industries, State of Tamil Nadu. On perusal of the said permission letter it is seen that the permission is not for Arts & Crafts course, but one year certificate course for the following subjects.

“Extension of Temporary recognition is given from 1.07.2008 till 30.06.2011 for three years to the SRM Catering & Hotel Management, S.R.M. NAGAR, Kattankaluthur – 603 203 Kancheepuram District, as per the request of the correspondent, by the Director, Employment & Training Department for the down listed five sections.

1. Permission is granted to Admit the trainees under 20% of Engineering Trades, 10% for Non engineering trades e.g., Catering trades etc., for one unit. Accordingly permission is granted to allow 4 (20+4) extra trainees for Engineering trades and 2 (20+2) extra Trainees for Non – Engineering Trades.”

 15. We are not able to understand whether separate fees are collected from students for this course. The order is not clear as to the details of demand in regard to this course. The appellant has not been able to show as to what portion of the demand is covered by the fees collected for the course approved by the Industries Department. We find that this issue also requires to be remanded.

16. From the above discussions, we set aside the impugned order and remand the matter to the adjudicating authority for denovo The appellant shall be given sufficient opportunity to furnish details and for personal hearing. All issues are left open. In the result, the appeal is allowed by way of remand.

(Order pronounced in open court on 05.06.2023)