M/s Indian Institute of Management Vs C.S.T.-Service Tax (CESTAT Ahmedabad)
Ahmedabad CESTAT has dropped demand of service tax amounting to Rs. 56 crore of Indian Institute of Management (IIM) Ahmedabad under the service commercial training & coaching service stating that IIM A does not require any accreditation from running course.
CESTAT held that recognition by law does not mean recognition by AICTE or AIU etc., but it means recognition by government in any significant manners. In the instant case, the courses under dispute have been recognized by government as equivalent to other degree/diploma courses for the purposes of employment and higher education. Moreover, Ministry of HRD has clearly laid down in their letter dated 31.01.2017 that recognition by AICTE or NBA accreditation is not required by IIMs. These facts have been affirmed by the letter of TRU dated 14.02.2017. Thus we hold that long term course of IIM are courses recognized by law. In view of that the demand does not survive on merits.
FULL TEXT OF THE CESTAT JUDGEMENT
These appeals have been filed by Indian Institute of Management (Ahmedabad) against confirmation of demand of Service Tax, interest and imposition of penalty.
2. Ld. Counsel for the appellant pointed out that the appellant is society registered under Society Registration Act, 1860 and are engaged in providing Management Consultancy Service, Commercial Training and Coaching, Man Power Recruitment Service, Health Club and Fitness Service, Renting of Immovable Property and Accommodation Services for which they are registered under Service Tax since 27.05.2003. He pointed out that the SCN was issued to them alleging that the long duration courses are not approved by AICTE. Consequently it alleged that they are required to pay service Tax on the amounts received for long duration courses.
2.1 He pointed out that one notice was issued for the period 20092010 to 2013-14 invoking extended period of limitation. The second notice has been issued within the period of limitation for the financial year 2014 – 2015. Ld. Counsel pointed out that the primary allegation in the SCN is that there long duration courses are not recognized by AICTE. Ld. Counsel pointed out that recognition by AICTE is not a necessary pre-condition for exemption from the Service Tax.
2.2 Ld. Counsel pointed out that Section 65 (26) of the Finance Act, 1994 defines Commercial Training or Coaching in the year 2003 as under:-
“Commercial training or coaching” means any training or coaching provided by a commercial training of coaching center.
He further pointed out that Section 65 (27) of the Finance Act defines ‘Commercial Training or Coaching Center’as follows:
“Commercial training or coaching center” means any institute or establishment providing commercial training or coaching for imparting skill or knowledge or lessons on any field other than sports, with or without issuance of a certificate and includes coaching or tutorial classes but does not include pre-school coaching and training center 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.
Ld. Counsel pointed out that definition of ‘commercial training or coaching center’ originally excluded from its ambit 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. Ld. Counsel argued that there is no requirement that the courses should be registered under AICTE as alleged in the SCN. He argued that so long as the institute conducts any courses which are recognized by ‘any law’, the said coaching institute would be outside the preview of Service Tax.
2.3 Ld. Counsel relied on the Circular No. 86/4/2006 dated 01.11.2006 wherein following has been clarified:
“The issue has been examined by the Board. A 4. Commercial concernis an institution/establishment that is primarily engaged in commercial activities, having profit as the primary aim. It is not one/ few isolated activities which determine whether or not as institution is a commercial concern. It is the totality of its activity and the objective or its existence that determines the commercial nature of an institution as an ‘entity’ or a ‘concern’. The principal activity of institutes like IITs or IIMs is to impart education without the objective of making profit. Therefore, these institutes cannot be called a commercial concern, even it on some of their activities (like holding campus interviews), they charge fee. Accordingly, these institutes were not liable to pay service tax prior to 01-05-2006 under the category of ‘manpower recruitment of supply service’. As regards the period after 1-5-06, decision should be taken after taking into account all material facts on case to case basis.”
He argued that the CBEC had originally also recognized that the appellants are not a commercial concern, and therefore, not covered under the definition of commercial coaching and training. Ld. Counsel relied on the Service Tax Circular No. 107/01/2009-SC dated 28.01.2009. In the said Circular following has been clarified.
“2. Commercial Nature of Institute
The first issue arises from the very name i.e. Commercial ‘training or coaching center’. Many service providers argue that the word commercial appearing in the aforementioned phrase, suggests that to fall under this definition, the establishment or the institute must be commercial (i.e. having profit motive) in nature. It is argued that institutes which are run by charitable trusts or on no-profit basis would not fall within the phrase ‘commercial training or coaching center’ and none of their activities would fall under the taxable service. This argument is clearly erroneous. As the phrase ‘commercial training or coaching center’ has been defined in a statute, there is no scope to add or delete words while interpreting the same. The definition commercial training or coaching center has no mention that such institute must have ‘commercial’ (i.e. profit making) intent or motive. Therefore, there is no reason to give a restricted meaning to the phrase. Secondly, service tax, unlike direct taxes, is chargeable on the gross amount received towards the service charges, irrespective of whether the venture is ‘profit making, loss making or charity oriented’ in its motive or its outcome. The word “Commercial” used in the phrase is with reference to the activity of training or coaching and not to the nature or activity of the institute providing the training or coaching. Thus, services provided by all institutes or establishments, which fulfills the requirements of definition, are leviable to service tax.”
He pointed out that this is clearly a departure from the earlier stand where the word ‘commercial’ appearing in the ‘commercial training and coaching center’ was deemed to qualify the ‘institute or center’ however in the Circular of 2009, the said stand was changed and the term ‘Commercial’ appearing in the definition of ‘commercial coaching and training center’ was deemed to qualify the nature of training. Ld. Counsel also relied on the decision of Tribunal in the case of Institute of Chartered Financial Analysis 2018 (17) STR 501 (CESTAT).
2.4 Subsequently by Finance Act 2010, the explanation was added with retrospective effect from 01.07.2003. The explanation 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 10(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 organization 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.
2.5 Ld. Counsel pointed out that w.e.f. 01.5.2011 the definition of commercial coaching and training center was amended. w.e.f. 01.05.2011 the definition of commercial coaching and training center was amended as follows:
“Commercial Coaching or Training Centre means any institute or establishment providing commercial coaching or training for inspiring skill or knowledge or lessons on any subject or field other than sports, with or without issuance of a certificate and includes coaching or tutorial classes”.
Simultaneously Notification 33/2011-ST dated 25.04.2011 was issued (w.e.f. 01.05.2011) to exempt any coaching or training leading to grant of a certificate or diploma or degree or any educational qualification which was recognized by any law for the time being in force, when provided by any commercial coaching or training centre. In a sense, the exemption which was earlier granted to all coaching and training given by institutes which were, interalia, providing Certificate or diploma or degree or any educational qualification recognized by law, was narrowed down and restricted to only those commercial coaching and trainings leading to grant of certificate or diploma or degree or any educational qualification recognized by any law. Therefore, while earlier for identical courses provided by two different institutes could be treated differently for the purpose of levy of service tax, w.e.f. 01.05.2011 the said distinction was removed by making the exemption course specific instead of institute specific.
2.6 Ld. Counsel for the appellant pointed out that IIM was set up in 1961 by a Cabinet Note of Govt. of India as an autonomous body and out of the regulatory fold of the Govt. of India. He pointed out that AICTE came into existence in 1968. He further pointed out that since IIM is not under UGC, therefore, the educational qualifications granted by them are called diplomas. Ld. Counsel relied on the decision of the Tribunal in the case of ITM International (P) Ltd. 2017 (7) GSTL 448 (Tri. Del.) He pointed out that the said decision was followed by Tribunal in the case of IILM Under graduate Business School reported in 2018 (10) GSTL 345. Ld. Counsel also has relied on the decision of Hon’ble High Court of Delhi in the case of Indian Institute Aircraft Engineering 2013 (30) STR 689 (Del.). Ld. Counsel also relied on the clarification issued by CBEC vide Dof. No. 334/8/2016 – Tru dated 29.02.2016. Ld. Counsel further pointed out that the Ministry of Education vide Office Memorandum dated 31.08.1966 has recognized the diploma granted by the appellant in following words:
“The Government of India have decided to recognize the postgraduate diploma in Business Administration awarded by the (i) Indian Institute of Management, Calcutta, and (ii) Indian Institute of Management, Ahmedabad, for purpose of recruitment to superior posts and services under the Central Government for which M.B.A. degree or equivalent diploma from the recognized University/ Institution is prescribed as the qualification.”
Ministry of HRD, Department of higher education vide letter dated 03.10.2013 clarified as follows:
“… IIM directed to inform you that IIM, Ahmedabad is an autonomous institution of Ministry of Human Resource Development, Govt. of India, engaged in running various Post Graduate Diploma and fellowship programmes which include PGP, PGP-ABM, PGPX, PGP-PMP to say a few.
2. The Institution is managed by a society i.e. IIMA Society, and has complete autonomy in running its programmes. The Institute is run by Board of Governors (BOGs), who represents relevant constituents of multifarious segments of society to take care of the need of developing nation. The objectives of the Institute include creation of skills, and to provide necessary advisory service and develop global linkage for the emergence of the best practices, to name a few. It is one of the top management institutes of India. Policy guidelines were also issued by Ministry of Education’s office memorandum, New Delhi-2, 31st August, 1966 on recognition of Technical and Professional Qualification.”
He further pointed out that vide letter dated 30.10.1975 the Association of Indian Universities has recognized the fellow in management as equivalent to Ph.D. Degree in management. The letter observes as under:-
“I am happy to inform you that the question of the equivalence of Fellow in Management of your Institute in terms of university degree was considered by the Equivalence and the Standing Committees of this Association at their meetings held on 29th September, 1975. The following resolution was adopted:
“Resolved to equate the ‘Fellow in Management’ of the Indian Institute of Management, Ahmedabad as equivalent to Ph.D. degree in management awarded by Indian Universities.””
2.7 Ld. Counsel also relied on report of AICTE Review Committee, 2015 wherein following has been observed with reference to the appellant:
