Case Law Details
Institute of Clinical Research (India) Vs Commissioner (CESTAT Delhi)
Conclusion: Commercial training or coach services that were provided by the Institute of Clinical Research (ICR) were liable to service tax as Commissioner had recorded a finding, after careful examination of the activities undertaken by the Indian Institute that it was providing training or coaching for a consideration. The matter was remitted to the Commissioner to decide whether out of the total demand that had been confirmed, Indian Institute would be entitled to the benefit of – Input credit of the expenses incurred as per the CENVAT Credit Rules, 2004; and the value of study material supplied; and cum-tax benefit under section 67 of the Finance Act.
Held: Assessee-charitable organization was engaged in imparting education in the field of Postgraduate Courses in ‘clinical research’ in India, entered into collaboration with Cranfield University, UK under an Agreement titled ‘Postgraduate Clinical Research Courses Collaboration Agreement’. It appealed against the order passed by the Commissioner, Service Tax for confirming the demand of service tax proposed in the two show cause notices under ‘commercial training or coaching’ services defined under section 65(26) of the Finance Act, 1994. It contended that the Indian Institute was imparting education to students in ‘clinical research’ and was not conducting any commercial training or coaching activity. Hence the activities of the Indian Institute fall outside the scope of commercial training or coaching services and the demand was, therefore, liable to be set aside. Department contended that the Indian Institute was engaged in providing commercial training or coaching services as it conducts a course in clinical research in collaboration with UK University and so the fees collected by the Indian Institute from the students intending to pursue the said degree course would attract service tax. It was held that Commissioner had recorded a finding, after careful examination of the activities undertaken by the Indian Institute that it was providing training or coaching for a consideration. There was no error in this finding as indeed the Indian Institute was engaged in imparting education in the field of Post Graduate courses in „clinical research‟ for a consideration. Commissioner had also recorded a categorical finding that the term recognized by law for the time being in force‟ would mean certificate/degree recognized by Indian law and so the certificates/degrees granted by the UK University would not fall in the category of certificates/degrees recognized by law for the time being in force. Thus, if the Indian Institute itself did not appear before the Commissioner despite ample opportunities having been provided, it could not be permitted to raise any grievance about violation of the principles of natural justice. It would be appropriate to remit the matter to Commissioner to decide this aspect only, namely as to whether the Indian Institute would be entitled to the aforesaid benefits out of the total demand that had been confirmed. Thus, the matter would have to be remitted to the Commissioner to decide whether out of the total demand that had been confirmed, Indian Institute would be entitled to the benefit of – Input credit of the expenses incurred as per the CENVAT Credit Rules, 2004; and the value of study material supplied; and cum-tax benefit under section 67 of the Finance Act. Thus, the service tax demand imposed against the assessee was upheld.
FULL TEXT OF THE CESTAT DELHI ORDER
M/s. Institute of Clinical Research (India)1 has filed this appeal to assail the order dated 26.02.2014 passed by the Commissioner, Service Tax (Adjudication), New Delhi2 adjudicating the show cause notice dated 15.03.2012 issued for the period from 01.10.2010 to 30.09.2011 and the show cause notice dated 16.04.2013 issued for the period from 01.10.2011 to 30.06.2012. The Commissioner has confirmed the demand of service tax proposed in the aforesaid two show cause notices under „commercial training or coaching‟ services defined under section 65(26) of the Finance Act, 19943 and made taxable under section 65(105)(zzc) of the Finance Act, with interest and penalty.
2. The Indian Institute claims to be a society registered under the provisions of the Societies Registration Act, 1860. It also claims to be recognized as a charitable organization under section 12AA of the Income Tax Act, 19614.
3. The Indian Institute, which during the aforesaid period was engaged imparting education in the field of Postgraduate Courses in „clinical research‟ in India, entered into collaboration with Cranfield University, UK5 under an Agreement dated 02.03.2006, titled as „Postgraduate Clinical Research Courses Collaboration Agreement‟. This Agreement was subsequently amended on 20.10.2008. Under the Agreement, the Indian Institute could conduct Post Graduation courses in clinical research of 2 years but the degrees were to be awarded by the UK University, which claims to be a University recognized under the UK laws.
4. During investigation by the department, it was noticed that that Indian Institute is engaged in providing „commercial training or coaching‟ services as it conducts a course in clinical research in collaboration with UK University and so the fees collected by the Indian Institute from the students intending to pursue the said degree course would attract service tax.
5. Accordingly, five show cause notices for the period from 16.08.2005 to 30.09.2010 were issued to the Indian Institute and they were adjudicated upon by a common order dated 03.01.2012. The proposed demand was confirmed under „commercial training or coaching‟ services. This order was assailed before the Tribunal, and the Tribunal by order dated 19.02.2013 remanded the matter for a fresh adjudication.
6. Another show cause notice dated 16.04.2013 for the period from 01.10.2011 to 30.06.2012 was issued to the Indian Institute proposing a demand under the „commercial training or coaching‟ services.
7. These two show cause notices have been adjudicated by a common order dated 26.02.2014, which order has been impugned in this appeal.
8. The details of the demands proposed in the two show cause notices are as follows:
|
Show cause |
Period | Invoice amount/fees accrued (in Rupees) |
Rate of Tax | Amount (in Rupees) |
| 15.03.2012 | 01.10.2010 to 30.09.2011 | 5,67,70,696 | 10.30% | 58,37,382 |
| 16.04.2013 | 01.10.2011 to 31.03.2012 | 1,37,38,100 | 10.30% | 14,15,024 |
| 01.04.2012 to 30.06.2012 | 77,75,000 | 12.36% | 9,60,990 | |
| Total | 7,82,83,796 | 82,13,396 |
9. The impugned order dated 26.02.2014 passed by the Commissioner, after noticing that despite repeated opportunities the Indian Institute did not appear for personal hearing, records:
“The noticee was engaged in the field of imparting training/education in collaboration with Cranfield University, United Kingdom and the degree awarded to the students was from Cranfield University, U.K. which did not have the specific recognition by the statutory authorities such as the U.G.C., AICTE etc. and therefore these degree were not “recognized by the law for the time being in force”. Further, the training was imparted for consideration.
The noticee has submitted a brochure which outlines the details of the courses offered by them. The brochure describes the Institute of Clinical Research (India) as the country’s premier clinical research Institute dedicated to promoting ethical research and high quality clinical research education.*****”
10. After considering the nature of the activity undertaken by the Indian Institute, and the definition of „commercial training or coaching’, the Commissioner recorded the following findings:
“11. I have elaborately discussed the meaning of the term/phrase “recognized by law” above. It does not require any further discussion except to say that the law related to educational qualification is governed and controlled by the University Grants Commission Act, 1956 or All India Council of Technical Education Act, 1987 as the case may be. The right of conferring or granting degree, under Section 22(1) of the Act of 1956 supra rests with a University established or incorporated by or under a Central Act, a Provincial Act or a State Act or an institution deemed to be a University under Section 3 of the University Grants Commission Act or an institution deemed to be a University under Section 3 of the University Grants Commission Act or an institution specially empowered by an Act of Parliament to confer or grant degree. Section 22(2) of the UGC Act clearly mandates that no person or authority shall confer, or grant, or hold himself or itself out as entitled to confer or grant, any degree. Thus, a degree or diploma or any educational qualification etc. granted or conferred by any person other than the person/authorities specified under Section 22(1) of the UGC Act is null and void ab initio. ICR or the Cranfield University U.K. are not institutions authorized to do so. Therefore, any degree or diploma or educational qualification granted or conferred by them cannot be terms as “recognized by law” for the purpose of seeking exemption from payment of services tax and accordingly the noticee’s plea on this ground is set aside.”
(emphasis supplied)
11. The Commissioner, thereafter, confirmed the penalties imposed under sections 76 and 77 of the Finance Act and also directed for payment of interest under section 75 of the Finance Act for delayed payment of service tax.
12. Shri A.K. Batra, learned chartered accountant appearing for the appellant, made the following submissions:
(i) The Indian Institute was imparting education to students in „clinical research‟ and was not conducting any commercial training or coaching activity. Hence the activities of the Indian Institute fall outside the scope of „commercial training or coaching‟ services. The impugned demand is, therefore, liable to be set aside ;
(ii) Even otherwise, the Indian Institute is entitled for the following benefits out of the total demand that has been confirmed:
(a) Input credit of the expenses incurred as per CENVAT Credit Rules, 20046;
(b) Deduction of the value of study material supplied; and
(c) Cum-tax benefit under section 67 of the Finance Act.
(iii) The impugned order is an ex-parte order and thus the principles of natural justice have been violated;
(iv) Since there was no malafide intent to evade payment of service tax, the penalties under sections 76 and 77 of the Finance Act are liable to be set aside; and
(v) As reasonable cause existed regarding non-taxability, the Indian Institute is entitled to the benefit of wavier of penalties under section 80 of the Finance Act.
13. Shri Harshvardhan, learned authorized representative appearing for the department, however, supported the impugned order and placed reliance upon the two Larger Bench decisions of the Tribunal in Great Lakes Institute of Management Ltd. vs. Commissioner of Service Tax, Chennai7 and Sri Chaitanya Educational Committee vs. Commr. of Cus., C. Ex. & ST, Guntur8.
14. The submissions advanced by the learned chartered accountant for the appellant and the learned authorized representative appearing for the department have been considered.
15. To appreciate the contentions that have been advanced, it would be appropriate to examine the definition of „commercial training or coaching‟ under the section 65(26) of the Finance Act as also the definition of „commercial training or coaching center‟ under section 65(27) of the Finance Act so as to determine whether the services provided by the Indian Institute would be taxable under section 65(105)(zzc) of the Finance Act.
16. Section 65(26) of the Act, which was inserted w.e.f. 01.07.2003, defines ‘commercial training or coaching’ as follows :
“65(26) ‘commercial training or coaching’ means any training or coaching provided by a commercial training or coaching centre.”
17. ‘Commercial training or coaching centre’ has been defined in section 65(27) of the Finance Act and the said section, as it stood prior to 30.04.2011, is as follows :
“65(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 preschool coaching and training centre or any institute or establishment which issues any certificate or diploma or degree or degree or any educational qualification recognised by law for the time being in force. ”
18. The definition of ‘commercial training or coaching center’ was amended w.e.f. 01.05.2011 and the amended definition is as follows:
“65(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.”
19. Section 65(105)(zzc) of the Finance Act, which defines „taxable service‟ is reproduced below:
“65(105)(zzc) “taxable service” means any service provided or to be provided to any person, by a commercial training or coaching centre in relation to commercial training or coaching.
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.”
20. It is, therefore, clear from the aforesaid definitions that „commercial training or coaching‟ means any training or coaching provided by a commercial training or coaching centre. A „commercial training or coaching centre‟ has been defined, prior to 30.04.2011, to mean any institute or establishment providing commercial training or coaching for imparting skill or knowledge or lessons on any subject or field with or without issuance of a certificate and includes coaching or tutorial classes, but does not include 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 definition, as amended w.e.f. 01.05.2011, deletes only that latter portion not included in the definition of „commercial training or coaching centre‟.
21. The Indian Institute, as noticed above, is engaged in the field of imparting training in collaboration with the UK University. The degrees are awarded to the students by the UK University. The training that was imparted to the students was for consideration.
22. The contention of the learned Chartered Accountant for the appellant is that the Indian Institute was only imparting education to students in „clinical research‟ and was not conducting any commercial or coaching activities. According to the learned Chartered Accountant, the said education was imparted under a curriculum/syllabus designed and approved by the UK University and after the completion of courses, students were provided degrees/certificates by the UK University duly recognised under UK laws. Learned Chartered Accountant also submitted that prior to 01.05.2011, the exclusion clause does not specify that the degree recognised under laws for the time being inforce would include only Indian laws and not foreign laws, and in any case the exclusion clause from the definition was omitted w.e.f. 01.05.2011.
23. It is not possible to accept the said contentions of the learned Chartered Accountant for the appellant.
24. „Commercial training or coaching‟ means any training or coaching provided by a commercial training or coaching centre and commercial training or coaching centre has been defined to mean any institute or establishment providing commercial training or coaching for imparting skill or knowledge or lessons on any subject or field other than sports. Institutes or establishments which issued certificates, diplomas or degrees recognised by law for the time being in force were excluded prior to 01.05.2011.
25. The Commissioner has recorded a finding, after careful examination of the activities undertaken by the Indian Institute that it was providing training or coaching for a consideration. There is no error in this finding as indeed the Indian Institute was engaged in imparting education in the field of Post Graduate courses in „clinical research‟ for a consideration.
26. The Commissioner has also recorded a categorical finding that the term „recognised by law for the time being in force‟ would mean certificate/degree recognised by Indian law and so the certificates/degrees granted by the UK University would not fall in the category of certificates/degrees recoginsed by law for the time being in force.
27. Learned Chartered Accountant for the appellant is not justified in submitting that this finding is incorrect. A Larger Bench of the Tribunal in Chaitanya Educational had observed as follows:
“53. In our opinion, for an institute to claim that it is not a „commercial training or coaching centre‟, it must also be issuing certificates recognized by law for the time being in force. The appellant does not issue the certificates. In such circumstances, it is clearly a „commercial training or coaching centre‟ providing „commercial training or coaching‟. It is providing a taxable service. All decisions of the Tribunal taking a contrary view stand overruled.”
28. The contention of the learned Chartered Accountant for the appellant that since the Indian Institute is a registered society and is working without profit, no taxable service can be said to have been provided cannot also be accepted.
29. The Larger Bench of the Tribunal in Chaitanya Educational repelled this contention and the observations are as follows:
“23. To remove all doubts, an explanation was also inserted in Section 65(105)(zzc) by Finance Act, 2010 with retrospective effect from 1 July, 2003. It provides that the expression ‘commercial training or coaching centre’ would include a centre or institute where training or coaching was imparted for consideration, whether or not such centre or institute was registered as a trust or society with or without profit motive.
24. Thus, it is immaterial whether the appellant is providing the taxable service on „non-profit basis‟.”
30. The contention of the learned Chartered Accountant for the appellant that since the order passed by the Commissioner is an ex-parte order, it should be set aside as it violates the principles of natural justice cannot also be accepted.
31. The Commissioner had proceeded to adjudicate the show cause notices on the basis of the facts on record and the written submissions submitted by the appellant for the reason that despite repeated opportunities, the appellant and its representatives did not appear for personal hearing. The relevant portion of the order passed by the Commissioner dealing with this aspect is reproduced below:
“Opportunity for personal hearing was granted on 28.10.2013. Since the noticee did not appear, another personal hearing was fixed on 23.12.2013. However, the noticee sought adjournment of 2 weeks and accordingly another personal hearing was granted on 13.1.2014. Intimation regarding the personal hearing was personally noted by the noticee’s representative Shri Yogendra Aldak, Advocate. However, the noticee neither appeared for the personal hearing nor sent any intimation regarding the same. The noticee was accorded three opportunities for personal hearing on 28.10.2013, 23.12.2013 and 13.01.2014 in accordance with the principles of natural justice. However, the notice has failed to avail the same, Since sufficient opportunity for being heard has been given, therefore, the case is being taken up for adjudication on the basis of the facts on record and written submissions of the noticee.”
32. Thus, if the Indian Institute itself did not appear before the Commissioner despite ample opportunities having been provided, it cannot be permitted to raise any grievance about violation of the principles of natural justice.
33. The contention of the learned Chartered Accountant for the appellant that since there was no malafide intent to evade payment of service tax, penalty under section 76 of the Finance Act should be set aside, cannot also be accepted.
34. The finding recorded by the Commissioner in this regard is as follows:
“The submissions that the ICR had a bona fide belief that they were an educational institution and were imparting education of international standard to its students, and they were not a “commercial training or coaching centre” as defined in Section 65(27) of the Act, is not convincing at all. Each and every component of the definition of “commercial training or coaching centre” defined under Section 65(27) have been explained in this order above, which clearly and unambiguously illuminate that service tax is leviable on the noticee being a “commercial training or coaching centre” providing “commercial training or coaching services”. The statutory provisions, as have been enumerated above in this proceeding, clearly unfold the fact that the service tax was leviable on the “commercial training or coach service” provided by the ICR.
In such circumstances, the plea put forth by the ICR that they were under the bona fide belief that no service tax was payable on the services provided by them, does not qualify that criterion of bona fide belief.”
35. There is no error in the aforesaid finding recorded by the Commissioner. When the provisions of sections 65(26) and 65(27) of the Finance Act are so clear, the Indian Institute cannot claim to have formed a bonafide belief that it was not liable to pay service tax.
36. The contention of the learned Chartered Accountant for the appellant that penalty under section 77 of the Finance Act should be set aside also does not deserve acceptance.
37. Section 77 of the Finance Act provides penalty for contravention of any provisions for which no penalties are provided under Chapter V of the Finance Act. Under section 70 of the Finance Act, every person liable to pay the service tax shall himself assess the tax due on the services provided by him and shall furnish to the Superintendent of Central Excise, a return in such form and in such manner and at such frequency as may be prescribed. The Indian Institute had not filed the prescribed returns with complete and authentic details. Thus, penalty under section 77 of the Finance Act was correctly invoked.
38. In the end, learned Chartered Accountant submitted that the Indian Institute would be entitled to the following benefits out of the total demand that has been confirmed:
(I) Input credit of the expenses incurred as per CENVAT credit;
(II) Deduction of the value of study material supplied; and
(III) Cum-tax benefit under section 67 of the Finance Act.
39. This matter has not been examined by the Commissioner. In the facts and circumstances of the case, it would be appropriate to remit the matter to the Commissioner to decide this aspect only, namely as to whether the Indian Institute would be entitled to the aforesaid benefits out of the total demand that has been confirmed.
40. Thus, the matter would have to be remitted to the Commissioner to decide whether out of the total demand that has been confirmed, Indian Institute would be entitled to the benefit of:
(i) Input credit of the expenses incurred as per the CENVAT Credit Rules, 2004; and
(ii) The value of study material supplied; and
(iii) Cum-tax benefit under section 67 of the Finance Act.
41. Thus, while confirming the findings recorded by the Commissioner, the matter is remitted to the Commissioner to decide whether the Indian Institute would be entitled to the aforesaid benefit from out of the demand that has been confirmed. The appeal is, accordingly, allowed only to the extent indicated above.
(Order pronounced on 03.11.2023)
Notes:
1. the Indian Institute
2. the Commissioner
3. the Finance Act
4. the Income Tax Act
5. the UK University
6. CENVAT credit
7. 2013 (32) STR 305 (Tri-Del.)
8. 2019 (29) GSTL 712 (Tri-LB)
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