Case Law Details
M/s Jet king Info train Ltd Vs. CC Delhi (CESTAT Delhi)
The only issue for decision is whether or not the appellants are right in their claim for exemption under Notification No. 12/2003. Notification No. 12/2003 provides for exemption of Service Tax for “so much of the value of all taxable services, as it is equal to the value of goods and materials sold by the service provider to the recipient of service from the Service Tax leviable therein under Section 66 of the Act, subject to the condition that there is documentary proof specifically indicating the value of said goods and materials.” In the present case, one of the grounds for denial of exemption is lack of documentary evidence as required for the Notification. In this regard, we have perused various sample invoices raised by the appellant to the franchisee. Various books and materials were sold and their price specifically indicated in the said invoices. Hence the claim of the appellant that they have sold the books and study materials as per the commercial invoices stands established. However, the total quantum of such sale can be verified with all the supporting evidence to determine the correct quantum of exemption available to the appellant. This can be done by the jurisdictional assessing authority.
FULL TEXT OF THE CESTAT ORDER IS AS FOLLOWS:-
The appeal is against order dated 13.01.2014 of Commissioner of Service Tax (Adj.), New Delhi. The appellant, a Public Limited Company, are engaged in Information Technology Training in hardware and networking for the past many years. The appellants are operating their teaching centers under the name and design “Jet king”. They are registered with the Service Tax Department under the category of “Commercial Training or Coaching Service” and “Franchise Services”. The appellants operate their own training center and also operate through franchise. For the income received from the franchise, the appellants are paying Service Tax. The appellants are not paying service tax on the consideration received for sale of books and materials to the franchise. For this, they claimed exemption under Notification No. 12/2003 ST dated 20.06.2003.
2. The Revenue entertained a view that the appellants were not discharging service tax under franchise service on the full consideration. In other words, it is held that the exemption of value of books and materials, claimed to have been sold by the appellant, is not available to them as these are not supported by documentary evidence. It was also held that the educational training materials were developed by the appellants and when they are providing service of commercial coaching or training, they were paying tax including the value of such When such training is imparted by the franchise, they provided prospectus, course materials, brochures, leaflets which are printed and supplied by them to the franchise. Since the franchise agreement stipulates that the course materials are to be given by the franchiser free of cost to every registered student, the exemption claimed under sale of goods in terms of Notification No. 12/2003 is not available. On these basis, the Revenue proceeded against the appellant and confirmed the differential Service Tax liability of Rs. 1,53,70,166/- with equal amount of penalty under Section 78 and further penalty under Section 77 of the Finance Act, 1994.
3. The ld Counsel appearing for the appellant submitted that in pursuance of the franchise agreement, the appellant sells study material to its franchises. This is a commercial transaction of sale of goods and not service. Benefit of Notification No. 12/2003 is available as value equal to the sale of goods and materials by the service provider to the service recipient is exempted. Reliance was placed on various decided cases of the Tribunal.
4. The ld AR submitted that the appellant did not indicate the claim for such exemption in their ST-3 return. It is apparent that they have not paid Service Tax on the gross value on the premise that some portion of consideration is towards sale of books and materials. Relying on the decision of M/s Sayaji Hotels Ltd-2011 (24) STR 177 (Tri.Del.), the ld AR submitted that simple claim of sale of goods, without supporting evidence, cannot be accepted for Notification No. 12/2003. The said exemption will not apply to indivisible service contract.
5. We have heard both the sides and perused appeal record. The only issue for decision is whether or not the appellants are right in their claim for exemption under Notification No. 12/2003. The said Notification provides for exemption of Service Tax for “so much of the value of all taxable services, as it is equal to the value of goods and materials sold by the service provider to the recipient of service from the Service Tax leviable therein under Section 66 of the Act, subject to the condition that there is documentary proof specifically indicating the value of said goods and materials.” In the present case, one of the grounds for denial of exemption is lack of documentary evidence as required for the Notification. In this regard, we have perused various sample invoices raised by the appellant to the franchisee. Various books and materials were sold and their price specifically indicated in the said invoices. Hence the claim of the appellant that they have sold the books and study materials as per the commercial invoices stands established. However, the total quantum of such sale can be verified with all the supporting evidence to determine the correct quantum of exemption available to the appellant. This can be done by the jurisdictional assessing authority.
6. We note that clause 2.7 of the agreement stipulated that franchiser is to provide prospectus, course materials, brochures, leaflets, direct mail materials, stationery, etc. printed and supplied by the franchiser at the franchise’s cost.
7. We note that similar dispute with reference to applicability of Notification No. 12/2003 ST came-up before the Tribunal in various cases. In M/s Cerebral Learning Solutions Pvt Ltd-2013 (32) STR 379 (Tri.-Ind.), the Tribunal observed as under:
“6. In our considered view, the clarification in the Board Circular dated 20.6.2003 is misconceived, clearly illegal and contrary to the statutory exemption Notification dated 20.6.2003. Where the legislature has spoken or in exercise of its statutory power exemption is granted by the Central Government under Section 93 of the Act, the CBEC has no manner of power, exemption is granted by the Central Government under Section 93 of the Act, the CBEC has no manner of power, authority or jurisdiction to deflect the course of an enactment or the exemption granted. Grant of exemption from the liability to tax is a power exclusively authorized to the Central Government under Section 93 of the Act. The statutory provision accommodates no participatory role to the Board. In seeking to en graft restrictions on the generally and plenitude of the exemption granted by the Central Government, the CBEC transgressed into the domain of the Central Government under Section 93 of the Act, a course of action clearly prohibited. On the above analysis, that part of the clarification of the CBEC which en grafts a condition that the exemption notification is applicable only where the value of the course material (by a commercial or training institute) answers the description of standard text books which are priced, is illegal, unauthorized and of no effect No notice or cognition can be taken by any authority or such unauthorized exertions by the CBEC. If this illegal and unauthorized condition, imposed on the generality of exemption granted by the Central Government vide Notification No. 12/2003-S. T., dated 20.6.2003 is ignored, as it must, the assessee/appellant is clearly entitles to the benefit of the exemption.
7. Ld. C.A. for the assessee has relied upon the decision of this Tribunal in Chate Coaching Classes Pvt Ltd v. CCE Aurangabad reported in 2012-TIOL-714-CESTAT-MUM-2013 (29) S.T.R. 138 (Tri.-Mum.) and which in turn rely on the earlier decision of this Tribunal in Pinnacle v. CCE, Chandigarh reported in 2011 (24) S. T.R. 453 (Tri.Del.) to support its challenge to the concurrent orders of the primary and appellate authorities. These decisions are clearly in favor of the assessee and our analysis of the relevant provisions of the Act and the exemption Notification No. 12/2003- S.T., dated 20.6.2003, is fortified by these decisions.”
8. The Tribunal, after the above analysis, held that the exemption Notification is clear and it admits no restrictive clauses. In the present case, on perusal of the contractual arrangement as well as sale invoices, we are of the view that the claim of the appellant for exemption under Notification 12/2003 cannot be denied. The exact quantification of such exemption will have to be supported by documentary evidence as stipulated in the Notification. This can be verified by the jurisdictional authorities, as observed, already in this order. Accordingly, we hold that the impugned order denying the exemption claimed by the appellant under Notification 12/2003-ST is not legal and sustainable and, as such, the same is set aside and appeal is allowed.
(Pronounced in the Court on 12.02.2018)
