Allowed

Commissioner of Central Excise v. M/S. Tandem Integrated Services

Kerala HC14 Dec 2018C.E.Appeal/3/2011

Case brief

AI extract

What is this about?

In a Central Excise Appeal, the High Court of Kerala allowed the appeal and dismissed the Revenue's challenge regarding service tax on commercial training services. The Court held that an institute providing coaching for recognized university degrees and diplomas, even for competitive entrance tests, is exempt from service tax under the definition of a Commercial Training or Coaching Centre.

What did the court decide?

The appeal was dismissed answering the question framed in favour of the respondent and against the department-appellant. No costs awarded.

Commissioner of Central Excise Vs M/S. Tandem Integrated… — GST and Indirect Tax | Kerala HC (2018)

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“C.R.”

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IN THE HIGH COURT OF KERALA AT ERNAKULAM

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PRESENT

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THE HONOURABLE MR.JUSTICE K.VINOD CHANDRAN

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THE HONOURABLE MR. JUSTICE ASHOK MENON

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FRIDAY ,THE 14TH DAY OF DECEMBER 2018 / 23RD AGRAHAYANA, 1940

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C.E.Appeal.No. 3 of 2011

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AGAINST THE ORDER/JUDGMENT IN ST 813/2009 of CUSTOMS,EXCISE&SERVICE TAX APP.TRIBUNAL,BANGALORE

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APPELLANT/S:

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COMMISSIONER OF CENTRAL EXCISE SERVICE TAX & CUSTOMS, T.C.NO.26/34, PRESS CLUB ROAD,I.C.E.BHAVAN, THIRUVANANTHAPURAM-695001.

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BY ADVS. SRI.THOMAS MATHEW NELLIMOOTTIL, SC, CENTRAL BOARD OF EXCISE & CUSTOMS SRI.P.R.SREJITH, SC CENTRAL BOARD OF EXCISE & CUSTOMS

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RESPONDENT/S:

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M/S. TANDEM INTEGRATED SERVICES "SAIKRISHNA",SANKAR ROAD,SASTHAMANGALAM, THIRUVANANTHAPURAM-10.

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BY ADVS. SMT.NIVEDITA A.KAMATH SRI.ANIL D. NAIR SRI.J.R.PREM NAVAZ SMT. NILOOFAR O. NIZAM

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OTHER PRESENT:

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THIS CENTRAL EXICISE APPEAL HAVING BEEN FINALLY HEARD ON 14.12.2018, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING:

CE Appeal 3/2011

“C.R.”

JUDGMENT

Ashok Menon, J.

The respondent-M/s Tandem Integrated Services is a firm providing commercial training and coaching in various fields. They also have a service tax registration. It is alleged that the respondent had not fully discharged their service tax liability for the financial years 2003-04, 2004-05 and 2005-06 as a “commercial training and coaching centre”. The

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assessee had also provided services falling under the category “franchisee services”, which was brought into the service tax net.

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Summons under Section 14 of the Central Excise Act, 1944 was issued to the Chairman of the respondentfirm. It was revealed that the firm has been imparting

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the following training to students to appear for various examinations:

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a) Engineering/Medical Entrance Examination b) B.Com/M.Com of various Universities c) Off-campus study centre of IGNOU, Manipal, Bharathiar Universities for MBA, MCA, etc. d) Certified Computer courses like CCNA, MCPC

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CE Appeal 3/2011

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e) BSC-IT, BCA, MCA, MIT, BIT of Sikkim/Manipal Universities.

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That apart, training was also provided by the

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assessee-firm, from their various branches across the

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State, to candidates for appearing in L.D.Clerk

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examinations. The assessee had franchisees at

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Kasaragod, Attingal and Payyannur. The accounting was

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centralised at the Head Office. The franchisee

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agreements were entered into by their associate

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company, M/s Tandem Infotech (P) Ltd., with the

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franchisees. Study materials were being provided for the students enrolled in the above-mentioned courses.

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Further, study materials for engineering/medical examinations and others were prepared by their own

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faculty and got printed and despatched to the branches. The assessee had provided taxable services resulting in

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short levy of service tax to the tune of

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Rs.1,47,92,214/- and hence a case was registered.

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The Adjudicating Authority vide order dated 07.07.2009 at Annexure C dropped the proceedings initiated against the assessee for the calculation of

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service tax due under the head “commercial training or

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coaching centre”. The Revenue went on appeal before the Tribunal and vide the impugned order at Annexure A, the appeal was dismissed, confirming the dropping of the proceedings by the Adjudicating Authority, relying on the decisions of this Court in Malappuram District Parallel College Association v. U.O.I., 2006 (2) STR 321 (Ker) and St.Antony's Educational & Charitable Society v. U.O.I., 2006 (1) STR 137 (Ker.) . Reliance was also placed upon Circular No.59/8/2003 dated 20.06.2003 of the CBEC, more specifically in para 2.2.3.

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Aggrieved by Annexure A order dated 03.08.2010 in S.T.No.813/2009 of the Customs, Excise and Service Tax Appellate Tribunal, South Zonal Bench at Bangalore, the Revenue is in appeal.

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The following substantial question of law, as re-framed by us, arises for consideration in this appeal:

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“Whether the Tribunal was right in extending the benefit of Para 2.2.2 and 2.2.3 of the CBEC Circular No.59/8/2003 dated 20.06.2003 to the respondent and thereby holding that the respondent cannot be treated as “commercial training or coaching centre” and the services

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CE Appeal 3/2011

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rendered by them cannot be taxed under the category of “Commercial Training or Coaching Service” ?”

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Sri.P.R.Sreejith and Smt. Nilofar O.Nizam, Counsel appearing for the respondent-assessee.

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It is urged by the learned Senior Standing Counsel that the respondent-firm was a “commercial coaching or training centre” and would therefore fall under the category of “commercial training or coaching service” as per Section 65(105)(zzc) of the Finance Act, 1994 and for the other services provided by the

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respondent, it would fall under the category “franchisee service” as per Section 65(105)(zze) of the Finance Act and therefore service tax levy was on the gross amount charged for the services rendered by them as leviable in terms of Section 67 of the Finance Act. Since the respondent had suppressed the value of taxable services with the intention to evade payment of

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service tax and thereby the proviso to Section 73(1) of the Finance Act was also attracted. Sections 68, 69

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and 70 of the Finance Act read with the Service Tax

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Rules, 1994 were contravened by the assessee for not

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paying service tax at the rates mentioned in Section 66 in such manner and within such period prescribed under Rule 6 of the Service Tax Rules. The assessee is also

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liable to pay interest at appropriate rate.

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The parallel colleges in the State of Kerala were earlier not granted exemption as in the case of regular colleges affiliated to Universities. In

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Malappuram District Parallel College Association case(supra), a learned Single Judge quashed all the proceedings against the parallel colleges, as the levy of service tax for services rendered by parallel colleges would indirectly fall on the students. By providing exemption to regular affiliated Universities allowing the students therein to study free of tax, such a levy was found to be patently discriminatory and violative of Article 14 of the Constitution.

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Section 65(27) of the Finance Act, 2003 reads

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thus:

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“(27) “Commercial training or coaching centre” means any institute or establishment providing commercial training or coaching for imparting skill or knowledge or lesson on any

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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 recognised by law for the time being in force.”

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The argument of the learned Counsel for the

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Revenue is that the respondent is not a regular college

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which grants certificate, diploma or degree for any educational qualification recognised by law and would therefore, not come within the exemption under subsection (27) of Section 65 of the Finance Act, 2003. It was also argued that though parallel colleges were granted the same benefits as University affiliated regular colleges, the assessee herein has activities other than preparing students for University degrees, diplomas and certificates or those issued from institutes, legally recognised. The assessee prepares

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students for entrance tests, competitive tests for employment, etc., all of which are commercial in nature bringing it under the tax net.

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We cannot agree with the learned Counsel for

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the department, after a reading of para 2.2.3 of the

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CBCE Circular dated 20.06.2003; clarifying the

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position, along with the decision of this Court in

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Malappuram District Parallel College Association . The Circular reads thus:

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“Certain doubts have been raised in case of commercial 2.2.3 coaching and training. In this regard, the following is clarified:

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xx xx

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Whether service tax is leviable on institutes providing commercial coaching in addition to recognized degree courses : Some institutes like colleges, apart from imparting education for obtaining recognized degrees/diploma/ certificates, also impart training for competitive examinations, various entrance tests etc. It is clarified that by definition, such institutes or establishments, which issue a certificate, diploma or degree recognized by law, are outside the purview of “commercial training or coaching institute”. Thus, even if such institutes or establishments provide training for competitive examinations etc., such services rendered would be outside the scope of service tax.”

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The assessee herein is also imparting education to obtain recognised degrees/diplomas from Universities

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and that apart the students are also being provided training to appear for competitive examinations, entrance tests, etc. It is not necessary that the respondent-firm should issue a certificate, diploma or degree. The students given coaching by the appellant

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are issued with certificates, diplomas and degrees, as issued by the Universities; identical to regular colleges and parallel colleges also. The students are being prepared for courses and are imparted training to appear for competitive examinations as well. The decision of this Court in Malappuram District Parallel College Association (supra) would squarely apply to the respondent-firm, since they are imparting coaching for courses leading to recognised certificates, diplomas and degrees issued by lawfully constituted academic bodies. Hence when such institutes also carry on training schedules to prepare students for competitive exams, categorised as “commercial coaching”; as per the clarification issued by the CBCE, they stand exempted.

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14. The decision of this Court in Malappuram

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District Parallel College Association (supra) was not challenged by the Revenue and has become final. The

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respondent assessee also, is brought within the exemption as an institute, center or establishment imparting coaching leading to issuance of recognised certificates, degrees or diplomas. The contention of

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the Revenue is that the clarification intended only

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coverage of regular colleges who also carry on coaching, for entrance exams and the major activity of the appellant herein is commercial coaching. We cannot agree in the context of Malappuram District Parallel College Association (supra). When the said decision had become final and having equated the assessee respondent with regular colleges; the clarification also would have to be given full play. It cannot but be noticed that the clarification issued by the CBCE, could have been altered after the judgment of this Court; which was not done. In interpreting the provision we cannot ignore the clarification, which is binding on the department and its officers. The clarification has to be read along with the decision of this Court.

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Franchisee services provided by the respondent has been excluded by the Adjudicating Authority as well as the Tribunal from exemption. It is only the service

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tax pertaining to “commercial training or coaching services” that the exemption is extended. We find no infirmity, whatsoever, in the impugned order of the

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Tribunal and the appeal is only to be dismissed answering the question framed in favour of the respondent and against the department-appellant. No costs.

Sd/-

K.VINOD CHANDRAN

JUDGE

Sd/-

ASHOK MENON

JUDGE

dkr

CE Appeal 3/2011

APPENDIX

APPELLANT(S)' ANNEXURES:

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ANNEXURE A	COPY OF 03.08.20 CUSTOMS, TRIBUNAL	THE 10 IN EXCIS , SOUTH	FINAL APPEA E AN ZONAL	ORDER NO.1095/2010 DATED L NO.ST/813/2009 OF THE D SERVICE TAX APPELLATE BENCHA, BANGALORE.
ANNEXURE B	COPY OF DATED 22	THE SHOW .04.2008	CAUSE .	NOTICE NO.20/2008/ST(COMMR)
ANNEXURE C	COPY OF (COMMR)	THE DATED 07	ORDER .07.20	-IN-ORIGINAL NO.08/2009-ST/ 09.
ANNEXURE D	COPY OF COURT OF PARALLEL OF INDIA	THE JUDG KERALA COLLEGE .	MENT IN THE ASSOC	DATED 31.08.2005 OF THE HIGH CASE OF MALAPPURAM DISTRICT IATION AND OTHERS VS. UNION

Commissioner of Central Excise v. M/S. Tandem Integrated Services

Case brief

What is this about?

What did the court decide?

Commissioner of Central Excise v. M/S. Tandem Integrated Services

Case brief

What is this about?

What did the court decide?

What the court decided

A compact analysis

Issues for consideration

Cases cited

Statutes considered

Parties & counsel

Coram

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