2007 (9) TMI 658 - AT - Service Tax

Service Tax Demand Upheld on Coaching Classes by Trust for University Students

The Appellate Tribunal upheld the demand of service tax amounting to Rs. 71,200 on coaching classes conducted by a trust for students of Alagappa ... Service tax on commercial training and coaching centre - Prima facie case for waiver of pre-deposit - Pre-deposit as condition for interim relief - Waiver of pre-deposit and stay of recovery of penalty upon compliance - Charitable trust income tax exemption not a substitute for service tax exemptionService tax on commercial training and coaching centre - Prima facie case for waiver of pre-deposit - Charitable trust income tax exemption not a substitute for service tax exemption - Pre-deposit of the service tax demand directed because the appellants have not established a prima facie case against the demand made under the category 'commercial training and coaching centre' for the period July'03-March'05. - HELD THAT: - The appellants, a trust conducting coaching classes unaffiliated to the university, were assessed to service tax under the 'commercial training and coaching centre' category for July'03-March'05 and penalties were imposed. Reliance on the assessee's income tax exemption was not supported by any specific service tax exemption notification. Judicial decisions cited by the appellants were inapposite on the facts and/or periods considered: the Kerala High Court decision was confined to peculiar facts of parallel colleges in Kerala and did not purport to enlarge its application beyond those facts; the Gujarat High Court decision dealt with the pre-1-7-2003 position and therefore did not assist in respect of demands from 1-7-2003 when the service tax levy on commercial training or coaching centres was introduced. In view of the absence of any established entitlement to relief on the merits at the prima facie stage, the Tribunal declined to grant waiver of pre-deposit and required a pre-deposit of the tax demanded, while offering conditional relief in respect of penalties upon compliance.Appellants directed to pre-deposit the service tax amount within eight weeks; on due compliance there will be waiver of pre-deposit and stay of recovery in respect of the penalties.Final Conclusion: The Tribunal, finding no prima facie case to interfere with the demand of service tax for July'03-March'05, directed pre-deposit of the tax within eight weeks and granted conditional waiver/stay of penalties upon such compliance. Issues involved: Demand of service tax u/s 65(27) of the Finance Act, 1994 for the period July'03-March'05 on coaching classes conducted by a trust, applicability of exemption under Income-tax Act, reliance on judgments of Kerala High Court and Gujarat High Court.Demand of Service Tax:The Appellate Tribunal found that the lower authorities had demanded service tax of Rs. 71,200 from the appellants, who were conducting coaching classes for students of Alagappa University. The demand was based on the total amount of fees collected from the students attending the coaching program. The Tribunal directed the appellants to pre-deposit the service tax amount within 8 weeks from the date of the order, failing which there would be no waiver of pre-deposit and stay of recovery in respect of the penalties.Exemption under Income-tax Act:The appellants claimed exemption from payment of income tax under the Income-tax Act as they were a charitable trust. However, the counsel did not cite any exemption notification in respect of service tax. The Tribunal noted that the exemption under the Income-tax Act did not automatically extend to service tax liabilities unless specifically provided for.Judgments of Kerala High Court and Gujarat High Court:The counsel for the appellants referred to the Kerala High Court's judgment in the case of Malappuram District Parallel College Association v. Union of India, where discrimination between regular and parallel colleges in Kerala regarding levy of service tax was highlighted. The Tribunal clarified that this judgment was specific to the facts of parallel colleges in Kerala and not meant to be a precedent for educational institutions outside Kerala. Additionally, the counsel mentioned the Gujarat High Court's judgment in Noble Institute (Education) (P.) Ltd. v. Union of India, which dealt with the levy of service tax on educational institutions prior to 1-7-2003, whereas the present case involved a demand for tax from 1-7-2003 onwards.Compliance and Reporting:The Tribunal directed the appellants to report compliance on 2-11-2007, emphasizing the importance of pre-depositing the service tax amount within the stipulated timeframe to avail waiver and stay of recovery in relation to the penalties imposed under various provisions of the Finance Act.