Tribunal exempts study material value from service tax calculation, upholds penalty with reduced amount.

The Tribunal ruled in favor of the appellants, finding that the value of study material supplied should not be included in the gross value of services for service tax calculation. The appellants were granted exemption under Notification No. 12/2003-S.T. for the value of goods sold. However, the denial of Cenvat credit was upheld, with the Tribunal allowing the appellant to pay a reduced penalty amount.

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Issues:
1. Whether the value of study material supplied by appellants should be included in the gross value of services for service tax calculation.
2. Whether the appellants are eligible for exemption under Notification No. 12/2003-S.T. for the value of goods sold.
3. Denial of Cenvat credit amounting to &8377; 16,762/-.

Analysis:
1. The Department contended that the study material supplied by the appellants to students should be included in the gross value of services for service tax calculation. The Department issued a show cause notice demanding differential tax along with penalties. The Commissioner (Appeals) upheld the order, leading to the present appeal. The appellants argued that as they were not the owners of the study material and were selling books from another company, the value of the books should not be added to the value of their coaching services. They claimed exemption under Notification No. 12/2003-S.T. The Tribunal found that the appellants were providing coaching services and had purchased the study material from another company, thus ruling in favor of the appellants.

2. The appellants relied on Notification No. 12/2003-S.T. for exemption, which exempts the value of goods sold by the service provider to the recipient of service from service tax, subject to specific conditions. The Department argued that the exemption was applicable only to standard textbooks, as per a Circular issued by CBEC. The Tribunal held that since the books sold were from another entity and the term "standard text books" was not specified in the notification, the appellants were entitled to the exemption under Notification No. 12/2003-S.T.

3. Regarding the denial of Cenvat credit, the Tribunal noted that the credit was claimed for invoices received before the Cenvat Credit Rules, 2004 came into force. As per Rule 3 of the Cenvat Credit Rules, credit could only be taken for services received after a certain date. The Tribunal found no merit in the appellant's argument and upheld the denial of Cenvat credit. However, the Tribunal provided the appellant with the option to pay a reduced penalty amount, allowing the appeal partially.

In conclusion, the Tribunal ruled in favor of the appellants regarding the inclusion of study material in the gross value of services and the exemption under Notification No. 12/2003-S.T., but upheld the denial of Cenvat credit, offering a reduced penalty amount.

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