2012 (6) TMI 721 - AT - Service Tax

Appeal granted: Appellant exempt from service tax on study material.

The Tribunal allowed the appeal, setting aside the order confirming a demand of service tax against the appellant. The dispute centered on whether study ... Exemption of value of goods and materials sold by service provider from taxable service - interpretation of Notification No.12/2003-ST - scope and effect of administrative clarification by CBEC Circular - includibility of study material in assessable value of commercial coaching servicesExemption of value of goods and materials sold by service provider from taxable service - interpretation of Notification No.12/2003-ST - scope and effect of administrative clarification by CBEC Circular - includibility of study material in assessable value of commercial coaching services - Whether the appellant is entitled to exemption under Notification No.12/2003-ST dated 20.6.2003 for the value of study material sold to it, or whether such material is includible in the assessable value of commercial coaching services - HELD THAT: - Notification No.12/2003-ST exempts from the value of taxable services an amount equal to the value of goods and materials sold by the service provider to the recipient, subject to documentary proof of the value. The department's circular sought to confine the exclusion, in the case of commercial training and coaching institutes, to sales of 'standard textbooks' only. The Tribunal followed its earlier decision in Pinnacle which held that the expression 'standard textbooks' does not appear in the notification and that the circular's narrower description cannot supplant the clear terms of the notification. In the present case the study material was purchased by the appellant from a third party publisher (Chate Publications Pvt. Ltd.) and the value was shown separately in the invoice, satisfying the documentary requirement of the notification. Applying the reasoning in Pinnacle, the Tribunal held that there is no reason to deny the benefit of Notification No.12/2003-ST and that the value of those goods is to be excluded from the taxable value of the service. [Paras 6, 7]The appellant is entitled to the benefit of Notification No.12/2003-ST dated 20.6.2003; the demand confirmed by the adjudicating authority is set aside and the appeal is allowed; cross objections disposed of accordingly.Final Conclusion: The Tribunal allowed the appeal, holding that Notification No.12/2003 ST applies to the value of study material sold to the appellant (documentary proof having been produced), and set aside the demand confirmed by the adjudicating authority. Issues:1. Challenge to the order confirming a demand of service tax under the Finance Act, 1994.2. Interpretation of Notification No.12/2003 regarding exemption from service tax for goods and materials sold by service providers.3. Dispute over whether study material provided by the appellant is includible in the assessable value of taxable services.4. Comparison with a previous Tribunal decision regarding the applicability of the exemption under Notification No.12/2003.Analysis:1. The appellant challenged the order confirming a demand of service tax amounting to Rs. 2,82,46,874 along with interest and penalties under Sections 76 and 78 of the Finance Act, 1994. The appellant, engaged in commercial training and coaching services, was investigated for not including the value of study material provided to students in the assessable value of services. The exemption under Notification No.12/2003 was contested, leading to the issuance of a show cause notice and subsequent confirmation of the demand.2. The main contention revolved around the interpretation of Notification No.12/2003, which exempts the value of goods and materials sold by service providers from service tax, subject to specific conditions. The appellant argued that they fulfilled the conditions by separately indicating the value of material supplied in the invoice, hence claiming entitlement to the exemption. Reference was made to a Tribunal decision in a similar case where the benefit of the notification was allowed to the assessee.3. The dispute over the inclusion of study material in the assessable value of taxable services was crucial. The appellant asserted that the study material was sold separately by a third party and not integral to the service provided, thus qualifying for the exemption under Notification No.12/2003. In contrast, the respondent contended that since the study material was provided as part of the service, its value should be included in the assessable value, disqualifying the appellant from the exemption.4. Drawing parallels with a previous Tribunal decision in the case of Pinnacle, the Tribunal analyzed the applicability of the exemption under Notification No.12/2003. The Tribunal noted that the study material was purchased from a third party, similar to the situation in the previous case, leading to the conclusion that the appellant was entitled to the benefit of the notification. Consequently, the impugned order was set aside, and the appeal was allowed, with the cross objections disposed of accordingly.