2007 (8) TMI 71 - AT - Service Tax

Tribunal grants waiver & stay in service tax case for coaching institutes

The Tribunal granted a waiver of pre-deposit and stay of recovery to M/s. Thanjai Study Centre and M/s. Trichy Institute of Management Studies (P) Limited ... Exemption to educational institutions under Notification No. 10/2003-S.T. - service tax on commercial training and coaching - discrimination under Article 14 - prima facie sustainability of demand - waiver of pre-deposit and stay of recoveryExemption to educational institutions under Notification No. 10/2003-S.T. - service tax on commercial training and coaching - discrimination under Article 14 - prima facie sustainability of demand - Whether the coaching services rendered by the appellants fall on the same footing as regular colleges and are prima facie covered by the exemption under Notification No. 10/2003-S.T., making the demands of service tax and penalties unsustainable. - HELD THAT: - The Tribunal found that the institutes render the same service as regular colleges affiliated to the University and are comparable to the parallel colleges considered by the High Court of Kerala. The distinction drawn by the lower authority-that exemption does not apply because the charges are collected directly from the students-is not proper in the facts of these cases because, under the memorandum of understanding, part of the fee is payable to the University and part to the institute, and the institutes provide infrastructure and faculty for the courses. In view of these facts and the comparable treatment of regular affiliated colleges under the Notification, the Tribunal concluded that, prima facie, the demands of tax and penalties are not sustainable. [Paras 2, 4]Prima facie the demands of tax and penalties are not sustainable and the appellants are to be treated on the same footing as regular colleges for the purpose of the exemption.Waiver of pre-deposit and stay of recovery - prima facie sustainability of demand - Whether pre-deposit should be waived and recovery stayed pending disposal of the appeals. - HELD THAT: - Having held that the demands and penalties are prima facie unsustainable, the Tribunal directed a complete waiver of pre-deposit and granted stay of recovery of the demand of tax and penalties until the appeals are finally disposed of. [Paras 4]Complete waiver of pre-deposit and stay of recovery of tax and penalties till disposal of the appeals.Final Conclusion: The Tribunal prima facie accepted that the appellants' coaching services are comparable to regular affiliated colleges and that the demands are unsustainable; accordingly, it granted complete waiver of pre-deposit and stayed recovery of the assessed tax and penalties until the appeals are disposed of. Issues:Waiver of pre-deposit and stay of recovery sought by M/s. Thanjai Study Centre and M/s. Trichy Institute of Management Studies (P) Limited.Analysis:1. Nature of Services Provided by the Institutes:The applicants are engaged in coaching individuals for examinations conducted by Alagappa University, offering courses like B.A., B.Com., M.B.A., etc., similar to regular colleges affiliated with the University. The study centers operate under Memoranda of Understanding with the University, responsible for infrastructure and faculty provision. Fees collected by the institutes are shared with the University, with students paying amounts directly to both the University and the institute.2. Service Tax Demands and Exemption Claim:After issuing notices, service tax demands were made on fees collected by the institutes under 'Commercial Training and Coaching.' The demands were based on the argument that the exemption under Notification No. 10/2003-S.T. does not apply if charges are paid directly to the training center by the students. The appellants contended they should be exempted, citing similarity to regular colleges exempted under the same notification. Reference was made to a Kerala High Court judgment highlighting discriminatory treatment of parallel colleges regarding service tax.3. Arguments and Findings:The ld. Consultant argued for exemption based on similarities with regular colleges, emphasizing the unfairness of denying exemption. The ld. DR reiterated the findings in the impugned order. The Tribunal examined the case records and submissions, noting that the institutes provided services akin to regular colleges or parallel colleges mentioned in the Kerala High Court judgment. The distinction made by the lower authority to deny the exemption was deemed improper, as the exemption extends to colleges collecting fees directly. Despite the institutes collecting fees entirely from students, a portion was payable directly to the University, with the balance going to the institutes per the MOU.4. Decision and Rationale:Considering the facts and circumstances, the Tribunal found the demands of tax and penalties not sustainable. Consequently, a complete waiver of pre-deposit and stay of recovery of tax and penalties was granted until the appeals were disposed of. The judgment was dictated and pronounced in open court, emphasizing the prima facie merit in favor of the appellants' case, aligning with the exemption granted to regular colleges under Notification No. 10/2003-S.T.