2022 (11) TMI 598 - AT - Service Tax

Tribunal upholds exemption for study materials from service tax despite CBEC circular

M/s Lakshya Education Solutions Pvt. Ltd. Versus The Commissioner (Appeals), Customs, Central Excise & Service Tax, Bhopal (M. P.).

The Tribunal held that the CBEC circular could not modify the exemption notification issued by the Central Government under the Finance Act, 1994. It was ... Exemption from service tax - Valuation of goods - text books - no maximum retail price printed - whether the exemption Notification No. 12/2003-ST dated 20.06.2003 was available to the appellant for study materials which it had provided which, undisputedly, were not standard text books printed with maximum retail price but were material printed by the appellant and bound together through spiral binding? - CBEC circular dated 20.06.2003 - HELD THAT:- It is evident from the exemption notification that the exemption was available from so much of the value of all the taxable services as is equal to the value of goods and materials sold by the service provider to the recipient of service subject to the condition that there is documentary proof specifically indicating value of the said goods and materials. The exemption notification does not place any restriction on the type of goods or materials which are entitled to the exemption. As long as there is documentary proof, indicating the value of the goods and materials sold by the service provider to the service recipient, their value gets excluded from the taxable value and hence no service tax will be leviable on such goods. In respect of commercial coaching and training services, the materials in question will, obviously, be the study materials which the appellant has undisputedly provided. The documentary evidence of value of such materials is also not in dispute. The exemption notification is a delegated legislation made under the power of granting exemption available to the Central Government and not to anybody else, including the Central Board of Excise and Customs [CBEC]. Whenever any delegated legislation is framed, it is placed before both houses of the Parliament along with a note. Thereafter, the “Committee on subordinate legislation” of each house of the Parliament examines the notification so issued to ensure that it is consistent with the powers delegated by the law to the Government under the Act. The impugned order passed denying the benefit of exemption notification relying upon the CBEC Circular dated 20.06.2003 cannot be sustained as the CBEC has no power to modify the scope of the exemption notification No. 12/2003-ST dated 20.06.2003 issued by the Central Government - Appeal allowed. Issues:Interpretation of exemption notification for service tax on study materials provided by coaching institute.Analysis:The case involved a coaching institute providing training for IIT (JEE)/AIEEE exams, facing a demand for service tax on study materials provided to students. The dispute centered on whether the exemption under Notification No. 12/2003-ST applied to the study materials, which were not standard textbooks with printed maximum retail prices. The appellant had paid service tax only on coaching fees, not on study materials. The Revenue argued that the exemption did not apply based on a CBEC circular. The Commissioner (Appeals) upheld the demand and imposed penalties, leading to the present appeal.The key question was whether the exemption notification covered the study materials provided by the appellant. The exemption, as per the notification, applied to the value of goods and materials sold by the service provider to the recipient, subject to documentary proof. The dispute arose from the CBEC circular restricting the exemption to standard textbooks with printed prices. The Tribunal held that the circular, being an administrative instruction, could not modify the scope of the exemption notification issued by the Central Government under Section 93 of the Finance Act, 1994.Referring to previous case law, the Tribunal emphasized that the CBEC had no authority to impose conditions beyond what was specified in the exemption notification. The Tribunal found that the exemption notification did not impose restrictions on the type of goods eligible for exemption as long as there was documentary proof of their value. Therefore, the denial of the exemption based on the CBEC circular was deemed incorrect. The Tribunal allowed the appeal, setting aside the impugned order and granting consequential benefits to the appellant.In conclusion, the Tribunal clarified that the CBEC circular could not override the exemption notification issued by the Central Government. The decision reaffirmed that the scope of exemptions granted under delegated legislation must align with the statutory provisions, and administrative instructions cannot impose additional conditions beyond what the law specifies.