2023 (11) TMI 312 - AT - Service Tax

Flight training institutes with DGCA recognition under Aircraft Act 1934 exempt from service tax on coaching services

M/s. Orient Flight School Versus Commissioner of GST & Central Excise, Chennai

CESTAT Chennai held that flight training institutes providing courses recognized by DGCA under Aircraft Act, 1934 are not liable for service tax under ... Levy of Service tax - ‘commercial’ institute or not - Commercial Coaching or Training Services - whether the courses imparted by the appellant leads to the grant of a educational qualification recognized by law and is therefore outside the purview of levy of service tax? - period prior to 01.07.2012 and after - service tax on Management, Maintenance and Repair Services for the period 2005-2007 - invocation of extended period of limitation for the period 2005-2010. Whether the course imparted by appellant institute would fall within the meaning of ‘recognized by law’? - HELD THAT:- The Hon’ble High Court of Delhi in the case of Indian Institute of Aircraft Engineering [2013 (5) TMI 592 - DELHI HIGH COURT] has considered precisely the very same issue, so as to reach the conclusion that the clarification issued by the board vide circular dt. 11.5.2011 is invalid. The very same issue as to whether Flight Training Institute and Aircraft Engineering Institutes are liable to service tax under ‘Commercial Training or Coaching Service’ was considered by the Hon’ble Allahabad High Court in the case of CCE, Cus., ST Vs Garg Aviations Ltd. COMMISSIONER OF CENTRAL EXCISE, CUSTOMS & SERVICE TAX VERSUS M/S. GARG AVIATIONS LTD. [2014 (5) TMI 955 - ALLAHABAD HIGH COURT] - The Hon’ble High Court followed the decision of the Hon’ble High Court in the case of Indian Institute of Aircraft Engineering [2013 (5) TMI 592 - DELHI HIGH COURT] and held that the activity is not taxable. This case was appealed to Hon’ble Supreme Court, and the appeal was dismissed on 6.2.2018. Thus, the issue stands covered by the above judgments which have categorially held that these institutes are not liable to pay service tax under ‘Commercial Coaching or Training Services’. The words ‘recognized by law for the time being in force’ cannot be construed so as to restrict its’ coverage only to Universities and Educational Boards. There can be other statutes which recognize certain degree, diploma, certificate or qualification. The DGCA is a statutory authority exercising powers conferred on it under the Aircraft Act, 1934 and the Rules made thereunder. Consequently, if a course completion certificate is recognized by DGCA for any specific purpose, in pursuance to the provisions contained in Aircraft Act / Rules, then the said certificate will satisfy the condition of having been recognized by law for the time being in force - the demand of service tax for the period after 1.7.2012 also alleging that appellant is imparting Commercial Coaching or Training services cannot sustain and requires to be set aside. Management, Maintenance and Repair Services - HELD THAT:- It is found that the argument put forward by appellant on this services to be too flimsy to be acceptable. The appellant can render services on the basis of oral contract also - For these reasons, on merits the appellant is liable to pay service tax on Maintenance or Repair Services for the period 2005-06 (Rs.90,848/-) and 2006-07 (Rs.26,243/- Total Rs.1,17,091/-). Time Limitation - HELD THAT:- There is no specific allegation of suppression of facts brought out against the appellant alleging intent to evade payment of tax. Further though SCN was issued in 2010, the same has been adjudicated with much delay only on 31.12.2021. For these reasons the SCN issued invoking the extended period cannot sustain and requires to be set aside. The impugned orders are set aside. The appeals are allowed. Issues Involved:1. Liability to pay service tax under 'Commercial Coaching or Training Services' for the period before and after 01.07.2012.2. Liability to pay service tax under 'Management, Maintenance, and Repair Services' for the period 2005-2007.3. Invoking of the extended period for the demand (2005-2010).4. Legality and propriety of the penalties imposed.Summary:1. Commercial Coaching or Training Services:The appellant, a society engaged in flight training, was investigated for providing taxable services without service tax registration. The Department argued that the appellant's activities fall under 'Commercial Training or Coaching' as defined in Sections 65(26), 65(27), and 65(105)(zzc) of the Finance Act, 1994. The appellant contended that their training leads to qualifications recognized by law, thus exempt under Notification No.33/2011-ST. The Tribunal referred to the Delhi High Court's judgment in Indian Institute of Aircraft Engineering vs. Union of India, which quashed a CBEC circular deeming such training taxable. The Tribunal concluded that the appellant's courses, approved by DGCA, lead to qualifications recognized by law and are exempt from service tax.2. Management, Maintenance, and Repair Services:For the period 2005-2010, the Department demanded service tax for repair services rendered by the appellant. The appellant argued there were no contracts for these services. The Tribunal found this argument flimsy, stating that services can be provided based on oral contracts. However, the demand was set aside due to the extended period being invoked without specific allegations of suppression of facts.3. Extended Period for Demand:The Tribunal noted that the demand for the period 2005-2010 was issued after a significant delay and without specific allegations of suppression of facts. Therefore, the invocation of the extended period was not justified, and the demand was set aside.4. Penalties:Given the findings on the main issues, the penalties imposed on the appellant were also set aside.Conclusion:The Tribunal set aside the impugned orders and allowed the appeals with consequential reliefs, if any.