2025 (12) TMI 371 - HC - Service Tax

Revenue appeal on post-2009 service tax dismissed as no substantial question of law or factual perversity shown

HC dismissed the Revenue's appeal, holding that no substantial question of law arose regarding levy of service tax on alleged post-2009 services linked to ... Levy of service tax - materials sold by the Respondent - accompanying services were also provided or not - HELD THAT:- Since the taxability is no longer an issue for consideration in this case, the question as to whether the Respondent provided services or not post the year 2009, would be a factual dispute based on the analysis of the documents. Obviously if the Respondent was not rendering any services post 2009, service tax would not be liable to be paid. The CESTAT has also noted that for the subsequent years i.e., 2013-14 and 2014-15, the Department has in fact accepted and not challenged the decision that service charge would not be payable. This Court is therefore of the view that there is no substantial question of law that arises in the present appeal. Appeal dismissed. 1. ISSUES PRESENTED AND CONSIDERED 1.1 Whether delay in filing and re-filing the appeal ought to be condoned. 1.2 Whether, in view of the factual finding of change in business model from April 2009, the Respondent remained liable to service tax under 'Commercial Training & Coaching service' and 'Franchise service' for the period 2009-10 to 2012-13. 1.3 Whether the order of the Tribunal, restricting service tax liability to the period up to 2008-09 and setting aside the demand for 2009-10 to 2012-13, gave rise to any substantial question of law warranting interference in appeal. 2. ISSUE-WISE DETAILED ANALYSIS Issue 1 - Condonation of delay in filing and re-filing Interpretation and reasoning 2.1 The Court noted the applications seeking condonation of delay in filing the affidavit of appeal and in re-filing the appeal, and examined the reasons stated therein. Conclusions 2.2 Delay in filing the affidavit of appeal and in re-filing the appeal was condoned; the applications were disposed of. An exemption application was allowed subject to all just exceptions. Issue 2 - Service tax liability post-April 2009 in light of changed business model Legal framework (as discussed) 2.3 The Tribunal had proceeded on the basis that taxability of the relevant service per se was not in dispute, as recorded in para 6.1 of the impugned order. The discussion before the Court therefore narrowed to whether services were in fact rendered post-2009 so as to attract service tax, and to the correctness of the Tribunal's approach in that regard. Interpretation and reasoning 2.4 The Tribunal recorded that up to 2008-09, the Respondent extended courses online and offline through self-owned and authorised training centres, involving online access to reading material, interaction with experts and students, and conducting tests. Invoices had separate components for online software lease, website space lease, online education and university fund, and service tax was collected and paid on 'online education'. 2.5 From April 2009, the Tribunal found a change in business model: the Respondent converted to supply of CDs, DVDs, e-books, power-point presentations, etc., with no interactive sessions and no courses conducted through authorised training centres; customers merely purchased course material as goods. On this basis, the Tribunal treated the post-2009 activity as sale of goods not involving provision of service. 2.6 The Tribunal further noted that for the period from April 2009 the Respondent stopped collecting and depositing service tax, and it considered balance sheets and relevant documents to verify this factual position. It also noticed that for subsequent periods 2013-14 and 2014-15, show cause notices on the same issue had been decided in favour of the Respondent and were not challenged by the Department, thereby attaining finality. 2.7 On this factual foundation, the Tribunal held that demand was sustainable only for 2007-08 and 2008-09, and that, in view of the changed business model with effect from April 2009, the service tax demand for 2009-10 to 2012-13 and the demand under 'Franchise service' could not survive. 2.8 The Court noted that the Adjudicating Authority had confirmed service tax demands for 2007-08 to 2012-13, together with interest and penalties, but that the Tribunal had modified this by upholding the demand only for 2007-08 and 2008-09, remanding quantification on cum-duty basis for that period, and setting aside the remaining five show cause notices. 2.9 The Court observed that whether services were rendered post-2009 was a factual question turning on analysis of documents and conduct of the parties. It accepted that 'obviously if the Respondent was not rendering any services post 2009, service tax would not be liable to be paid.' Conclusions 2.10 The Court accepted the Tribunal's factual assessment that, post-April 2009, the Respondent's activity comprised supply of study material (CDs, DVDs, e-books, presentations) without associated training services or authorised training centres, and that for that period the levy of service tax was not sustainable. 2.11 The Court did not disturb the Tribunal's decision to uphold the demand, with interest and penalty, only for 2007-08 and 2008-09, subject to re-quantification on cum-duty basis, and to set aside the service tax demands (including under 'Franchise service') for 2009-10 to 2012-13. Issue 3 - Existence of a substantial question of law in challenge to the Tribunal's order Interpretation and reasoning 2.12 The Appellant argued that the Respondent continued to provide the same services even after 2009 and that customers receiving CDs/DVDs required support, thus making service tax payable. The Respondent maintained that, post-2009, no training was rendered through authorised training centres and only material/content was supplied, hence no service tax was leviable. 2.13 The Court noted that the Tribunal had 'gone into the facts and details' and had considered balance sheets and other relevant documents. The Tribunal's findings on the nature of activity post-2009, including the absence of authorised training centres and the characterisation of the post-2009 activity as sale of goods, were treated as findings of fact. 2.14 The Court further relied on the Tribunal's observation that show cause notices for 2013-14 and 2014-15 on the same issue had been decided in favour of the Respondent and had not been challenged by the Department, indicating departmental acceptance of non-taxability of the post-2009 model in subsequent years. 2.15 The Court, referring to para 6.1 of the Tribunal's order, recorded that 'the taxability of the service, as provided by the appellant, is not in dispute'; the remaining controversy turned on factual determination of whether any taxable service was provided after 2009 under the changed business model. Conclusions 2.16 The Court held that the question of taxability in principle was not in dispute; the Tribunal's conclusion that no taxable service was rendered post-2009 was based on appreciation of facts and documents. 2.17 As the Tribunal's findings for the post-2009 period were purely factual, supported by material on record, and consistent with the Department's own acceptance for 2013-14 and 2014-15, the Court held that no substantial question of law arose from the Tribunal's order. 2.18 The appeal was dismissed and all pending applications were disposed of.