2026 (1) TMI 518 - AT - Service Tax

Coaching institute's separately invoiced study materials/books: can their sale value be excluded from coaching service tax under Notification 12/2003-ST? Appeal allowed

The dominant issue was whether the value of study material/books sold by a coaching institute could be included in the taxable value of Commercial ... Classification of services - Commercial Training or Coaching Service or not - sale of books by the appellant, when the sale value of books are separately identified, documented and recorded in the invoice issued - HELD THAT:- The Department has mainly relied on Circular No. 12/2003ST to include the value of the books and materials sold in the gross value for charging service tax under the category of CTCS. In this case, admittedly, the books and materials were being sold to various students and there is a separate billing for the same as well as it’s accountal in the Profit & Loss Account of the appellant. There is nothing on record that the said materials and books were being compulsorily sold to students and it was an option to the students, who may purchase and use such materials. No doubt, these materials were not any standard text books or for that matter carrying any specific price thereon and were not procured from any independent publisher etc. It is also an admitted fact that said books were prepared by their group company and have not been basically purchased from any other agency etc. Reliance placed by the appellant on the judgment of Cerebral Learning Solutions Pvt Ltd., Vs Commr of C.Ex, Indore [2013 (4) TMI 527 - CESTAT NEW DELHI] is applicable to the facts of the case. In this case, the Tribunal was dealing with similar factual matrix where the appellant was running institute for providing the coaching and paying service tax thereon and was also engaged in selling the printed materials. There is a force in the argument that the scope of notification cannot be curtailed by the Circular dated 20.06.2003 and that the notification cannot restrict exemption only to standard textbooks or which are priced etc. - the fact remains that Notification No. 12/2003-ST allows exclusion of value of certain goods which are forming part of the service, subject to compliance with certain conditions. In this case, the appellants have clearly established that they were billing separately and once they were billing the same, obviously there was a price attributable to such materials, even though they might not have been independently or specifically stamped or mentioned on the said books or materials. Thus, relying on various judgments including the Cerebral Learning Solutions Pvt Ltd. as upheld by the Hon’ble Supreme Court, and the factual matrix, it is found that in these appeals, the appellants would be entitled for the benefit of Notification No. 12/2003-ST for exclusion of value pertaining to study material etc., sold by the appellant under the cover of separate invoice. The orders passed by the Adjudicating Authority, as well as Commissioner (Appeals) are liable to be set aside - Appeal allowed. 1. ISSUES PRESENTED AND CONSIDERED 1) Whether, for levy of service tax under Commercial Training or Coaching Service, the value of study material/books sold by the coaching institute and shown under separate billing/accounting is includable in the gross value of the taxable service, and if includable, whether the assessee is nevertheless entitled to exclusion of such value under Notification No. 12/2003-ST upon satisfying its conditions. 2) Whether the Department can deny the benefit of Notification No. 12/2003-ST by restricting it (through the Circular dated 20.06.2003) only to 'standard text books'/priced books, despite separate invoicing and documentary segregation of the value of study material. 2. ISSUE-WISE DETAILED ANALYSIS Issue 1: Includability of study material value in CTCS and availability of deduction/exclusion under Notification No. 12/2003-ST Legal framework (as discussed by the Court): The Court considered Notification No. 12/2003-ST which permits exclusion of the value of goods/materials from the taxable value, subject to conditions. The Court also noted that with effect from 20.06.2012, Notification No. 12/2003-ST stood rescinded upon coming into force of the negative list regime and that Section 65B(44) excludes activities constituting transfer of title in goods by way of sale; however, the decision ultimately turned on entitlement to exclusion under Notification No. 12/2003-ST on the established facts. Interpretation and reasoning: The Court found it admitted that books/materials were sold to students with separate billing and were separately accounted in the Profit & Loss Account. The record did not show that purchase of such materials was compulsory for students. Although the materials were not 'standard text books', did not bear printed prices, and were prepared by a group company rather than procured from an independent publisher, the Court held the decisive consideration under the notification was compliance with its conditions-particularly documentary proof indicating the value of the goods and absence of any allegation of availing CENVAT credit on such goods. The Court treated separate invoices and separate accounting as sufficient documentary segregation of value. The Department's reliance on the circular-based approach was not accepted to defeat the notification benefit where the notification conditions were met. Conclusions: The Court concluded that the study material value was, in principle, connected with and includable in the gross value of coaching because it was relevant and helpful in enlarging the scope of classroom training; however, the appellant was entitled to exclusion of the value of such study material/books under Notification No. 12/2003-ST since the materials were sold under separate invoices with separately identifiable value and there was no allegation of CENVAT credit being taken. Consequently, the demands and penalties founded on inclusion of the separately invoiced study material value were unsustainable and the impugned orders were set aside. Issue 2: Whether the Circular could curtail the scope of Notification No. 12/2003-ST to only 'standard text books'/priced books Legal framework (as discussed by the Court): The Court examined the Department's reliance on Circular No. 59/8/2003-ST to deny exclusion on the premise that only 'standard text books'/priced books could be excluded and that institute-prepared study material formed an integral part of coaching. Interpretation and reasoning: The Court accepted the contention that the scope of the notification cannot be curtailed by the circular, and that the notification does not restrict exclusion only to standard or priced text books. The Court reasoned that once separate invoicing existed, a price/value was attributable to the materials even if not stamped/printed on the books, and therefore the notification could operate on that documented value. The Court also relied on the consistent tribunal view on similar facts (including the decision upheld by the Supreme Court) to apply the notification benefit where separate sale/value identification was established. Conclusions: The Court held that denial of Notification No. 12/2003-ST benefit merely because the items were not standard/price-printed text books, or because the circular suggested a narrower scope, was not justified. The appellant satisfied the notification's operative requirements through separate documentation and value identification; hence exclusion was allowable and the contrary view in the impugned orders could not stand.