TaxTMI 
TaxTMI 
2019 (5) TMI 230
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.... HYD-EXCUS-004-COM-021-17-18 dt.17.11.2017 3. Appeal filed by Varsity Education Management Pvt Ltd (herein after referred to as VEMPL) is against confirmation of demands raised in the show cause notices dated 24.4.2014 and 23.4.2015; appeal filed by K12 Education Management Pvt Ltd (herein after referred to as KEMPL) is against show cause notices dated 22.4.2014 and 20.4.2015 while in appeal filed by the department is against show cause notice dated 6.7.2017. The period involved in the appeals of VEMPL and KEMPL are 2011-12 to 2012-13 and 2013-2014 while the appeal filed by revenue is for the period 2014-2016. 4. Since the allegations in the show cause notices in all these three cases more or less are the same, the allegations in the show cause notices issued to VEMPL are taken up as a starting point for this order. 5. The relevant facts that arise for consideration in the appeals filed by the assessees as well as the revenue is that the assessee is engaged in providing services like teacher training, examination services, payroll management, transportation management, accounting services, information technology management, marketing etc., and are engaged in sale of books, uni....
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.... (ii) For the period post 01.7.2012 the activity of the appellant is not eligible for exemption under Sl.No.9 of notification 25/2012-ST dated 20.6.2012 inasmuch as neither KEMPL nor Nexgen nor Sri Chaitanya are educational institutions, and that VEMPL is not education institution, so also SKCMET and hence, are not eligible for the exemption. (iii) Both the appellants have collected service tax and have not deposited the same to the Government and accordingly, demand was raised under Sec.73A of the Finance Act, 1994. 8. In addition to the above allegations in the case of VEMPL, another allegation service tax is payable on hostel fee and artificial bifurcation of the amounts in respect to tuition fee and hostel fee under the category of "commercial training or coaching service". Appellants contested the show cause notices on merits before the lower authorities arguing that up to period 30.6.2012 that the service recipients of the appellants were providing educational training to students and the agreements entered into by them are composite in nature and cannot be vivisected; for the period post 01.7.2012, the Trusts are not identifiable separately from the school and they a....
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....t fund was to be employed for any object or other purposes other than those set out in Trust deed; the Trust fund shall be utilized for objectives of the Trust only and under no circumstances the Trust fund shall be alienated; all the charges and expenses incidental to the nature administration of the Trust were first defrayed by the trustees out of the Trust fund. After taking us through the trust deed he submits that the said trust even provides for handing over of all the assets to other trust or society or institution having similar objectives registered under Sec.12A of the charitable trusts; in the case of winding up of the trusts. He would also submit that it is expressly stated that no part of the trust property or its income shall be distributed among the members. He would submit that Sri Chaitanya Education Trust, Nexgen Education Trust and SKCMET are fulfilling the conditions of charitable trust as per Sec.11 of Income Tax Act, 1961 and hence, services rendered to these trusts cannot be considered as rendered in relation to business or commerce. He would rely upon the judgment of the Tribunal in the case of SM Sai Constructions [2016 (42) STR 716] for the proposition tha....
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....lude what is operational and administrative assistance in the definition of 'support services of business or commerce'. He relies upon the decision in the case of GE Global Services, Final Order No.20896-20903/2014 dated 19.5.2014 to submit that only services in nature of those listed under Sec.65(104c) would form part of business support services. 10. All these above submissions are in respect of period prior to 01.7.2012. For the period post July, 2012 to March, 2014 the submissions are summarized as under: (i) After introduction of negative list from 01.7.2012, for an activity to be taxable, it has to fulfil requirements of service under Sec.65B(44) and should not be a service specified in the negative list. Sec.65B(44) provides exclusion to levy of service tax and it states that tax is leviable on all services except those services specified in the negative list. a. Mega notification 25/2012-ST dated 20.6.2012 exempted certain taxable services from the whole of the service tax as per Sl.No.9, which excludes services provided "to or by an educational institution" in respect of education. Appellants are covered by the phrase, as reading of the definition of what is an aux....
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....Education Committee vs CCE, Guntur, Final Order No. 30361-30365/2018 dated 24.1.2018 wherein the demand of service tax on the appellant was on commercial training and coaching services and it was held that Sri Chaitanya Education Committee are educational institutions imparting education through various modes and are providing degrees recognized by law. Therefore they are out of the purview of commercial training or coaching services. d. Furthermore, the Trust which sponsors a course and conducts education as part of institution has to be considered as educational society or Trust is fortified by the decision of the Hon'ble Apex Court in the case of Aditanar Educational Institution vs Addl. Commissioner of Income Tax [2002-TIOL- 931-SC-IT]. He would read through the relevant paragraphs of the said judgment of the Apex Court to submit that educational society imparting education is to be recognized as educational institution; that the ratio of the judgment would squarely apply to the facts of the present case is the submission. e. The decision of the Hon'ble Supreme Court in the case of Aditanar Educational Institution was followed by the department in appellant's own case for....
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....ubmission that in the case of VEMPL, that as regards demand on commercial training or coaching services, the appellants claim that it includes hostel fees and many other fees which are non taxable, he would suggest to remand the same to lower authorities as they will be able to produce Chartered Accountant's certificate and documents wherever possible to justify that the amounts which have been collected by the appellants includes hostel fee and other fee which are not taxable under the category of "commercial training or coaching services" and in the case of KEMPL, the demand under the provisions of Sec.73A as also on VEMPL, needs to be remanded for verification as they have either refunded or reversed the entries giving effect to nullity of the collection of service tax, if any. (vi) It is his submission that no interest and penalty is leviable. 11. Shri P.R.V. Ramanan, Special Counsel, appearing for the department, after giving overall picture of the issue involved, more specifically stated that VEMPL was earlier known as Diamond Dreams IT Solutions Pvt Ltd, subsequently as Junior Varsity Education Management Pvt Ltd (herein after referred to as JVEMPL) and subsequently bec....
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....nd tabular statements signed by both VEMPL and SKCMET have been filed; that there was collection of huge fees from the students, the scale and rigour of the operations of the "Chaitanya" institutions and sustained marketing through advertisement in the media and door-todoor canvassing etc. point to the fact that the operation as a whole was nothing but a business operation; neither the activity of SCEC nor that of SKCMET was charitable in nature; various courses like LEO, NEON, ICON and MEDICON conducted at campuses were their core activity and the same has no nexus with the Intermediate course of BIE, Andhra Pradesh and Telangana and enabled another arm of their group to earn substantial profits and the students had to bear the burden of the financial cost which were added to the profit of Sri Chaitanya Education Committee and hence these facts may be kept in mind while he argue on merits in favour of the revenue. ii. Services rendered by the appellants are not covered under the definition of "Support Services of Business or Commerce" as the services are rendered to charitable trusts and the said trust is not engaged in the business or commerce is the argument of the assessee a....
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....dly substantial sums as fees have been collected from the students in having to pay for the services rendered by the appellants. It is his further submission that the argument of the learned counsel that services rendered are not in relation to business, the term "business" as understood from various dictionaries and lexicons is that "business stands for almost anything which is an occupation as distinguished from a pleasure-anything which is an occupation or duty which requires attention as a business"; As per Halsbury, 4th editon, Vol.27, "the word business extends the covenant to all cases where work, involving the recourse of numerous persons to the premises, is done for payment, or even without payment where the result is in effect the same as if a change were made. The making of profit is not essential to constitute a business; nor, on other hand, does payment necessarily constitute one." He would submit for the argument of learned counsel that the trusts are not business entity; that provisions of Sec.65(19b) [with effect from 1.7.2010], the term business entity has been defined as that includes an association of persons, body of individuals, company or firm but does not inc....
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....case of Sri Chaitanya Education Committee. b. It is his submission that the appellants were engaged by trusts to run and manage affairs of the committee. Thus the coaching which was imparted to prepare the students for competitive exams like IIT-JEE, EAMCET etc. does not itself lead to issue of certificate or diploma. He would further explain that if a student were to undergo a course under ICON, unless he appears in Intermediate exam conducted by BIE, AP or Telangana and passes it, he cannot get any certificate from the BIE. Completion of any such course in the campuses of SCEC is neither necessity nor sufficient condition for getting certificate from the BIE. Further the services are made available to the appellants who prepare students for only to competitive exams but not to intermediate colleges. He would submit that it is evident from the records that amounts are collected by appellants as charges on student count base as per addendum to main service agreement dated 31.12.2012; are based on number of campuses and not on the basis of intermediate colleges. c. He would submit that with effect from 01.7.2012, the concept of negative list was introduced and provisions relat....
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....or the appellant, in the case of Aditanar Educational Institution he would submit that it is distinguishable both on facts and law and a significant fact is that trusts administered only coaching in campuses of education committee which could have students drawn from different colleges. Thus, a college could have three students, one appearing for EAMCET, another for IIT-JEE and another for NEON, all doing same subjects and each would have to pay different curriculum fee on account of difference in examination fees. Thus, with reference to the services rendered by the trust, they were rendered to coaching centres or campuses and not to educational institutions. iii. As regards confirmation of demand of amounts under "Commercial Training or Coaching Service", he would submit that the said gross income includes hostel fee which merits reconsideration by the lower authorities if the appellant is able to justify it with the records. He would submit that another argument which was made by the appellants in the grounds of appeal that the trust should be considered as educational institution is incorrect as the said judgment was cited for the first time. He would submit that the relianc....
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....e from time to time. 3. The Trust and the Trust Fund shall be irrevocable for all times. 4. The objects of the Trust are enhancement of education imparting knowledge to students of all age groups and shall include the following: i. to set up, establish in India, educational institutions for imparting education to primary, secondary, primary and secondary education, degree, professional and technical courses, distance education and adult education of the highest standards. ii. to establish student friendly environments in the educational institutions of the Trust on the models of courseware/content of contemporary teaching institutions with supporting entities providing research/development and implementation of new improved teaching techniques so as to prove that in-depth learning means studying thoroughly and not rigorously; iii. to impart such education to children/students in conformity with the norms and standards of the Board of Secondary Education, Board of Higher Secondary, Indian Council Secondary Education, Central Board Secondary Education, Board of Intermediate Education, and any other Competent Authority which is deemed fit for offering such course, by th....
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.... time to time, for educational institutions of the Trust; xiv. to appoint advisors, professionals, eminent persons, educationalists and to form committees of the above for assisting the Trust in fulfilling its objects; xv. to enter into alliance with, cooperate or affiliate with such bodies organizations that have similar objectives or those that help in the advancement of objects of the Trust; xvi. to do all other acts and things as are conducive or helpful to the advancement and fulfilment of the principal objects above mentioned." 16. The above reproduced terms are more or less same in respect of Sri Chaitanya Education Trust and SKCMET. On plain reading of the Trust deed it is crystal clear that all the three trusts are registered with the authorities as educational trusts for enhancement of education, imparting knowledge to students of all age groups. There is no dispute as to the contents of Trust deeds. 17. Sri Chaitanya Education Trust and Nexgen Education Trust are functioning as education trusts through various schools and enhancing the education on imparting knowledge up to class 10 and SKCMET is enhancing education by imparting knowledge in junior college a....
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....eds to be considered and followed to come to a conclusion whether the trusts in these cases before us are to be alienated from the institutions which impart knowledge on the students. Following the ratio of the Apex Court, we hold that these educational trusts are imparting knowledge in education through the schools and junior colleges. Having held that these trusts are educational trusts and cannot be considered as separate entity from the educational institutions through whom they are rendering the activity of imparting education, we have also have to record factual position that the students passing out of the schools and the colleges managed by the trusts are given BIE certificates signed by the said colleges along with signature of officer of the Board of Intermediate. On this factual position that these certificates are issued by the independent schools and Junior colleges which is in accordance with the law is an undisputed fact. 20. Now we have to consider the services rendered by the appellants whether it would fall under business support services or otherwise. In order to appreciate the factual position, that the definition of business support services needs to be seen ....
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....dings for educational institutions recognized by AICTE or State Education Board for providing education are not liable to service tax inasmuch, as such institution/ buildings cannot be termed as commercial merely on the basis of charging high fees from the students. In similar kind of situation, in the case of Viz Construction Pvt Ltd (supra) appellants therein were undertaking construction of building for National Rifle Association of India and ICFAI University, it was held that buildings constructed were not commercial in nature inasmuch as National Rifle Association of India was duly recognized by the Ministry of Youth Affairs and Sports and affiliated to Indian Olympic Association and ICFAI University was recognized university for education. Further, it was also emphasized that collection of fees for promoting or allowing a person to use the facility by these bodies will not make the building commercial and accordingly, demand of service tax will not survive. 22. In our considered view, the ratio of the above decisions would be applicable in the facts of the instant case as the services rendered by the appellants herein are to the trust which is formed to provide and enhance ....
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....portation of students, faculty or staff of such institution;" (Emphasis supplied) 26. It is to be noticed that by notification 03/2013-ST (w.e.f. 01.4.2013), entry No. 9 of the notification 25/2012-ST, the words "provided to or by" were substituted by the words "provided to". Despite such amendment w.e.f. 01.4.2013, it can be noticed that auxiliary educational services provided to educational institutions stands squarely covered under Sl.No.9 of notification 25/2012-ST dated 20.6.2012. In the case in hand, it is undisputed fact that services provided by appellants are which would clearly fall under the definition of 'auxiliary educational services' and therefore, exemption will apply. The adjudicating authority has come to a conclusion that tax liability on the appellant would arise as the services rendered by the appellant are to the trust and not to the educational institutions, however, we find that this argument of the adjudicating authority needs to be rejected as is already held by us in earlier paragraphs herein above. Subsequently, the definition of auxiliary educational services was omitted from the mega exemption notification 25/2012-ST w.e.f. 10.7.2014 which was expl....
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....ing or Coaching services" is the reasoning given by bench in the case of Sri Chaitanya Education Committee case. The ratio would apply in the case in hand also as the trusts to whom the appellants/assessees are providing services cannot be held that they are different from the educational institutions through whom, an activity of enhancement of knowledge and education is rendered. 30. It is to be mentioned here that for the subsequent period 2014-2016, show cause notices were issued to KEMPL which were adjudicated by the authority by Order-in-Original No. HYD-EXCUS-004-COM-14-17-18 dated 06.10.2017, wherein the adjudicating authority, after recording the fact that demands were confirmed on the same issue, needs to be revisited as the said allegations which were same in the earlier Order-in-Original (which is in challenge before us in appeal ST/22340/2015) and by order dated 06.10.2017 departed with earlier order and relying upon the ratio of Aditanar Educational Institution (supra) dropped the proceedings initiated by the show cause notice, holding that KEMPL is rendering services to Sri Chaitanya Educational Trust and Nexgen Educational Trust are not taxable. This Order-in-Origi....
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....ility but because of calculation error the amount is in dispute, that point needs reconsideration. We find that the said submission of the learned counsel is acceptable inasmuch the adjudicating authority has to give eligible abatement to the appellants from the tax liability under the category of "commercial training or coaching service". Hence, on this point, we remit the matter back to the adjudicating authority to reconsider the issue afresh and arrive at correct tax liability. Needless to state, the adjudicating authority shall pass an order on this point after following principles of natural justice; appellant is at liberty to produce documents, certificates on which they wish to rely upon. 34. As regards demand raised under Sec.73A of the Finance Act, 1994 on both the appellants/assessees, we find that these demand also need to be reconsidered by the adjudicating authority inasmuch the claim of the appellants/assessees is that they have repaid/reversed the amount collected as service tax from the students or from the trusts has not been examined by the authority. In our view, since this needs factual verification, the demands raised under this provisions of Sec.73A of the ....
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....ction 65B and Mega notification 25/2012-ST dated 20.6.2012 squarely covers 'auxillary educational services' provided by the appellant as per the definition given in the notification. 2. I respectfully disagree with my brother as far as demand prior to 1.7.2012 under Business Support Services under Section 65 (104c) read with Section 65 (105) (zzzq) is concerned. The taxable event as per Section 65 (105) (zzzq) (Business Support Service) is 'service rendered by any person, to any other person, in relation to support services of business or commerce in any manner. It is not in dispute that the appellant is a person and so is the service recipient and that the services were rendered. The issues to be decided are: a) Is the service being rendered in relation to support of business or commerce, in any manner? This depends on whether the nature of the activity of the service recipients is business or commerce. b) If so, whether the nature of their activities would get excluded from the definition of business or commerce because they are registered as a Trust and not as a business company? c) Since the services rendered by the service recipients were held to be not exigible und....
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....rvice recipients from the students will be, evidently, much larger. To sum up, it is an industrial-scale business of education with revenues running into thousands of crores of rupees and is not a charity. It is common knowledge that the service recipients herein are among the most successful in the thriving business of coaching for IIT JEE. In view of these factors, I find that the service recipients are running a business and the answer to question (a) above is a categorical YES. 6. Regarding the question (b) above, I find that the nature of the entity does not determine whether it is a business only the nature of its activity does. Business can be run by any person- natural or juridical. There is no bar on a trust running a business. The Objects in the Trust deed, as in the case of most Trusts, may claim that they are working for the advancement of education but the proclamations in the Trust deed will make no difference to determining whether their activity is a business. If the same activity was carried out by any other person or company nobody would even doubt that it is business. It makes no difference if the Trust does the activity. It is also pertinent that the Trust in ....