TaxTMI 
TaxTMI 
2019 (5) TMI 230
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....O: HYD-EXCUS-004-COM-046-15-16 dt.12.11.2015 ST/30350/2018 OIO: 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 tec....
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....ivity of the appellants are classifiable under the category of "business support services" in terms of Sec.65(104c) read with Sec.65(105)(zzzq) of the Finance Act, 1994 for the services rendered by the appellants; (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 providi....
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....usts being registered Trusts for providing education as a charitable Trust, are for objective of enhancement of education imparting knowledge to the students of all groups. He would submit that no part of income or corpus of the Trust 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....
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....common thread among the activities covered in the inclusive list/ clause is that the services are in relation to sales/ marketing and distribution of goods and services, while in the case in hand it is not so; that the contention of appellants stands supported by the amendment carried out by the Finance Act, 2011 to include 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 ne....
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....ieved through schools and junior colleges and the annexure-1 to the agreement of the schools and the junior colleges clearly indicate so; fees collected by the schools is deposited in the respective Trust accounts and salaries to teaches and other related expenditure is met by the Trust. c. Reliance was placed on the decision of the Tribunal in the case of Sri Chaitanya 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 ....
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....terpretation and the appellants had bonafide impression that service tax liability is not attracted and with effect from 01.7.2012 exemption notification 25/2012-ST has direct effect on the entire proceedings and that the department has dropped the demand for the subsequent period based upon the finding that education services provided to educational institution is exempted from payment of service tax. (v) It is the submission 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....
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....id courses themselves; SCEC was formed in 2004 and all the trustees were family members of Dr. B. Satyanaraya Rao; In March, 2011 SCEC entered into agreement with SKCMET for conducting the administration, management and operations relating to various integrated courses; SKCMET had no teaching faculty or administrative set up to run the campuses/ colleges; further submits that revenue has filed some paper books wherein the service addenda and 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 fina....
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....during the relevant period, they have rendered services only to the students at various coaching campuses established by the trusts in the name of Chaitanya Educational Institutions; the appellants have earned substantial profits and the burden of the same has been loaded on the students through the trusts. Thus the entire arrangement worked out by the appellants has the characteristics of business activity with a commercial objective as admittedly 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 ....
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....ion to the findings recorded from Para 36 to 38.8 of the impugned Order-in-Original and submit that during the period involved, students registered in the colleges set up by Sri Chaitanya Education Committee were allotted various courses conducted at the campuses of the trusts as has been already explained by him. He would submit that the same position existed as seen from Final Order No. 21239-21240/2015 dated 01.6.2015 passed by the Tribunal in the 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 prep....
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....the colleges themselves; the approval for setting up the colleges also does not provide for it at all. f. Further submits that 'Teacher Assistance Services' which forms a substantial part of the value of services which points out to the fact that these services were related to complex nature of particular competitive exam and not to the complexity of intermediate exam which was same for all the candidates. i. As regards the judgment relied upon by the learned counsel for 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....
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.... In order to consider the correct position, we reproduce herein below the terms of trust deed of Nexgen Education trust. "2. The trust hereby declared shall be known as "Nexgen Educational Trust" (herein after referred to as the said "Trust") and shall not be for the benefit of any particular religion, sex, community or caste. The office of the Trust shall be at #304, Kasetti Heights, Ayyappa Society, Khanamet (village), Ranga Reddy Dt, Hyderabad or at such other place as the Trustees may decide 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 supporti....
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....ultural activities and social work that will serve to enrich the lives of students and children and encourage national integration; xi. to provide a space where persons who share the vision of the Trust can interact with each other and in the process help promote the aforesaid objectives; xii. to utilize the Trust Fund for the benefit of Trusts primary objectives and at no time and under no circumstances shall the Trust Fund be alienated; xiii. to appoint, remove, change, alter, delegate or outsource necessary support services or facilities as may be required, from 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 a....
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.... of Aditanar Educational Institution (supra) has very clearly in Para 5 to 7 specifically records that society which is established to run, manage or assist colleges or schools or other educational institutions solely for educational purposes are to be regarded as educational institutions coming within the purview of educational institutions. Though this judgment of the Apex Court was rendered in the context of Income Tax Act, 1961 in the absence of there being any clarification or meaning to the word "charitable trust" or "educational trust" in the Finance Act, the ratio of the law laid down by the Apex Court needs 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 posit....
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.... (supra) wherein the Tribunal in the case of context of taxability on construction of college building catering to technical education approved by AICTE, technical and scientific education department, Government of Maharashtra, set aside the demand of service tax and held that recipient of services viz., Vidya Prasarak Mandal was undisputedly a charitable trust registered with Bombay Public Trust Act, 1950, that the building constructed by the said SM Sai Constructions was used for providing education and not commercial in nature. Further, in the case of Ratan Das Gupta and Co. (supra), it was held that activity of constructing buildings 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 Ri....
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....rvices' as per the said Sl.No.9 is defined under Para 2(f) of the same notification which reads as under: "(f) 'Auxiliary educational services' means any services relating to imparting any skill, knowledge, education or development of course content or any other knowledge - enhancement activity, whether for the students or the faculty, or any other services which educational institutions ordinarily carry out themselves but may obtain as outsourced services from any other person, including services relating to admission to such institution, conduct of examination, catering for the students under any mid-day meals scheme sponsored by Government, or transportation 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 undispu....
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....was subject to Sec.66D of the Finance Act and the amendments brought in mega exemption from time to time did not have any impact on the entry No.9 in the negative list of the Finance Act, 1994. Therefore, essentially an activity provided to an "educational institution" as defined with reference to Sec.66D of the Finance Act, 1994 was outside the purview of service tax and the appellants are squarely covered in the ambit of the same. 29. We find that trusts in these cases have to be considered as educational institutions imparting education through various modes and are providing certificates recognized by law; therefore, they are out of the purview of "Commercial Training 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 adjudicat....
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....confirmation of demands on VEMPL under the category of "commercial training or coaching service", for the period in question, we find that the matter needs reconsideration by the adjudicating authority inasmuch, it is the claim of the learned counsel that authorities have confirmed the demands on the entire amount without extending them abatement on hostel fees, periodicals, books, etc. It was submitted that they are in a position to produce documents in support of their claim and may also produce a Chartered Accountant's Certificate on the issue as to the amount that requires deduction from the total demands raised. It is his submission that they have discharged the tax liability 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 adjudi....
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....nts'/assessees' appeals are allowed and revenue's appeal is rejected. (Pronounced in the Open Court on) (P. VENKATA SUBBA RAO) MEMBER (TECHNICAL) (M.V. RAVINDRAN) MEMBER (JUDICIAL) [Order per: P.V. Subba Rao] I concur with my brother Hon'ble Member (Judicial) on the following two issues: a) Recovery of Service Tax collected by the appellant and sought to be recovered under Section 73A needs to be remanded to the original authority for verification of the claim of the appellant that the amounts have been been refunded to the students. b) As far as the Service Tax post 1.7.2012 since the demand was on the ground that it is not covered by the negative list under Section 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 othe....
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....dical or other Engineering entrance examinations combined with the two year Intermediate course. Thus, these are composite courses of Intermediate with additional value in the form of coaching for the entrance exam rendered for a fee. 5. These services are being provided on a very large scale. The scale of the operations can be gauged from the demand of service tax of Rs. 42.47 crores from KEMPL and Rs. 105 crores from VEMPL implying the services rendered by the appellant to the service recipient will be about 10 times this amount. (The fact that tax is held not payable post 1.7.2012 does not make any difference to the value of the services rendered). If this is the value of the services outsourced to the appellant, the fee collected by the service 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 t....