TaxTMI 
TaxTMI 
2024 (2) TMI 1160
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....order dated 02.05.2022 passed by the Commissioner that drops the demand of Rs. 2,73,56,539/- pertaining to provision of commercial coaching and training service. 3. Cross Objection No. 50300 of 2023 have been filed by the appellant in the aforesaid appeal filed by the department. 4. The appellant is a Maharishi Group Initiative, which is a multinational educational institution having more than 200 Maharishi Vidya Mandir schools throughout India and USA. To fulfil its basic objective, i.e., 'to use and deal in media technology in the field of production and education', the appellant is engaged in imparting education by collaborating with different national as well as international universities. In keeping with this objective, the appellant conducts Bachelor/Master Degrees and Diploma Courses in Multimedia VFX (Visual Effects) and Animation in coordination/tie-up with national as well as international universities. 5. The details of the courses mentioned by the appellant are as follows: A. BSc and MSc (Multimedia & VFX) Degree courses in affiliation with Punjab Technology University which is a State University established by the state government of Punjab under the Punjab Techni....
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....nial College are taxable under 'commercial training or coaching services' for the period from April 2006 to March 2011 as the appellant does not fall either under the exclusion clause nor the activity is exempted under Notification No. 24/2004-ST dated 10.09.2004 as the appellant is not a 'vocational training institute'; II. Franchise Services [section 65(105)(zze)] against Forward Charge: The department mentioned fourteen franchisee names against which appellant received 'Royalty Fee/Sign-up Fee' from April 2006 to March 2011 and accordingly, it has been alleged that appellant is engaged in 'franchise services' and liable to pay service tax under forward charge; III. Franchise Services [section 65(105)(zze)] against Reverse Charge: While proposing reverse charge demand against the expenditures covered under the head 'royalty paid' (reflected in the schedule 'operating and other expenses') and 'expenditure in foreign currency' (reflected in the notes to accounts) for the period from April 2006 to March 2011 under taxable category of franchise service, the department believed that the appellant used the brand name 'Centennial College' which provides infrastructural support (incl....
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....ice tax on 'receipt basis' during the period in dispute from April 2006 to March 2011. The chart submitted by the appellant in the Memo of Appeal depicting the aforesaid submission is reproduced below: Issue/Activity Demand proposed through show cause notice dated 21.10.2011 Excess Amount considered in show cause notice due to Taking actual values instead of Best Judgment Assessment for Financial Year 2010-11 Calculation on 'accrual basis' instead of 'receipt basis' I. Commercial Training and Coaching Services (Fee Receipts) 3,11,31,564 59,18,282 36,14,383 II. Franchise Service (Forward Charge Demand) (Royalty Receipt/Sign-up Fee) 1,07,88,799 28,28,055 16,99,843 III. Franchise Services (Reverse Charge Mechanism) (Foreign Currency remittance) 60,98,383 12,66,956 12. The appellant has also stated that the department had proposed appropriation of service tax of Rs. 44,41,384/- only but the appellant had actually paid service tax of Rs. 92,63,532/- before service of show cause notice. Thus, the remaining tax of Rs. 48,22,148/- was not acknowledged/appr....
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....sultancy service have been contested on the ground of limitation under section 73(1) of the Finance Act and the issues of commercial coaching and training services, and franchise service (reverse charge) have been contested, both on the ground of limitation as also on merits. 18. In fact, the learned counsel for the appellant has summarised the contentions, issue wise, in the following manner: Commercial Coaching and Training Services (in Rs.) Franchise Services (Forward Charges) (in Rs.) Franchise Services (Reverse Charges) (in Rs.) Management Consultancy Service (in Rs.) Demand in the show cause notice Best Judgment Assessment (BJA) 3,11,31,564 1,07,88,799 60,98,383 33,730 Set aside in impugned order 2,73,56,539 45,34,582 0 0 Confirmed in impugned order 37,75,025 62,54,217 60,98,383 33,730 Amount of demand to be set aside when actual value is considered instead of Best Judgment Assessment (BJA) 59,18,282 45,34,582 12,66,956 NA Amount of demand to be set aside on merits 2,44,39,238 NA 48,31,427 NA Amount of dema....
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....djudication 22. Learned counsel for the appellant placed reliance upon the provisions of section 73(4B) of the Finance Act to contend that the order passed by the Commissioner should be set aside as it was passed beyond the period prescribed in the said section. This ground which is both factual and legal was not taken by the appellant in reply to the show cause notice. Section 73(4B) provides that the Central Excise Officer shall determine the amount of service tax within one year from the date of notice, where it is possible to do so. In the absence of such a ground having been taken in the reply to the show cause notice, it was not considered by the Commissioner. It would, therefore, in the absence of the factual aspect having been brought on record, not be appropriate to decide this issue. Extended Period of Limitation 23. Learned counsel for the appellant pointed out that the show cause notice covers the period from 01.04.2006 to 31.03.2011 and the period within which the show cause notice was required to be issued during the relevant period was one year from the due date or the actual date of filing of the service tax return. Thus, according to the learned counsel for the ....
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....(e) contravention of any of the provisions of this Chapter or of the rules made thereunder with intent to evade payment of service tax, by the person chargeable with the service tax or his agent, the provisions of this sub-section shall have effect, as if, for the words "one year", the words "five years" had been substituted." 25. It would be seen from a perusal of sub-section (1) of section 73 of the Finance Act that where any service tax has not been levied or paid, the Central Excise Officer may, within one year from the relevant date, serve a notice on the person chargeable with the service tax which has not been levied or paid, requiring him to show cause why he should not pay amount specified in the notice. 26. The "relevant date' has been defined in section 73 (6) of the Finance Act as follows; "73(6) For the purpose of this section, "relevant date" means,- (i) In the case of taxable service in respect of which service tax has not been levied or paid or has been short-levied or short paid- (a) where under the rules made under this Chapter, a periodical return, showing particulars of service tax paid during the period to which the said return relates, is to be filed....
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....payment of service tax. Their wrongful claim of treating the course completion certificate issued by them as recognized by law appears to be an intentional and deliberate attempt to mislead the service tax authorities in order to avoid due discharge of their service tax liability. This indicates their deliberate intention of non-compliance of the Law & the Rules. As per law, they had time up to 30 days from the date of commencement of Business to apply for service tax Registration, but they did not apply for the registration and pay the due Service Tax. These acts of non compliance of the Law & Rules appeared to be deliberate on the part of the party with an intent to evade Service Tax and tantamount to suppression of facts. Had it not been for the investigation carried out by the department, the fact regarding non payment of service tax would have gone unnoticed. Therefore, the provisions of, the proviso of Section 73(1) of the Act ibid for recovery of the Service Tax within extended period of 5 years are invokable." (emphasis supplied) 30. The appellant submitted a reply dated 21.11.2012 to the aforesaid notice and contented that the extended period of limitation could not ha....
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....n payment of service would not have come to the notice of the department. The Commissioner, in the impugned order, also after noticing that the appellant had not paid service tax correctly and had failed to bring the correct facts to the knowledge of the department observed that in the era of self-assessment great trust is placed on the assessee by the department, but this trust had been breached by the appellant. It is only for these reasons that the Commissioner concluded that the appellant had suppressed facts in order to evade payment of service tax. The Commissioner, therefore, concluded that the onus for proper assessment and discharge of service tax was on the appellant and as the appellant had failed to discharge the said burden, the extended period of limitation contemplated under the proviso to section 73(1) of the Finance Act was correctly invoked. 33. The issue that arises for consideration is whether the extended period of limitation can be invoked merely because service tax is not paid for some services. In the present case, the contention of the appellant is that service tax was not paid as the appellant believed that it was not liable to pay service. 34. It has be....
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....uppression." (emphasis supplied) 36. This decision was referred to by the Supreme Court in Anand Nishikawa Company Ltd. vs. Commissioner of Central Excise [2005 (188) E.L.T. 149 (S.C.)] and the observations are as follows: "26........... This Court in the case of Pushpam Pharmaceutical Company v. Collector of Central Excise, Bombay, while dealing with the meaning of the expression "suppression of facts" in proviso to Section 11A of the Act held that the term must be construed strictly. It does not mean any omission and the act must be deliberate and willful to evade payment of duty. The Court, further, held:- "In taxation, it ("suppression of facts") can have only one meaning that the correct information was not disclosed deliberately to escape payment of duty. Where facts are known to both the parties the omission by one to do what he might have done and not that he must have done, does not render it suppression." 27. Relying on the aforesaid observations of this Court in the case of Pushpam Pharmaceutical Co. v. Collector of Central Excise, Bombay [1995 Suppl. (3) SCC 462], we find that "suppression of facts" can have only one meaning that the correct information was no....
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....xtended period of limitation under the proviso to section 73 (1) of the Finance Act and held as follows; "27. Therefore, it is evident that failure to pay tax is not a justification for imposition of penalty. Also, the word "suppression" in the proviso to Section 11A(1) of the Excise Act has to be read in the context of other words in the proviso, i.e. "fraud, collusion, wilful misstatement". As explained in Uniworth (supra), "misstatement or suppression of facts" does not mean any omission. It must be deliberate. In other words, there must be deliberate suppression of information for the purpose of evading of payment of duty. It connotes a positive act of the assessee to avoid excise duty. xxxxxx Thus, invocation of the extended limitation period under the proviso to Section 73(1) does not refer to a scenario where there is a mere omission or mere failure to pay duty or take out a license without the presence of such intention." xxxxxx The Revenue has not been able to prove an intention on the part of the Appellant to avoid tax by suppression of mention facts. In fact it is clear that the Appellant did not have any such intention and was acting under a bonafide belie....
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....he receipt in the service tax return." (emphasis supplied) 41. It would transpire from the aforesaid decisions that mere suppression of facts is not enough and there must be a deliberate and wilful attempt on the part of the assessee to evade payment of tax. In the absence of any intention to evade payment of service tax, which intention should be evident from the materials on record or from the conduct of the assessee, the extended period of limitation cannot be invoked. Thus, mere non disclosure of the receipts in the service tax returns would not mean that there was an intent to evade payment of service tax. 42. This issue was also examined at length by a Division Bench of the Tribunal in M/s G.D. Goenka Private Limited vs. The Commissioner of Central Goods and Service Tax, Delhi South [Service Tax Appeal No. 51787 of 2022 dated 21.08.2023]. After referring to the provisions of section 73 of the Finance Act, the Bench observed:- "13. There is no other ground on which the extended period of limitation can be invoked. Evidently, fraud, collusion, wilful misstatement and violation of Act or Rules with an intent all have the mens rea built into them and without the mens rea,....
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....ax would not have come to notice. It is a matter of fact that all the details were available in the records of the appellant. The appellant was required to furnish returns under section 70 with the Superintendent of Central Excise which it did. It is for the Superintendent to scrutinize the returns and ascertain if the service tax had been paid correctly or not. If the assessee either does not make the returns under section 70 or having made a return, fails to assess the tax in accordance with the provisions of Chapter or Rules made thereunder, the Superintendent of Central Excise can make the best judgment assessment under section 72. For this purpose, he may require the assessee to produce such accounts, documents or other evidence, as he may deem necessary. Such being the legal position, if some tax has escaped assessment which came to light later during audit, all it shows is that the Superintendent of Central Excise with whom the returns were filed had either not scrutinized the returns or having scrutinized then found no error in self-assessment but the audit found so much later. Had the Superintendent scrutinized the returns calling for whatever accounts or records were requ....
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....invoke the extended period of limitation, one of the five necessary elements must be established and their existence cannot be presumed merely because the assessee is operating under self assessment. If some tax escapes assessment, the officers of the department can always call upon the assessee to submit further documents and he may also conduct an enquiry. 46. Rule 7 of the Service Tax Rules provides for returns to be filed by the assessee and rule 5A empowers the Officer to have access to any premises for the purpose of carrying out any scrutiny, verification and checks as may be necessary to safeguard the interest of the Revenue. Rule 6(6) provides that it shall be lawful for the Assistant Commissioner of Central Excise or the Deputy Commissioner of Central Excise to complete the assessment, wherever he deems it necessary, after calling such further documents or records as he may consider necessary and proper in the circumstances of the case. Thus, the observation of the Tribunal in paragraph 20 in the aforesaid decision of the Tribunal in Sunshine Steel Industries would also be applicable in the present case. 47. Civil Appeal No. 4246 of 2023 (Commissioner of CGST, Customs a....
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....iod of limitation. It has been held that the extended period of limitation could not have been invoked. The confirmation of demand under this head, therefore, deserves to set aside. Franchise service (forward charge) 53. The appellant has challenged only the amount confirmed for the extended period of limitation. As held above, the extended period of limitation could not have been invoked. The demand of Rs. 5,02,168/- for the normal period is, therefore, confirmed. Merits 54. The appellant has also contested, on merits, the demand pertaining to 'commercial coaching and training services' and 'franchise service (reverse charge mechanism)'. Merits - commercial coaching and training services 55. In respect of 'commercial coaching and training services', the demand of Rs. 3,11,31,564/- has been challenged and the same has been explained by the appellant in a chart which is reproduced below: Sl. Description Amount (in Rs.) Breakup Remarks 1. Wrong computation based on 'Best Judgment Assessment' instead of actual value on 'accrual basis' 59,18,282 Set aside in the impugned order Part of Revenue appeal 2. Degre....
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.... for the period under consideration that is April 2006 to March 2011. Accordingly, I hold the same." 58. Out of the amount of Rs. 2,11,42,021/-, an amount of Rs. 1,81,41,040/- was set aside as service tax could not be levied. The finding recorded by the Commissioner does not suffer from any error and the learned authorised representative appearing for the department has also not been able to point out any specific error in the finding. It is, because of the discussion on the extended period of limitation, also barred by limitation. 59. Though an amount of Rs. 25,95,804/- has been set aside in the operative part of the order, but while calculating the amount it has included this amount. This is a calculation error and, therefore, the demand for this amount has to be set aside. 60. As regards the diploma courses from Centennial College, Canada, the finding recorded by the Commissioner is as follows: "7.10 In this respect I find the objectives of the Diploma course provided by the notice in Animation Program is to train the students/Learners for the job of an animator, designer, graphics designer, computer animator, 3D modelling animator etc. I find the scope of the Course in des....
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....Rs. 4,05,174/- is barred by limitation the appeal filed by the department to assail this finding, for the reasons stated while discussing the limitation issue, deserves to be dismissed. So far as the amount of Rs. 7,74,044/- is concerned, payment of this amount is admitted by the appellant. The appeal filed by the department to this extent deserves to be allowed. Franchise service (reverse charge) 62. To appreciate this contention it would be appropriate to examine the definition of 'franchise' and 'franchisor'. They are as follows: "65(47) "franchise" means an agreement by which the franchisee is granted representational right to sell or manufacture goods or to provide service or undertake any process identified with franchisor, whether or not a trade mark, service mark, trade name or logo or any such symbol, as the case may be, is involved. 65(48) "franchisor" means any person who enters into franchise with a franchisee and includes any associate of franchisor or a person designated by franchisor to enter into franchise on his behalf and the term "franchisee" shall be construed accordingly." 63. The service is made taxable under section 65(105)(zze), which is reproduced be....
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....s the fees collected from the students, while Career Launcher was entitled to the remaining 25%. This arrangement is a typical revenue sharing model arrangement. The appellant was not to receive fixed amount per annum or per month from Career Launcher but only a certain percentage of the net revenue. In such a situation, it cannot be said that the appellant was a service provider and Career Launcher was a service recipient. No service was, therefore, provided by the appellant to Career Launcher. This view finds support from the decision of the Tribunal in Mormugao Port Trust. The Tribunal found that unless it can be established that a specified amount had been agreed upon to be paid as a quid pro quo for undertaking any particular activity, it cannot be assumed that there was a consideration agreed upon for a specific activity so as to constitute a service." 68. In the present appeal, there is no fixed amount specified to be paid to Centennial College, Canada. Instead for every student enrolled in a course, Centennial College, Canada gets a specified amount as a share of the fees. This is a typical revenue sharing model and in view of the aforesaid decision of the Tribunal in Nira....