TaxTMI 
TaxTMI 
2024 (2) TMI 1160
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....y the department against that part of the 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....
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....e Punjab Technology University and Diploma Courses in affiliation with Centennial 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 appe....
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....rual basis' as per the financial statements, though in terms of the rule 6A of the Service Tax Rules the appellant was liable to pay service 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 depa....
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....el for the appellant submitted that the entire demand confirmed in the impugned order needs to be set aside on the ground of inordinate delay in the adjudication process in violation of the time limit prescribed in section 73(4B) of the Finance Act. In addition, the issues of franchise service (forward charge), and management consultancy 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 &nbs....
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.... under the Notifications dated 20.06.2003 and 10.09.2004. Learned authorised representative submitted that the exemption notification would not be available if the charges of such services are paid by the person undergoing such courses directly to the commercial training or coaching centers. 21. The submissions advanced by the learned counsel for the appellant and the learned authorised representative appearing for the department have been considered. Inordinate delay in adjudication 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 ....
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.... Demand is within time 01.10.2010 to 31.03.2011 25.04.2011 25.04.2012 24. Section 73 of the Finance Act deals with recovery of service tax not levied or paid or short-levied or short paid or erroneously refunded and section 73(1) of the Finance Act, as it stood relevant time, is reproduced below: "73(1) Where any service tax has not been levied or paid or has been short-levied or short-paid or erroneously refunded, the Central Excise Officer may, within one year from the relevant date, serve notice on the person chargeable with the service tax which has not been levied or paid or which has been short-levied or short-paid or the person to whom such tax refund has erroneously been made, requiring him to show cause why he should not pay the amount specified in the notice: PROVIDED that where any service tax has not been levied or paid or has been short-levied or short-paid or erroneously refunded by reason of- (a) fraud; or (b) collusion; or (c) wilful mis-statement; or (d) suppression of facts; or (e) contravention of any of the provisions of this Chapter or of the rule....
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....tions made in the show cause notice are: "21 Whereas it appears that the party has deliberately contravened the provisions of Finance Act, 1994, as amended and the Rules made thereunder with intent to evade payment of service tax. In spite of the fact that they are engaged in providing service of Commercial Training or Coaching, the party has wrongly taken the stand that the course completion certificate issued by them is recognized by law and hence they were not covered in the service tax net in terms of exclusion clause given in the definition of Commercial training or coaching centre under Section 65(27) of the Finance Act, 1994. Further, the party is neither discharging their service tax liability on the royalty amount paid & nor on the Expenditure incurred in foreign currency under the taxable service 'Franchisee service'. They have also failed to discharge their service tax liability on the amount receipt as consultancy charges under taxable service 'Management or Business Consultancy service' and amount receipt as 'market expenses' under taxable service 'Business Auxiliary service'. The party's above omission & commission is deliberate to avoid payment of service ta....
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....t was placed on the assesses by the Department. The notice has breaches that trust by not disclosing the correct facts to Department and by not calculating and paying the service tax correctly. They suppressed the fact in order to evade service tax on the amount received in lieu of the service rendered. Had the inquiry not been conducted in this regard same would have remained hidden and Government suffered a loss of a big amount of revenue. I find that it is an established position that the onus of proper assessment and discharging of the service tax falls on the tax payer. The noticee has failed to discharge the said burden and on the contrary, they failed to pay service tax properly. Hence, I hold the extended period for demand under section 73(1) has correctly been sought to be invoked." (emphasis supplied) 32. It would be seen from the show cause notice that the extended period of limitation has been invoked by alleging that facts had been suppressed with intent to evade payment of service tax merely because the appellant did not pay service tax for certain services. The show cause notice also mentions that had the investigation not been conducted by the department....
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.... "4. Section 11A empowers the Department to re- open proceedings if the levy has been short-levied or not levied within six months from the relevant date. But the proviso carves out an exception and permits the authority to exercise this power within five years from the relevant date in the circumstances mentioned in the proviso, one of it being suppression of facts. The meaning of the word both in law and even otherwise is well known. In normal understanding it is not different that what is explained in various dictionaries unless of court the context in which it has been used indicates otherwise. A perusal of the proviso indicates that it has been used in company of such strong words as fraud, collusion or wilful default. In fact it is the mildest expression used in the proviso. Yet the surroundings in which it has been used it has to be construed strictly. It does not mean any omission. The act must be deliberate. In taxation, it can have only one meaning that the correct information was not disclosed deliberately to escape from 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, doe....
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....e Central Excise Act, 1944." 38. The Supreme Court in Continental Foundation Joint Venture Holding vs. Commissioner of Central Excise, Chandigarh-I [2007 (216) E.L.T. 177 (SC)] also held: "10. The expression "suppression" has been used in the proviso to Section 11A of the Act accompanied by very strong words as 'fraud' or "collusion" and, therefore, has to be construed strictly. Mere omission to give correct information is not suppression of facts unless it was deliberate to stop the payment of duty. Suppression means failure to disclose full information with the intent to evade payment of duty. When the facts are known to both the parties, omission by one party to do what he might have done would not render it suppression. When the Revenue invokes the extended period of limitation under Section 11-A the burden is cast upon it to prove suppression of fact. An incorrect statement cannot be equated with a willful misstatement. The latter implies making of an incorrect statement with the knowledge that the statement was not correct." (emphasis supplied) 39. The Delhi High Court in Bharat Hotels Limited vs. Commissioner of Central Excise (Adjudication) [....
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.... material facts for evading its tax liability, is sustainable. xxxxxxxx 41. In the facts of this case, the impugned show cause notice does not disclose any material that could suggest that MTNL had knowingly and with a deliberate intent to evade the service tax, which it was aware would be leviable, suppressed the fact of receipt of consideration for rendering any taxable service. On the contrary, the statements of the officials of MTNL, relied upon by the respondents, clearly indicate that they were under the belief that the receipt of compensation/financial support from the Government of India was not taxable. Absent any intention to evade tax, which may be evident from any material on record or from the conduct of an assessee, the extended period of limitation under the proviso to Section 73(1) of the Act is not applicable. The facts of the present case indicate that MTNL had made the receipt of compensation public by reflecting it in its final accounts as income. As stated above, merely because MTNL had not declared the receipt of compensation as payment for taxable service does not establish that it had willfully suppressed any material fact. MTNL's contentio....
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....6. Another ground for invoking extended period of limitation given in the impugned order is that the appellant was operating under self-assessment and hence had an obligation to assess service tax correctly and take only eligible CENVAT credit and if it does not do so, it amounts to suppression of facts with an intent to evade and violation of Act or Rules with an intent to evade. We do not find any force in this argument because every assessee operates under self-assessment and is required to self-assess and pay service tax and file returns. If some tax escapes assessment, section 73 provides for a SCN to be issued within the normal period of limitation. This provision will be rendered otiose if alleged incorrect self- assessment itself is held to establish wilful suppression with an intent to evade. To invoke extended period of limitation, one of the five necessary elements must be established and their existence cannot be presumed simply because the assessee is operating under self-assessment." (emphasis supplied) 43. The Tribunal in M/s. Kalya Constructions Private Limited vs. The Commissioner, Central Excise Commissionerate, Udaipur [Service Tax Appeal No. 54385 of....
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....at the proper officer may, on the basis of information contained in the return filed by the assessee under sub-rule (1), and after such further enquiry as he may consider necessary, scrutinize the correctness of the duty assessed by the assessee. Sub-rule (4) of rule 12 also provides that every assessee shall make available to the proper officer all the documents and records for verification as and when required by such officer. Hence, it was the duty of the proper officer to have scrutinized the correctness of the duty assessed by the assessee and if necessary call for such records and documents from the assessee, but that was not done. It is, therefore, not possible to accept the contention of the learned authorized representative appearing for the Department that the appellant should have filed a proper assessment return under rule 6 of the Rules." (emphasis supplied) 45. What, therefore, transpires from the aforesaid decisions is that there can be a difference of opinion between the department and Revenue and an assessee may genuinely believe that it is not liable to pay service tax. On the other hand, the department may have an opinion that the assessee is liable t....
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....re self assessed. 49. According to the appellant, only the demand of Rs. 44,25,577/- that has been confirmed is within the normal period of limitation. 50. The appellant has also furnished a chart to highlight what amount was within time and what was barred by time in respect of each of the four services and the same is reproduced below: Commercial coaching & training services (in Rs.) Franchise Service (in Rs.) Franchise Service (RCM) (in Rs.) Management Consultancy Service (in Rs.) Total (in Rs.) Whether time barred? 2006-07 2011292 541587 33730 2586609 Time barred 2007-08 7754293 584813 1896128 10235234 2008-09 7433785 2648861 1409834 11492480 2009-10 4644064 2518375 430317 7592756 2010-11 (Actuals) 3369848 502168 553561 4425577 Within time Total 25213282 6254217 4831427 33730 ....
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....a) Demanded for period March 2010 but barred by limitation Part of appeal by the appellant 7,74,044 a. Demanded for the period April 2010-March 2011 b. Agrees with the demand and shall be paid. Prayer modified to this extent Part of appeal by the appellant (Stands withdrawn to this extent) Total 3,11,31,564 56. It would be seen that the Commissioner set aside the demand of Rs. 59,18,282/- for the reason that the computation should have been based on actual value on 'accrual basis' instead of best judgment assessment. There is no error in this finding recoded by the Commissioner as during the relevant period the computation was required to be undertaken on accrual basis. The department is not justified in assailing this finding recoded by the Commissioner. 57. As regards the degree courses affiliated with the Punjab Technical University is concerned, the finding recorded by the Commissioner is as follows: "7.6 In light of the above, I find that the noticee is providing Degree courses to the students which have been recognized and affiliated to Punjab Technical University. Th....
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.... undergoing it, to take employment or self-employment after completion of the same. For the issue of computer training institute, I find that the computer training relates to computer software and hardware. But in the case of the Noticee, they provide animation training and their students become animation professionals and not computer software or hardware professionals. xxxxxxxxxxx 7.14 In view of the above, I find the fee collected for offering Diploma Courses by the Noticee is exempted till 26.02.2010 since the courses offered broadly satisfied the criteria of providing coaching or training to enable the trainees to enable the trainees to secure employment or self-employment the exemption under Notification number 24/2004-ST dated 10.09.2004 is available. However, after 27.02.2010 the condition of the institute being affiliated to National Council of Vocational Training (NCVT) and offering courses in the designated trades covered Schedule I of the apprentices Act, 1961 to be eligible for Service tax exemption is not satisfied by the Noticee. This exemption therefore is not available to the noticee from 27.02.2010. Accordingly, I hold that the Service tax is pay....
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....e appellant and Centennial College, Canada work under a revenue sharing model wherein out of the trial fee received from the students for these courses by the appellant, Centennial College, Canada is entitled to a fixed share as per the terms of the agreement. For the impugned activity to be a franchise service, of which the appellant is a recipient, there has to be a representational right that is granted to the appellant and the consideration must be paid for such grant of right. This is not so in the present case as there is no element of service between the appellant and Centennial College, Canada and it is only a revenue sharing agreement on a principal-to-principal basis. Both the appellant and Centennial College, Canada have a share of responsibilities towards the students who are the consumers of the educational service being provided. In proportion to their share of services being provided, they have revenue sharing terms agreed upon. The foreign currency remittance done by the appellant in the instant case pertains to transferring the revenue share of Centennial College, Canada in terms of the Agreement in the course of providing education to the students enrolled in....