2018 (7) TMI 269 - AT - Service Tax

Commercial training and coaching services - clubbing the gross receipts - only allegation was that a common logo was used by both the entities - Held that - It has not been brought on record that there was financial flow-back between the appellant and the Private Limited Company. The condition of clubbing or gross receipt has not been established in this case. All the circumstances relied upon by the Department are innocuous in the absence of evidence of sharing of profits - The appellant is running his coaching institute since, 2010 and the Private Limited Company has come into existence only on 3rd June, 2013. The Private Limited Company is separately registered with the service tax authorities and they are discharging their service tax liabilities on a regular basis which has not been disputed by the Department. The status of both the entities is independent of each other - there are no justification for clubbing the gross receipts of the appellant and the Private Limited Company - appeal allowed - decided in favor of appellant.

Summary

Issues:
- Service tax demand on proprietorship concern and private limited company
- Allegations of common advertisement, website, and logo
- Penalty imposition under Sections 77, 78, and 78A of the Finance Act, 1994
- Clubbing of gross receipts of appellant and private limited company
- Justification for clubbing gross receipts

Analysis:

The appellant, a proprietor running a coaching center, appealed against an order alleging that the proprietorship concern and a private limited company were the same entity due to common advertisement, website, and logo. The adjudicating authority confirmed a service tax demand, interest, and penalties under various sections. The Commissioner (Appeals) upheld the demand and penalties on the appellant but dropped the penalty on the private limited company, leading to the present appeal.

The appellant argued that he was not connected to the private limited company, emphasizing differences in ownership, operations, and branding. The appellant's gross receipts did not exceed the exemption limit, and there was no financial connection between the entities. The Tribunal noted the service tax applicability to coaching services since 2003 and reviewed an affidavit from the appellant confirming the separation of entities.

After examining documents and submissions, the Tribunal found no evidence of financial interchange between the appellant and the private limited company. The clubbing of gross receipts was based solely on the common logo, without proof of profit-sharing. The private limited company was separately registered for service tax and maintained financial independence. As such, the Tribunal set aside the order, ruling against the clubbing of gross receipts.

Consequently, the appellant's appeal was allowed, providing relief from the service tax demand and penalties. The decision highlighted the importance of establishing financial connections before clubbing gross receipts for tax purposes.