TMI Blog2018 (8) TMI 1178X X X X Extracts X X X X X X X X Extracts X X X X ..... sold to the Franchisees - Held that:- The demand raised on the cost recovered from the Franchisees for supply of course materials and administrative materials cannot sustain and requires to be set aside, demand set aside. Franchise Services - Material kit supplied by CSC Publications and Ramiah Publications - Held that:- It is settled law that study materials supplied cannot be included in the taxable value for levy of service tax. Thus, the demand raised on the ground of amount received by CSC Publications and Ramiah Publications for supply of study materials to the Franchisee cannot sustain and requires to be set aside - demand set aside. Commercial Coaching or Training Service - demand of service tax for the period 2003-04 to 2007-08 - difference in the figures shown in ST-3 returns and Profit and Loss Account - amount received for imparting training to government staff and private companies - amount received by the appellant for sale of course materials to students - computer training imparted to students - computer training has been imparted to schools as per the agreement entered into with the Education Department of Tamil Nadu - JDC Summer Classes - income received fro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed from computer rentals - Held that:- The rent income received for leasing the computer hardware, etc., cannot be taxed under Computer Training Services. In any case, these agreements include imparting computer training to the students and therefore the benefit of exemption under Notification No. 10/2003 would be applicable to the appellant - demand set aside - appeal allowed. Business Auxiliary Services - demand of service tax due to rounding off - period 2003-4 to 2007-08 - the incentives received from M/s. Tally - sale of forms of Tamil Nadu Open University - amount of short paid tax by the appellant due to rounding off - penalties. Business Auxiliary Services - the incentives received from M/s. Tally - Held that:- The said issue as to whether the incentives received for the use of software would be subject to levy of service tax, has been decided in the case of D. Pauls Consumer Benefit Ltd. Vs. C.C.E. [2017 (3) TMI 1019 - CESTAT NEW DELHI], where it was held that They are by using these GDS/CRS for booking tickets, receiving incentives from the said companies for every segment booked by them. Hence, the service provided by the assessee-Appellants has rightly been covere ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g with applicable interest. (iii) Confirmation of demand of service tax of ₹ 4,96,720/- under Business Auxiliary Service, along with applicable interest. (iv) Confirmation of demand of ₹ 22,705/- under Section 73 A of the Finance Act, 1994, along with applicable interest, on the ground that to this extent service tax collected has not been paid to the Government, due to the rounding off done by the appellant. (v) Imposition of a penalty of ₹ 2,95,98,394/- under Section 78 and ₹ 5,000/- under Section 77 of the Finance Act, 1994. Aggrieved, the appellants are now before the Tribunal. 2.1 The Ld. Counsel Shri. G. Natarajan appeared and argued on behalf of the appellant. He submitted the details of the demand which is tabulated as below : I. Demand of Service Tax under Franchise Service (2003-04 to 2007-08) : Sl. No. Details of demand Value (in Rs.) ST Payable (in Rs.) ST Paid (in Rs.) ST Demande d (in Rs.) Defence 1. ST demanded on Caution Deposit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Benefit of exemption as computer training institute and vocational training institute available up to 15.06.2005 ( Notif. 19/2005) 3. Sale of course materials to students 43827737/- 5012804/- 0 5012804/- These materials are sold to the students and hence no ST can be demanded 4. Examinatio n fee and other charges 8342275/- 850912/- 0 850912/- 5. Hardware training fee 380200-/ 38780/- 0 38780/- Benefit of exemption of computer training institute and vocational training institute available up to 15.06.2005 6. Service provided to Department of School Education 23023000/- 3400826/- 0 3400826/- Essential character of the s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , it is submitted by the Ld. Counsel that the appellant has discharged the entire service tax payable on this count. He adverted to page 187 and 188 of the appeal paper book and submitted that the appellant has paid an amount of ₹ 1,14,824/- and the demand raised on the ground of Caution Deposit received by the appellant is thus discharged fully. 2.2.3 In respect of the demand in Sl. No. 2 based on the difference in figures shown in ST-3 returns and the Profit and Loss (P L) Account, it is explained by the Ld. Counsel that the difference is because of the fact that during the disputed period the service tax was payable on realization basis whereas the figures appearing in the Profit and Loss Account is shown on accrual basis. 2.2.4 A demand of ₹ 9,48,2015/- is made in Sl. No. 3 in respect of sale of administrative materials and promotion materials to Franchisees. It is submitted by the Ld. Counsel that these materials were sold by the appellants to the Franchisees. No service tax can be demanded on a transaction of sale. It is also argued by him that the demand is raised invoking Rule 5 of the Service Tax (Determination of Value) Rules, 2006 and the said rules hav ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aid up the amount for the period after 30.06.2004. 2.3.4 In regard to Sl. No. 3, the demand is raised on sale of course materials to students and reiterated the arguments in regard to Franchise Service and submitted that service tax cannot be demanded on the transaction of sale of course materials to students. 2.3.5 The demand raised in Sl. Nos. 4 and 5 is with regard to computer training imparted to various schools as per the agreement entered with the Tamil Nadu Education Department. He submitted that up to 30.06.2004, the Notification No. 09/2003 and 01/2004 exempted computer training from the levy of service tax. After 30.06.2004, the Notification No. 24/2004-ST dt. 10.09.2004 though did not specifically mention Computer Training Institutes to be exempted, it was mentioned in the Notification that Vocational Training Institute and Recreational Training Institute are exempted. Since the computer training was imparted to students which would help them to seek employment or undertake self-employment after such training/coaching, the same would fall under vocational training and therefore, the appellant is eligible for exemption under Notification No. 24/2004. To support this ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... icable to this demand also. Thus, it was mainly for leasing out computer hardware and a part of the agreement also was for giving coaching to the students. The computer coaching being part of the course/curriculum of the school, the appellant is eligible for exemption under Notification No. 10/2003. 2.4.1 The third table relates to the demand raised under Business Auxiliary Services Demand due to rounding off. 2.4.2 In Sl. No. 1, the Department has made demand under Business Auxiliary Services (BAS) on the incentive received by them from M/s. Tally. For providing training in the field of Accounting Software Packages, the appellant was using tally package and this was used to train the students. The tally kits (in the form of books, development by M/s. Tally) were used for that purpose. This was purchased by the appellant from M/s. Tally Sales P. Ltd. Based on the number of packages purchased, M/s. Tally would give incentive to the appellant. The Department alleges that the appellant is engaged in promotion or marketing or sale of goods produced belonging to the client and thus, has demanded service tax under the category of Business Auxiliary Services. He argued that the in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tted that after 30.06.2004, the appellants are not eligible for exemption of service tax for computer training courses. The legislative intent is very much clear from Notification No. 24/2004-ST dt. 10.09.2004. The Notification, by its amendment, has excluded computer training institutes. The services provided by Vocational Training Institute or Recreational Training Institute are only exempted under Notification No. 24/2004. Computer training will not fall within the category of Vocational Training Institute. The subsequent Notification No. 19/2005 has expressly excluded the Computer Training Institute from the purview of exemption of service tax. The legislative intent therefore is very much clear to remove the exemption provided to computer training institutes. Thus, after 30.06.2004, the appellant cannot claim exemption up to 16.06.2005, contending that Computer Training Institute would fall within the category of Vocational Training Institute. 3.6 It is also argued by the Ld. Counsel that the appellant has imparted computer training to the students as per the agreement entered into with the Education Department. There is no evidence to show that this training was part of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... anchisees. Even as per the Show Cause Notice, the allegation is that these course materials, administrative materials, promotion materials, etc., are part and parcel of the Franchise Service and are sold to the Franchisee. When the Department itself admits that the amount is collected for the sale of such materials, the demand of service tax on the same cannot sustain. It is clarified by the Ld. Counsel for appellant that being books and study materials, these are not subject to levy of VAT. Thus, we hold that the demand raised on the cost recovered from the Franchisees for supply of course materials and administrative materials cannot sustain and requires to be set aside, which we hereby do. 5.2.4 In Sl. No. 4, the demand is raised on course material kit supplied by CSC Publications and Ramiah Publications. It is very much clear from the Show Cause Notice as well as from the impugned order that the amounts for the supply of such study materials are collected by CSC Publications and Ramiah Publications and not by appellants. In such event, the amount received by CSC Publications and Ramiah Publications, who are independent entities, cannot be included in the taxable value of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g imparted to students. He has contended that up to 16.06.2005, Computer Training Institute is exempted from levy of service tax and therefore, the demand can sustain only post 16.06.2005. The Ld. AR has vehemently opposed this contention of the appellant stating that after 30.06.2004, the Notification No. 24/2004 has excluded Computer Training Institutes from the purview of exemption. The appellant is seeking shelter under the category of Vocational Training Institute mentioned in Notification No. 24./2004. It is correct that as per Notification No. 19/2005 which has come into force on 16.06.2005, the Computer Training Institutes have been removed from the purview of exemption granted by Notification No. 24/2004. 5.3.5 The issue has been addressed by the various judgments of the Hon ble High Court of Uttarakhand. In the decision of Doon Institute of Information and Techno. P. Ltd. (supra) it was held that Computer Training Institute would fall under Vocational Training Institute in terms of Notification No. 24/2004 until 16.06.2005. The relevant portion is reproduced as under : 3. On 10th September, 2004, when the original Notification No. 24/2004- Service Tax was noti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ame is dismissed. 5.3.6 Following the same, we are of the view that the appellant is eligible for exemption up to 16.06.2005. The demand for the period up to 16.06.2005, therefore, requires to be set aside, which we hereby do. We make it clear that the appellant is liable to pay service tax from 16.06.2005 along with interest. 5.3.7 In Sl. No. 6 of the table, computer training has been imparted to schools as per the agreement entered into with the Education Department of Tamil Nadu. The Ld. Counsel has strongly argued that the essence of this agreement is for leasing of computer hardware, software and connected accessories. We find that the agreement also has stipulations for imparting computer training. It is the case of the Ld. Counsel that even if the appellant has imparted computer training to the students of these schools as per the agreement, the same would be eligible for exemption under Notification No. 10/2003. For better appreciation, the exemption contained in the above Notification is reproduced as under : In exercise of the powers conferred by section 93 of the Finance Act, 1994 (32 of 1994), the Central Government, being satisfied that it is necessary in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... overnment of Tamil Nadu also twice a week consisting of 2 periods of 45 minutes each. (g) For the Computer appreciation course to the 6th to 10th students Practical training in Computer should be given. 5.3.9 In respect of the demand raised in Sl. No. 7 on JDC Summer Classes, the Ld. Counsel at the time of hearing submitted that the appellant is not contesting the same and has paid up the amount in respect of this demand. 5.3.10 In Sl. No. 8, the demand is raised on the income received from computer rentals. The Ld. Counsel has submitted that the said agreements included both renting/leasing of computer, computer hardware/software, etc., and also imparting courses to the students. The discussions made in respect of Sl. No. 6 above, applies to the demand made under this category also. The rent income received for leasing the computer hardware, etc., cannot be taxed under Computer Training Services. In any case, these agreements include imparting computer training to the students and therefore, as argued by the Ld. Counsel for the appellant, the benefit of exemption under Notification No. 10/2003 would be applicable to the appellant and the case law as discussed above wo ..... X X X X Extracts X X X X X X X X Extracts X X X X
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