TMI Blog2019 (5) TMI 230X X X X Extracts X X X X X X X X Extracts X X X X ..... Shri G. Shivadass, Sr, Adv, Shri R. Raghavendra Rao Shri Sudeshna B, Advocates for the Appellants/ Assessees. Shri P.R.V. Ramanan, AR for the Respondent. ORDER Per: M.V. Ravindran 1. By this common order, we are disposing of the following appeals. (i) ST/22340/2015 filed by K12 Education Management Pvt Ltd (now known as Varsity Education Management Pvt Ltd); (ii) ST/30200/2016 filed by Varsity Education Managment Pvt Ltd and (iii) ST/30350/2018 filed by the revenue. 2. These appeals are directed against the following impugned orders. Appeal No. Impugned Order ST/22340/2015 OIO: HYD-EXCUS-004-COM-031-15-16 dt.09.09.2015 ST/30200/2016 OIO: 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 Educat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Services (iv) Cleaning Services (v) Cooking Services (vi) ERP Services (vii) Examination Services (viii) House Keeping Services (ix) IT Management Services (x) Fleet Management Services (xi) Marketing Services (xii) Mess Provisions Procurement Services (xiii) Payroll Services (xiv) Procurement Services (xv) Security Service (xvi) Sports Training Services (xvii) Teacher Assistance Service (xviii) Teacher Training Services (xix) Other Charges (xx) Vendor Management Services 7. During the period in question, both the appellant/ assessees have been paying service tax and filing returns with the authorities under the various services rendered by them like ERP Services, IT Management Services, Marketing Services, Campaigning Services, Advertising Security Services and Teacher Training Services. Separate show cause notices were issued to both the appellants for the periods as indicated herein above allegin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be summarized as under for both the appeals. I. Demands for the period April, 2010 to June, 2012 in the case of KEMPL and for the period April, 2011 to June, 2012 in the case of VEMPL is under the category of Support Services of Business or Commerce . After taking the bench through the definition of Support Services of Business or Commerce and also the Board Circular No. 334/4/2006-TRU dated 28.2.2006, he would submit that the definition of business support services was widened by the Finance Act, 2011 with effect from 2011 wherein words operational assistance for marketing was replaced by operational administrative assistance in any manner and it was clarified that scope of amendment made includes certain services already taxed under any other head for more specific discussion. After taking the bench through this, he would submit that essential ingredients for activity to be classified under Support Services of Business or Commerce are services provided in relation to business or commerce and shall include list of activities as indicated in the definition. The activity of the appellants is rendered to educational Trusts viz., Sri Chaitanya, Nexgen and SKCM ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at services rendered by the assessee therein were in relation to education which was exempted by notification 14/2004-ST. Levy of service tax on educational institutions under the category of commercial training or coaching services was expressly excluded. III. The activities undertaken by the appellants are not included in the definition of Support Services of Business or Commerce . After taking the bench through this definition, he would submit that the activities covered under this head as per the definition would be as follows: a. Evaluation of prospective customers b. Telemarketing c. Processing of purchase orders and fulfilment services, d. Information and tracking of delivery schedules e. Managing distribution and logistics f. Customer relationship management services g. Accounting and processing of transactions h. Operational administrative assistance in any manner i. Formulation of customer service and pricing policies j. Infrastructural support services and k. Other transaction proc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dated 10.7.2014. d. Further by notification 6/2014-ST dated 11.7.2014, entry No.9 of Mega notification was further amended which he reads through and also the definition of educational institution introduced by notification 6/2014. e. Therefore, essentially, an activity provided to an educational institution defined with reference to Sec.66D of the Finance Act, 1994 was outside the purview of the service tax and appellants are squarely covered in the ambit of the same. (ii) Services rendered by the appellants are educational services provided to educational institutions. a. Allegation of the department that services are provided to Sri Chaitanya, Nexgen and SKCMET are not in the nature of services provided to an educational institution; as what is registered as an educational institution are junior colleges and various schools by different name. He would that revenue s case for example, Sri Chaitanya Techno Primary school, Sri Chaitanya Techno Junior Kalasala, and Sri Chaitanya Junior college are institution issuing mark sheets, certificate recognized by law to the students, trusts do not conduct any examination perio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... MPL, revenue has filed an appeal ST/30350/2018 on this issue while the Order-in-Original dated 6.10.2017 of KEMPL has been accepted by the department and no appeal has been filed by the revenue. He draws our attention to the reply given by the revenue authorities under an RTI query. (iii) Demand under Sec.73A of the Finance Act, 1994 is not sustainable for the following reasons. a. That no service tax was collected by the appellants and was retained by them. b. Appellants had raised invoices on SKCMET and other Trusts but subsequently realising that they had wrongly collected the tax, Sri Chaitanya and Nexgen Educational Trusts refunded service tax by way of reduction in fees from the students. He submits that demands raised on KEMPL on this point may need verification from the lower authorities and appellant are ready and willing to produce all the documents on refund of the amounts to the students. As regards VEMPL, it is his submission that appellant reversed the service tax billed to SKCMET, which in effect refunded the amount of service tax billed and collected from the said students. (iv) Substantial portion of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t the appellants had not discharged the service tax liability on accounting services, administration services etc. He would then draw our attention to the allegations made in the show cause notice as to the definition relevant to support services of business of commerce and also notification 25/2012-ST. He would also submit that appellant had collected amounts from students for and under the category of commercial training or coaching services up to 30.6.2012 and collected some amount as service tax liability which was not deposited with the Government. After confirming the facts as stated by the learned counsel for the appellants was more or less identical in all the appeals, he proceeds to make submissions which are summarized as under: i. He would submit that certain essential facts concerning Sri Chaitanya Educational Institutions needs to be considered; that one Dr. B. Satyanarayana Rao and his family members started Sri Chaitanya Education Committee (SCEC), established various coaching centres called as campuses in Andhra Pradesh and Telangana for imparting education to students admitted in colleges set up by them, engaged in coaching for competitive exams ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... services and other transaction processing and hence, the services which are rendered under a composite agreement, are classifiable as support services of business or commerce; that the facts that service recipients receive consideration for providing educational training of the nature of the commercial coaching and training to students determine the commercial character of their activity and the case law cited by both the appellants are distinguishable in the circumstances of the present case. After adopting the said reasons and findings given by the adjudicating authority he would submit that as per MOA, the appellant are to carry on in India and anywhere else in the world, the business of providing all products and services, facilities, books and educational material etc., the term Business as per the MOA shall mean the business of providing products and services, whether for curricular or co-curricular activities in relation to technology, education management, content, training, consulting, transport facilities etc. which would mean that the nature of these business activities and the outcome goes to the students being coached in the campuses set up by the Trusts. Apparently ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... persons or body of individuals, whether incorporated or not, Government, a local authority or any artificial juridical person, not falling within any of the preceding sub-clauses) and submits that in terms of aforesaid definitions, trust is nothing but business entity notwithstanding its professed identity as a charitable institution. It is his submission that trusts have been bearing the cost raised by the appellants remains undisputed. a. For the period 01.4.2011 to 30.6.2012, it is the submission that on reading the definition of support services for business or commerce under Sec.65(104c) and the Board Circular thereof, the scope of definition of support services or commerce is very wide and it covers all outsourced activities. The second or the inclusive part of the definition which starts with and include indicates that the activities listed therein are only illustrative but not exhaustive. It is the submission that the term includes generally expands the definition to add things which by general import would not be included in the definition. In sum, demand of service tax raised from 1.4.2011 to 30.6.2012 is justified and is legally sustainable. Further, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ted in SCEC campuses by the appellants are not in the negative list. They are exigible to service tax. d. Further he would submit that the benefits of notification 25/2012-ST (Sl.No.9) would not be available to the appellants herein as the education guide issued by the Central Government, Ministry of Revenue, indicates that exemption is not available for services to or by educational institutions in respect of education exempted from service tax. Therefore, service tax is chargeable on such auxiliary educational services which are in respect of education chargeable to service tax. He would rely upon the said education guide to submit that there is no advancement of any other object of general public utility and the exemption is only available if activities are meant for general public. As regards the period from 01.4.2013 to 31.3.2014 the exemption continued to cover all the services in terms of definition of auxiliary educational services received by educational institutions. But it did not cover any of the above services provided by the educational institutions. This means that apart from the services of education listed in the negative list there was no exemption ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in jeopardy and on contrary, decision of 2015 stands accepted. He would rely upon the decision of the Hon ble High Court of Punjab Haryana in the case of Bhupinder Pal Singh [AIR 1973 P H 76] for the proposition that definition of business was interpreted in the minds as has been recorded by him herein before. 12. We have heard both sides and perused the records. 13. On considering the submissions made by both sides in detail and the written submissions filed during the court hearing, we find that the issue involved in this case is regarding taxability of the services rendered by appellants to the educational trusts is liable or otherwise. 14. Brief undisputed factual positions are as stated in Paragraphs 5 to 8. 15. In appeal ST/22340/2015, KEMPL has rendered services pertaining to details as mentioned in Para 6 to Sri Chaitanya Education Trust and Nexgen Education Trust while in appeal ST/30200/2016, VEMPL has rendered services to SKCMET. In both the appeals, the demand confirmed is for two periods i.e., prior to 01.7.2012 under the category of Business Support Services and post 01.7.2012 under the category of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aching and learning skills so as to empower leadership qualities and inculcate life skill values in students including self discipline, hard work, honesty, integrity, truthfulness, efficient work culture, sportsmanship, courtesy, respect to elders and such other social and moral values; v. to equip students with a thorough understanding of the subject and the skills required to compete in life, and improve efficiency to their highest personal ability; vi. to provide skills to manage in a competitive environment and a rapidly changing standards of competitive skills and provide the best of facilities to the student to develop such skill to sustain in this competitive environment; vii. to teach, impart and inculcate, develop and enhance skills in computers, sciences, languages, mathematics, engineering, medical, sports, art, social work and all other subjects of learning and imparting knowledge to students of all age groups; viii. to conduct diverse educational programs with the purpose of expanding the horizons, life choices and livelihood opportunities to all students including physically and mentally challenge ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion on imparting knowledge up to class 10 and SKCMET is enhancing education by imparting knowledge in junior college and functions through various junior colleges. 18. KEMPL entered into an agreement with Sri Chaitanya Education Trust and Nexgen Education Trust for rendering various services by an agreement dated 16.3.2001. Similarly worded agreement was entered into by VEMPL with SKCMET. The schools and the colleges through whom the trust functions as educational trust are included in the annexure to the agreements of the said educational trusts. We have perused the agreements entered and also the list of schools and colleges annexed to the agreements signed by the appellants with trusts and find that they are the schools which are imparting education in schools and any junior colleges. 19. Based upon this basic factual matrix, now we have to analyze whether the educational trusts are educational institutions or otherwise. On holistically considering the contents of agreements entered into by the appellant with the trusts, and also noting the trust deeds of the said trusts, we note that these trusts are educational trusts and are functioning through ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ll under business support services or otherwise. In order to appreciate the factual position, that the definition of business support services needs to be seen which we reproduce herein below for the entire period in question. (104c) Support Services of Business or Commerce means services provided in relation to business or commerce and includes evaluation of prospective customers, telemarketing, processing of purchase orders and fulfilment services, information and tracking of delivery schedules, managing distribution and logistics, customer relationship management services, accounting and processing of transactions, operational or administrative assistance in any manner, formulation of customer service and pricing policies, infrastructural support services and other transaction processing. Explanation -For the purposes of this clause, the expression infrastructural support services includes providing office along with office utilities, lounge, reception with competent personnel to handle messages, secretarial services, internet and telecom facilities, pantry and security; (zzzq) to any person, by any ot ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ill not survive. 22. In our considered view, the ratio of the above decisions would be applicable in the facts of the instant case as the services rendered by the appellants herein are to the trust which is formed to provide and enhance imparting of knowledge through the schools and junior colleges and cannot be termed as an activity in relation to business or commerce. 23. In respect of appeal ST/22340/2015 for the period prior to 01.7.2012, the argument of the revenue authorities was that the trusts are not equivalent to educational institutions and the services rendered by the appellants to the trusts cannot be equated as being rendered to institutions and hence need to be rejected on the above findings recorded by us. 24. Now for the period July, 2012 to March, 2014, we find that the entire service tax regime w.e.f. 01.7.2012 has undergone a substantial change. A general definition of the term service was inserted by Sec.65B(44) of the Act instead of defining individual taxable services. For an activity to be taxable after 01.7.2012, it has to fulfil the requirement of services under Sec.65B(44) and should not be a service speci ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt would arise as the services rendered by the appellant are to the trust and not to the educational institutions, however, we find that this argument of the adjudicating authority needs to be rejected as is already held by us in earlier paragraphs herein above. Subsequently, the definition of auxiliary educational services was omitted from the mega exemption notification 25/2012-ST w.e.f. 10.7.2014 which was explained by the TRU by letter No.334/15/2014-TRU dated 10.7.2014 wherein the reason for omission of the concept of auxiliary educational services was to bring clarity and also the services received by the educational institutions are exempted from service tax in respect of transportation of students, faculty and staff of educational institutions, catering services including any mid day meal schemes sponsored by the Government, security/ cleaning/ housekeeping services in such educational institutions and services relating to admission into such institution or conduct of examination. It was also clarified that scope of exemption remains same as earlier in the case of services provided by eligible educational institutions in the case of services received by eligible instituti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sue, needs to be revisited as the said allegations which were same in the earlier Order-in-Original (which is in challenge before us in appeal ST/22340/2015) and by order dated 06.10.2017 departed with earlier order and relying upon the ratio of Aditanar Educational Institution (supra) dropped the proceedings initiated by the show cause notice, holding that KEMPL is rendering services to Sri Chaitanya Educational Trust and Nexgen Educational Trust are not taxable. This Order-in-Original was reviewed by the Committee of Chief Commissioners and the said committee accepted the said Order-in-Original dated 06.10.2017. One of the appellants herein VEMPL has produced a copy of the letter dated 24.1.2019 received from the office of the Central Tax (GST Commissionerate) informing them so. We reproduce the said letter: 31. It can be seen from the above reproduced letter the Order-in-Original which dropped the proceedings on identical allegations as made in the show cause notices in these appeals, has been accepted by the department for the earlier period in respect of one of the assessees. If that be so, we find that the confirmation of the demands on these two appeals ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ficates on which they wish to rely upon. 34. As regards demand raised under Sec.73A of the Finance Act, 1994 on both the appellants/assessees, we find that these demand also need to be reconsidered by the adjudicating authority inasmuch the claim of the appellants/assessees is that they have repaid/reversed the amount collected as service tax from the students or from the trusts has not been examined by the authority. In our view, since this needs factual verification, the demands raised under this provisions of Sec.73A of the Finance Act, 1994 also are remitted back to the adjudicating authority, to arrive at a conclusion after following principles of natural justice. 35. Since we have set aside the major portion of demands raised, question of visiting the appellant with penalty does not arise. In the remand proceedings the adjudicating authority may arrive at the issue of penalty sympathetically. 36. As regards the appeal filed by the revenue, on perusal of grounds of appeal, we find that the appeal was filed only on the ground that the judgment of the Tribunal in the case of Sri Chaitanya Education Committee is in appeal and hence, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... service rendered by any person, to any other person, in relation to support services of business or commerce in any manner. It is not in dispute that the appellant is a person and so is the service recipient and that the services were rendered. The issues to be decided are: a) Is the service being rendered in relation to support of business or commerce, in any manner? This depends on whether the nature of the activity of the service recipients is business or commerce. b) If so, whether the nature of their activities would get excluded from the definition of business or commerce because they are registered as a Trust and not as a business company? c) Since the services rendered by the service recipients were held to be not exigible under commercial coaching and training will it affect the taxability of the appellant. 3. As submitted by the Special Counsel for the Revenue, 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 same as if a charge were made. The making of p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uccessful 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 to question (a) above is a categorical YES. 6. Regarding the question (b) above, I find that the nature of the entity does not determine whether it is a business only the nature of its activity does. Business can be run by any person- natural or juridical. There is no bar on a trust running a business. The Objects in the Trust deed, as in the case of most Trusts, may claim that they are working for the advancement of education but the proclamations in the Trust deed will make no difference to determining whether their activity is a business. If the same activity was carried out by any other person or company nobody would even doubt that it is business. It makes no difference if the Trust does the activity. It is also pertinent that the Trust in this case, appears to be a closely family held one. It also makes no difference whether the Trust distributes profits or ploughs them back into its own corpus. It is only a different business model. In fact, even some large corporations like Google also don t distribute ..... X X X X Extracts X X X X X X X X Extracts X X X X
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