2018 (10) TMI 659 - AT - Service Tax

Commercial training or coaching services - prospective insurance agent - import of intellectual property service - CENVAT Credit of non-registered branches. Whether the appellant is liable to pay service tax under the category commercial training or coaching services wherein they provide training to prospective insurance agent Held that - The issue is covered by the decision in the case of NIS SPARTA LTD. VERSUS CST NEW DELHI 2015 (1) TMI 504 - CESTAT NEW DELHI where it was held that Training imparted by the appellants does not fall under the ambit of Section 65(27) of the Finance Act 1994 as the training imparted by the appellant is having the recognition of law and covered under exclusion clause of Section 65(27) of the Finance Act 1994 - demand set aside. Whether appellant is liable to pay service tax on import of intellectual property service Rs. 48.73 lakhs? - Held that - The burden to prove that the activity is liable to service tax is on the Revenue. In the present case as per the agreement admittedly there is no consideration qua for IPR and the Revenue is not able to show any other evidence. Hence when there is no consideration for IPR then the demand of service tax under IPR is liable to be set aside - demand set aside. Whether the appellant have wrongly availed and utilised Cenvat credit on the invoices which was addressed to separate unit working for about the same premises and whether appellant have wrongly availed and utilised Cenvat credit in respect of non-registered branches Rs. 88.09 lakhs? - Held that - Name of the appellant i.e. from NIS Sparta to NIS Sparta (Division of Mudra Communications Pvt. Ltd.) had been changed in accordance with High Court (permission) order. Moreover the department is not disputing that the services mentioned in the invoices has been used by the appellant. It is settled law that substantive benefit cannot be denied merely on the procedural lapse - credit allowed. Demand and Penalties set aside - Appeal allowed.

Issues Involved:
1. Liability to pay service tax under 'commercial training or coaching services' for training prospective insurance agents.
2. Liability to pay service tax on import of 'intellectual property service'.
3. Wrongful availing and utilization of Cenvat credit on invoices addressed to a separate unit and non-registered branches.

Issue-wise Detailed Analysis:

Issue 1: Service Tax under 'Commercial Training or Coaching Services'

The Tribunal examined whether the appellant is liable to pay service tax under the category of 'commercial training or coaching services' for providing training to prospective insurance agents. The Tribunal noted that an identical issue for an earlier period had been decided in favor of the appellant in the case of NIS Sparta Limited Vs CST, New Delhi (2015-TIOL-209-CESTAT-DEL). There was no change in facts or law for the periods covered in the present show cause notices. The Tribunal emphasized that the appellant is an approved institution under the Insurance Regulatory and Development Authority (Licensing of Insurance Agents) Regulation 2000. The training provided by the appellant is mandatory and recognized by law, thus excluding it from the ambit of 'commercial training or coaching services'. The Tribunal referenced the Delhi High Court's decision in India Institute of Aircraft Engineering Vs. UOI (2013 (30) STR 689 (Del)) and found that the benefit of Notification no. 24/2004-ST was also applicable. The Tribunal dismissed the Revenue's reliance on the Madras High Court's decision in Academy of Maritime Education Trust Vs CST Chennai (2014-TIOL-1327-HC-MAD-ST) as not applicable to the present matter. Consequently, the demand for service tax under 'commercial training or coaching services' was set aside.

Issue 2: Service Tax on Import of 'Intellectual Property Service'

The Tribunal evaluated whether the appellant is liable to pay service tax on the import of 'intellectual property service' (IPR services). The appellant had entered into a contract with Cross Knowledge Group Ltd., which provided intellectual property rights free of charge. The Tribunal cited the principle that something given free of cost cannot be charged to service tax, referencing Larsen and Toubro Ltd Vs. CCE (2016 (41) STR 95 (Tri-Del)) and CST Vs Bhayana Builders (2018 (2) TMI1325 Supreme Court). The Tribunal noted that the transaction was a sales transaction, as held by the Supreme Court in Tata Consultancy Services Vs. State of AP (2005(1) SCC 308), and not a service transaction. The Revenue failed to establish that the consideration paid was for the license to use trademarks or other intellectual property rights recognized under Indian law. The Tribunal also considered that if any service was involved, it would fall under 'information technology software service' rather than IPR service. Therefore, the demand for service tax under IPR services was set aside.

Issue 3: Cenvat Credit

The Tribunal addressed the issue of whether the appellant wrongly availed and utilized Cenvat credit on invoices addressed to a separate unit and non-registered branches. The Tribunal found that the denial of Cenvat credit was based on procedural lapses, such as the name change to 'NIS Sparta (Division of Mudra Communications Pvt. Ltd.)' and the address on the invoices. There was no dispute over the substantial availment of credit or the use of services mentioned in the invoices. The Tribunal referenced Vimal Enterprises Vs. UOI (2006 (195) ELT 267) and held that substantive benefits cannot be denied merely on procedural lapses. Therefore, the denial of Cenvat credit was found to be incorrect.

Extended Period of Limitation:

The Tribunal noted that the extended period of limitation was not applicable in this case. The show cause notice was issued based on audits conducted two years prior, indicating that the delay could not be attributed to the appellant. Additionally, an earlier show cause notice on the same issue had already been issued, indicating that the Department was aware of the issue. Therefore, the extended period of limitation was deemed inapplicable.

Conclusion:

The Tribunal allowed the appeal with consequential relief to the appellant and set aside the penalties. The issues of service tax under 'commercial training or coaching services' and 'intellectual property service' were resolved in favor of the appellant. The denial of Cenvat credit was also overturned. The issue of limitation was left open. The judgment was pronounced in court on 3.10.2018.

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