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2025 (7) TMI 567 - AT - Service TaxLevy of service tax - Manpower Recruitment or Supply Agency Service - recruiting facility to MNCs and other recruiting organisations by the appellant - period of dispute is from 13.05.2003 to 31.03.2004 and 01.04.2004 and from 01.05.2006 to 28.02.2009 - time limitation - HELD THAT - The institute being a trust has nothing to do with the service rendered by the appellant of recruitment by collecting the amounts from the respective students continues to be a commercial concern hence the demand in this appeal is sustained. The show-cause notice was issued on 12.03.2009 for the period from 13.05.2003 to 31.03.2004 and 1.4.2004 to 31.3.2005. It is seen from the records that the audit was conducted in July 2007 and audit report was submitted in August 2007; however the show-cause notice was issued on 12.03.2009 nearly after one and half years. Since the appellant was already registered for Management Consultancy Services and were regularly filed ST-3 returns the question of mala fide intention cannot be alleged against the appellant. Also no grounds have been brought on record to prove intention to evade payment except to state that the facts were not brought on record in their ST-3 returns and was known to the Revenue only after the audit was conducted cannot be sustained since Revenue got to know the facts in 2007 and issued notice only in 2009; therefore the demands are set aside on limitation. In the second appeal ST/2323/2012 the definition is amended to mean any person hence the claim of the appellant for this period is absolutely of no consideration as they are liable to pay tax on the amounts received by them from the students and based on the discussions above the demand in the second appeal is also sustained. However with regard to limitation we agree with the appellant that since the first show-cause notice had invoked suppression the question of invoking suppression for the subsequent period does not arise. Since the show-cause notice was issued on 12.4.2010 for the period 01.05.2006 to 28.02.2009 the demand for extended period cannot be sustained. Appeal disposed off.
1. ISSUES PRESENTED and CONSIDERED
The core legal questions considered by the Tribunal were: (a) Whether the appellant's activity of allowing multinational companies (MNCs) and recruitment agencies to conduct campus selections and collecting amounts per successfully placed student falls within the ambit of 'Manpower Recruitment or Supply Agency Services' as defined under the Finance Act, 1994; (b) Whether the appellant, being a charitable trust engaged in imparting education, can be considered a 'commercial concern' or 'any person' liable to pay service tax on such activities; (c) Whether the amounts collected by the appellant from recruiting companies or students constitute 'consideration' liable to service tax or are merely voluntary donations exempt from tax; (d) The applicability of the extended period of limitation for service tax demand and whether suppression or mala fide intention can be attributed to the appellant; (e) The relevance and applicability of precedents including the decisions in Great Lakes Institute of Management and Sydenham Institute of Management cases on the classification of services and tax liability; (f) The period-wise applicability of the definitions of 'Manpower Recruitment or Supply Agency Service' and their impact on the appellant's liability. 2. ISSUE-WISE DETAILED ANALYSIS Issue (a) - Classification of Service as 'Manpower Recruitment or Supply Agency Service' The relevant legal framework comprised Section 65(68) and Section 65(105k) of the Finance Act, 1994, which define 'Manpower Recruitment Agency Service' and later 'Manpower Recruitment or Supply Agency Service'. The definitions evolved over the years:
The Court noted that the appellant collected amounts per student placed, which constituted a service rendered for recruitment of manpower. The appellant's role in facilitating campus selections and collecting fees was squarely covered under the service definitions. The Tribunal held that the activity is taxable as 'Manpower Recruitment or Supply Agency Service' irrespective of the nomenclature or the nature of the institution. Issue (b) - Whether the appellant's status as a charitable trust excludes it from being a 'commercial concern' or 'any person' liable for service tax The appellant contended that as a charitable trust engaged in education, without profit motive, it cannot be treated as a commercial concern liable for service tax. It was argued that the amounts collected were voluntary contributions to a corpus fund, not consideration for services. The Tribunal rejected this contention, observing that the appellant collected fixed amounts (Rs. 25,000/- per student domestically and US $1000 for overseas placements), which cannot be construed as voluntary donations. The receipt of such amounts from students or recruiting companies demonstrated a commercial activity with profit motive. The Tribunal emphasized that the status of the appellant as a trust did not exempt it from tax liability if it was engaged in commercial activities. The amended definition from 2006 onwards replaced 'commercial concern' with 'any person', further broadening the scope of liability. Issue (c) - Nature of amounts collected: Consideration or Donation The appellant claimed the amounts collected were contributions to a corpus fund and voluntary in nature, thus not liable to service tax. The Revenue countered that the amounts were consideration for facilitating recruitment services. The Tribunal found that the amounts were charged per student placed and were linked to the service of recruitment facilitation. The amounts were not voluntary donations but payments for a service rendered. The Tribunal relied on the precedent that amounts collected from recruiting companies or students as placement charges are taxable, distinguishing it from cases where fees were collected from students for educational services alone. Issue (d) - Limitation and Allegations of Suppression or Mala Fide Intention The Revenue invoked extended limitation periods based on allegations of suppression. The appellant argued that the demand was barred by limitation and that no mala fide intention existed, as the facts were disclosed in returns and audit reports. The Tribunal noted that the audit report was submitted in August 2007, but the show-cause notice was issued only in March 2009, beyond the normal limitation period of one year. Since the appellant was registered and regularly filing returns under 'Management Consultancy Services', no suppression or intention to evade tax was established. The Tribunal held that the extended period of limitation could not be invoked for the first appeal period. For the second appeal period, since the first show-cause notice invoked suppression, the subsequent period could not again be subject to extended limitation. Accordingly, the demand was set aside on limitation grounds for the first appeal and sustained only for the normal period in the second appeal. Issue (e) - Applicability of Precedents The appellant relied on the Tribunal's earlier decision in Great Lakes Institute of Management, which had held that placement services were not taxable under 'Manpower Recruitment or Supply Agency Service'. However, the Tribunal observed that this decision was referred to a Larger Bench, which clarified that imparting education and related services are taxable as 'commercial training or coaching services'. The Larger Bench ruling established that the nature of the institution (trust or otherwise) and the nomenclature of the service do not exclude it from tax liability if commercial activity is involved. The Revenue relied on the Sydenham Institute decision, which distinguished cases where fees were collected from students versus recruiting companies. The Tribunal found the Revenue's reliance appropriate as the appellant collected amounts from recruiting companies/students for placement facilitation, thus liable to service tax. Issue (f) - Period-wise applicability of definitions and impact on liability The Tribunal carefully examined the changes in the statutory definitions over the relevant periods. For the period 2003-2005, the definition required the service provider to be a 'commercial concern', which the Tribunal found the appellant to be, based on the facts. For the period 2006-2009, the definition was amended to include 'any person', thereby removing any ambiguity regarding the appellant's liability. This statutory evolution reinforced the Tribunal's conclusion that the appellant's activities were taxable throughout the disputed periods. 3. SIGNIFICANT HOLDINGS The Tribunal held: "The institute being a trust has nothing to do with the service rendered by the appellant of recruitment by collecting the amounts from the respective students continues to be a commercial concern, hence, the demand in this appeal is sustained." "The taxable service of 'commercial training or coaching' occurs when any institute or establishment is engaged in the activity of imparting skill, knowledge or lessons on any subject or field (excluding sports), irrespective of whether such imparting of skill, knowledge or lessons is in respect of particular discipline or a broad spectrum of disciplines/academic areas; irrespective of the nomenclature or description of the institute or establishment, as a coaching or training centre or an educational institution; regardless of whether an institute or establishment is incorporated by or registered under any law; and irrespective of distinctions on the basis of curriculum, course content, teaching methodology, course duration or otherwise." On limitation, the Tribunal concluded that: "Since the appellant was already registered for 'Management Consultancy Services' and were regularly filed ST-3 returns, the question of mala fide intention cannot be alleged against the appellant... the demands are set aside on limitation." Final determinations:
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