TMI Blog2019 (1) TMI 75X X X X Extracts X X X X X X X X Extracts X X X X ..... extended period of five years limitation. The convoluted scheme in the form of the MoU dated 01.04.2009 adopted by the petitioner academy and the society, two separate legal entities, manned by one single individual, A.Rajendra Prasad, essentially seems to have been directed at avoiding tax liability but in effect, it amounted to evasion of tax, which is per se illegal. The manner in which the petitioner academy and the society went about the transaction manifests in no uncertain terms that the intention was to evade tax - the desperate ploy of the petitioner academy in its reply affidavit to completely disown its coaching activity for entrance exams clearly highlights its lack of bonafides and its real intention. That being so, the question of giving it the benefit of the normal limitation period would not arise. In the case on hand, the mere factum of the petitioner academy obtaining registration and filing a ‘nil’ return followed by cancellation of the registration seems to be a self-serving act for the purpose of warding off extended period of limitation at a later point of time. This premeditated act on the part of the petitioner academy was only to present a fait accom ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... der-in-Original dated 29.11.2016 passed by the Commissioner, Central Excise, Customs and Service Tax, Guntur, Andhra Pradesh, the second respondent, requiring it to pay ₹ 53,94,36,220/- towards service tax in relation to its commercial coaching services, with interest and penalties. The affidavit filed in support of the writ petition states thus: The petitioner academy is a registered partnership firm with two partners, viz., A.Rajendra Prasad and his wife, A.Madhavi. It has 9 branches located at Guntur, Visakhapatnam, Vijayawada, Hyderabad, Eluru, Tirupati, Ongole, Tenali and Nellore. The petitioner academy entered into Memorandum of Understanding (MoU) dated 01.04.2009 with M/s. NRI Educational Society (hereinafter, the society ), a society formed under the Societies Registration Act with 7 members. A.Rajendra Prasad, the Managing Partner of the petitioner academy, is a member of the society and is also the President Correspondent of the society s colleges for Intermediate education in the State of Andhra Pradesh. On the strength of this MoU, the petitioner academy operated 43 recognized junior colleges of the society, viz., NRI Junior Colleges, imparting education in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Order-in-Original dated 29.11.2016 levying ₹ 53,94,36,220/- towards service tax payable by the petitioner academy for the taxable service of commercial coaching during the period 01.10.2009 to 31.03.2015. The demand of interest thereon stood confirmed under Section 75 of the Act of 1994. The second respondent also imposed a penalty of ₹ 10,000/- for failure to apply for registration apart from a penalty of ₹ 10,000/- for contravention of the provisions of the Act of 1994 and a further penalty of ₹ 53,94,36,220/- for suppressing the value of the taxable services provided, resulting in the evasion of service tax, under Section 78(1) of the Act of 1994. The petitioner academy contends that the impugned Order-in-Original dated 29.11.2016 is unsustainable as the show-cause notice dated 17.04.2015 was issued invoking power under the proviso to Section 73(1) of the Act of 1994 but the extended period of limitation thereunder could only be invoked when fraud or collusion or willful misstatement or suppression of facts or contravention of any of the provisions of Chapter V of the Act of 1994 or the Rules made thereunder is committed with intent to evade payment of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... arted education only in Intermediate curriculum was incorrect as it was engaged in coaching students for All India Entrance Examinations. He placed reliance on the MoU dated 01.04.2009 and the statement made by A.Rajendra Prasad, the Managing Partner of the petitioner academy. He also cited the bills generated by the petitioner academy indicating different fee structures. He stated that the actual tuition fee prescribed by the Board of Intermediate Education, Andhra Pradesh, was collected by the society and not by the petitioner academy. He pointed out that the admitted position was that the petitioner academy and the society were collecting separate fees from the students which clearly showed that the fee towards Intermediate curriculum was collected by the society while the fee towards specialized coaching was collected by the petitioner academy. He asserted that the petitioner academy and the society had suppressed the fact that they were both separate legal entities and the nature of their activities and claimed that the petitioner academy had acted with the conscious intention of evading payment of service tax, by not bringing the actual facts to the knowledge of the departmen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the wider scope of appellate jurisdiction. Keeping this aspect in mind, we propose to adjudicate this writ petition as the issue of limitation has been raised which would go to the root of the matter. (See STATE OF PUNJAB V/s. BHATINDA DISTRICT CO-OPERATIVE MILK P. UNION LTD. 2017 (217) ELT 325 (SC) . Perusal of the MoU dated 01.04.2009 reflects that A.Rajendra Prasad signed therein both for the petitioner academy as well as the society in the respective roles of Managing Partner of the petitioner academy and Secretary Correspondent of the society. The MoU recorded that the petitioner academy was a coaching centre for +2 level or Intermediate courses, giving coaching for All India entrance examinations along with Intermediate examinations and the petitioner academy approached the society to forward its students to write examinations and as the society had recognition from the Board of Intermediate, Andhra Pradesh, it agreed to forward its students to the petitioner academy. Clause 1 of the terms and conditions recorded that the society would forward all its admitted students in +2 courses to the petitioner academy for a period of seven years and the students would be allowed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . Section 65(27) of the Act of 1994 defines commercial training or coaching centre to mean any institute or establishment providing commercial training or coaching for imparting skill or knowledge or lessons on any subject or field other than sports, with or without issuance of a certificate, and includes coaching or tutorial classes but does not include a preschool coaching and training centre or any institute or establishment which issues any certificate or diploma or degree or any educational qualification recognized by law for the time being in force. The portion of the definition in italics was deleted by the Finance Act, 2011, with effect from 08.04.2011. However, Notification No.10/2003-Service Tax dated 20.06.2003 was issued by the Central Government, in exercise of power conferred by Section 93 of the Act of 1994, exempting the taxable service provided by a commercial training or coaching centre, in relation to the commercial training or coaching which forms an essential part of a course or curriculum of any other institute or establishment, leading to issuance of any certificate or diploma or degree or educational qualification recognized by law for the time being in fo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt from the said application form, are Medical in NRI Special Programme-I and under Programme-II (IC), Global Scholars (JEE Main Advanced + BITSAT + VIT), Techno-Scholars (Jee Main + BITSAT + VIT) and Medi-Scholars (EAMCET + AIIMS + JIPMER + AFMC + CMC); and under Programme-III (Regular), JEE Main, Medical, Engineering, CEC, MEC + CPT and MEC. The fee collected from the said student towards MPC Intermediate and NRI Engineering Special Programme-I was ₹ 40,000/- for the first year and ₹ 45,000/- for the second year. Similarly, another application form evidences that a student who chose Medical NRI Special Programme-I was charged ₹ 85,000/- for the first year and ₹ 90,000/- for the second year. Another candidate belonging to MPC Intermediate who chose Techno-Scholars (JEE Main + BITSAT + VIT) was charged ₹ 52,000/- for the first year and ₹ 60,000/- towards the second year. As opposed to this, a candidate who opted for MEC group in Intermediate was charged only ₹ 10,000/-. A brochure brought out by the petitioner academy, reproduced in the notice, indicated that there was a vast discrepancy in the day scholar fee particulars for the academic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e to the tune of ₹ 29,31,218/- and building rents to the tune of ₹ 1,68,20,220/-. It also claimed expenditure towards salaries paid to the tune of ₹ 6,58,59,623/- and college salaries to the tune of ₹ 55,29,230/-. On the strength of this material, the Additional Director General opined that the petitioner academy was a coaching institution and was providing commercial coaching for Intermediate exams in the streams of MPC, BiPC MEC along with State and All India level competitive entrance examinations like IIT JEE (Mains Advanced), BITSAT, EAMCET, AIIMS, JIPMER, AFMC, VIT, NEET, CPT, IPCC etc. He further opined that the petitioner academy was collecting tuition/coaching fees directly from students for providing commercial coaching and it did not result in any degree, diploma or certificate being given to such students. He accordingly opined that the petitioner academy would come within the category of a coaching centre falling within the ambit of Section 65(27) of the Act of 1994 and its activity would be liable to taxation under Section 65(105)(zzc). Basing on the investigation undertaken and in the light of what he had discussed in the body of the sho ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sons on any subject or field other than the sports, with or without issuance of a certificate and including coaching or tutorial classes, is a service within the meaning of Commercial Training or Coaching Service. The coaching rendered by Junior colleges managed by NRIA is definitely in the curriculum of Intermediate course for imparting skills or knowledge or lessons in the subjects and fields which constitute Intermediate curriculum, formulated by the Board of Intermediate Education. Therefore, the distinction between education and coaching is inconsequential if the activity involves imparting of skills or knowledge or lessons in Intermediate curriculum. The service rendered even by a Commercial Training or Coaching Centre gets exempted under the above legal provisions, if such coaching or education leads to issue of a Certificate or Educational Qualification which is recognized by the law. Neither M/s NRI Education Society is providing education to intermediate students nor does M/s NRI Academy provide coaching. Only the recognized junior colleges belonging to M/s NRI Education Society, managed by M/s NRI Academy, impart education in intermediate curriculum. NRIA have not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... no tax was leviable thereon in the light of the legal regime obtaining under the Notifications. It accordingly prayed for setting aside of the show-cause notice and for dropping of all further proceedings against it. The impugned Order-in-Original dated 29.11.2016 demonstrates that the Commissioner of Central Excise and Service Tax, Guntur, recorded his findings in para 30 thereof. He referred to the fact that the petitioner academy was an institution/establishment run on commercial basis and was imparting coaching to students undertaking Intermediate examinations and various entrance examinations. The petitioner academy was found to meet the parameters to fit into the definition of commercial training and coaching centre providing taxable services, as per Section 65(105)(zzc) read with Sections 65(26) and (27) of the Act of 1994. The contention of the petitioner academy that its coaching falls under the exclusion clause was not accepted as it was an admitted fact that it did not issue any certificate to the students undergoing the entrance exam coaching. He pointed out that the petitioner academy did not have any recognition or own any colleges affiliated to the Board of Int ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... notice did not include the amount collected by the society as tuition fees towards Intermediate course. He therefore held that the petitioner academy was not eligible for any exemption and that all the fees charged by it would have to be counted towards providing coaching for competitive entrance exams only. As regards the contention of the petitioner academy that with effect from 01.07.2012, the services provided by it would fall within the negative list, the Commissioner opined that as per Section 66D of the Act of 1994, the negative list only exempted education up to higher secondary school or equivalent, but not services relating to specialized coaching for various entrance examinations. As he found that the petitioner academy was providing coaching for entrance exams like EAMCET, AIEEE and IIT-JEE, he opined that it could not be classified as merely higher secondary school education, whereby the petitioner academy could claim to fall within the ambit of Section 66D of the Act of 1994. He accordingly concluded that the services provided by the petitioner academy were classifiable under the head commercial training or coaching falling under Section 65(26) of the Act of 1994 fo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... regarding the taxability of its services. He therefore held that the extended period of limitation was rightly invoked against the petitioner academy. He also held the petitioner academy liable to pay interest on the service tax dues under Section 75 of the Act of 1994, apart from penalty under Section 78(1) thereof. He accordingly passed the order confirming the demand for payment of service tax along with interest and penalties. Sri S.Ravi, learned senior counsel appearing for Sri Pushyam Kiran, learned counsel for the petitioner academy, would point out that the petitioner academy, having entered into the MoU dated 01.04.2009 with the society, merely imparted coaching in Intermediate curriculum to the students who were admitted in Intermediate course in the society s colleges. He would state that though the petitioner academy also supplied study material to such students who were desirous of appearing for competitive exams, it was only an extension of the instruction and curriculum taught to such students for the Intermediate course and as there is no possibility of distinguishing and delineating the teaching imparted under the individual heads of Intermediate curriculum coa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... diate colleges of the society who took coaching in the classes conducted by the petitioner academy paid separately to the petitioner academy as well as to the society. The statement of Bhaskara Rao, Manager of the petitioner academy, which was also recorded under Section 14 of the Act of 1944 was one of the other documents furnished along with the show-cause notice. He also admitted that the society was directly collecting recognition fees, admission fees, application fees, bus fees, smart class fees, tuition fees and special fees separately from the students as per the Board of Intermediate norms and that the petitioner academy was giving coaching for State and All India Entrance Examinations, like EAMCET, AIEEE, IIT-JEE, BITSAT, AIIMS, JIPMER, AFMC, CMC etc. He also acknowledged that the statements as to the fees collected by the petitioner academy from students during the last five years had already been taken under a panchanama. He also admitted that the petitioner academy and the society were separate legal entities engaged in separate activities, i.e., the petitioner academy was providing commercial coaching services while the society was providing education services to Inter ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... separate and was claimed by the society alone, such fee would be liable to exemption under this Notification and not the coaching fee received by the petitioner academy which was for the specialized coaching imparted by it to the students for undertaking entrance examinations. Therefore, neither of the Notifications applied to the petitioner academy. Similarly, Section 66D of the Act of 1994 does not come to the rescue of the petitioner academy as the entry therein exempts pre-school education or higher secondary education or education as a part of the curriculum for obtaining a qualification and it has no application to coaching for entrance exams. The argument of Sri S.Ravi, learned senior counsel, is that the authorities could not dissect the coaching imparted by the petitioner academy for Intermediate curriculum and the entrance examinations, as the matrix was interlocked due to the fact that the content was the same, cannot be accepted. There may be no possibility of dissecting such coaching but the inescapable fact remains that the fees paid by the students for the two were distinct and separate as the society and the petitioner academy collected fees separately. The mater ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the petitioner academy could claim such benefit in the context of the limitation period. The actual transaction between the petitioner academy and the society only came to light after investigation by the authorities and therefore, the authorities were justified in invoking the extended period of five years limitation. The convoluted scheme in the form of the MoU dated 01.04.2009 adopted by the petitioner academy and the society, two separate legal entities, manned by one single individual, A.Rajendra Prasad, essentially seems to have been directed at avoiding tax liability but in effect, it amounted to evasion of tax, which is per se illegal. The manner in which the petitioner academy and the society went about the transaction manifests in no uncertain terms that the intention was to evade tax. Further, the desperate ploy of the petitioner academy in its reply affidavit to completely disown its coaching activity for entrance exams clearly highlights its lack of bonafides and its real intention. That being so, the question of giving it the benefit of the normal limitation period would not arise. Reference was made by Sri S.Ravi, learned senior counsel, to Section 11A(1) of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s pointed out by the Supreme Court in C.C.E., VISAKHAPATNAM V/s. M/S. MEHTA CO. Civil Appeal No.1090 of 2009 dated 10.02.2011 , when an assessee suppresses material facts with intent to evade payment of duty, the department is entitled to issue a show-cause notice within five years from the date of acquisition of knowledge of such facts. In the case on hand, the mere factum of the petitioner academy obtaining registration and filing a nil return followed by cancellation of the registration seems to be a self-serving act for the purpose of warding off extended period of limitation at a later point of time. This premeditated act on the part of the petitioner academy was only to present a fait accompli and there is no indication of the full facts, including the existence of the MoU, having been disclosed by the petitioner academy at that point of time. When the authorities did not have the complete facts before them, a presumption that they were aware of the core activity of the petitioner academy, i.e., coaching for entrance examinations, would not arise. Invocation of the extended period of limitation was therefore justified. As regards the contention of Sri S.Ravi, learne ..... X X X X Extracts X X X X X X X X Extracts X X X X
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