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2019 (11) TMI 436

..... he Appellant and Career Launcher is on a principal to principal basis with no element of agency and the Appellant functions in the capacity of an independent contractor where the Appellant is responsible for providing the cost of the equipments, premises, furniture and allied articles for the recruitment and selection of staff and the faculty - double taxation - Revenue sharing. Whether the taxable service was provided in relation to education? HELD THAT:- The word “education” has a wide meaning and includes the practice of teaching or training in a particular subject. The adjudicating authority, even after noticing that education apart from the process of teaching and learning includes training in a particular subject, erred in observing that ‘education’ is different from ‘training’. In this connection what is important to notice is that the exemption is “in relation to education”. It cannot be doubted that the activity conducted by the Appellant is ‘in relation to education’ and, therefore, the Appellant would clearly be entitled to the benefit of the exemption Notification dated 10 September 2004. It would be appropriat .....

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..... ble force in the submission advanced by the learned Counsel for the Appellant. Appeal allowed - decided in favor of appellant. - Service Tax Appeal No.3834 of 2012 - FINAL ORDER NO. 71597/2019 - 17-7-2019 - HON BLE MR. JUSTICE DILIP GUPTA, PRESIDENT AND HON BLE MR. ANIL G. SHAKKARWAR, MEMBER (TECHNICAL) Shri B.L. Narasimhan Advocate for the Appellant Shri P.K. Singh, Authorised Representative for the Respondent ORDER JUSTICE DILIP GUPTA This appeal has been filed to assail the order dated 28 August 2012 passed by the Commissioner, Central Excise & Service Tax, Kanpur The Commissioner by which the demand of Service Tax has been confirmed. The Commissioner has also confirmed the demand for payment of interest and penalty. 2. The Appellant entered into agreement dated 15 March 2007 with Career Launcher (India) Limited Career Launcher which was engaged in providing commercial training and coaching services through its numerous centres located across the country. Shri Niraj Prasad The Appellant entered into a License agreement with Career Launcher under which the Appellant was granted the right to use the trademark, logo and proprietary system developed by Career Launcher regarding .....

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..... ive and collect all fees including Tuition Fees, advances and deposits except the Prospectus Fee on behalf of the Licensor and shall deposit such collections whether by Cash, Draft, Cheque or any other means into the Licensor s Bank Account specified by the Licensor. The Licensee shall deposit collections received on a particular day directly into the Licensor s Bank Account on that very day itself. Collections made after closure of banking hours on the said day will be deposited at commencement of banking hours the following bank working day. The Licensee shall issue receipts on behalf of the Licensor in respect of monies received under this Agreement. All such payments shall be due to and payable to the Licensor and not to the Licensee. - 5.6 RECURRING FRANCHISE FEES The licensee shall be paying recurring franchise fees to the Licensor @ 25% of the Net Revenue (net of taxes, applicable now or at any time in future) earned from the operations. 8.2 No Agency 1. The parties hereto agree that the Licensee is an independent contractor, nothing herein contained shall constitute the Licensee an agent, legal representative, partner, subsidiary, joint venturer or employee of the Licensor. .....

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..... and the act of rendering taxable service against some consideration/charge /commission/remuneration/ value are present in the instant case and therefore considering the nature of services being performed by the party in this case, as spelt out in the agreement, there remains no iota of doubt that the party was acting on behalf of M/s Career Launcher, and thus the activities undertaken by the party were squarely covered under clause (vi) of the definition of Business Auxiliary Service, and the Service Tax is leviable under Section 65(105)(zzb) of the Act in the said category. Further, I also fail to find any force in the plea taken by the party that the CTC services were provided by them jointly and Service Tax on the said services was being paid by M/s Career Launcher at Delhi in as much as the same is contrary to the spirit of the statutory provisions of the Finance Act 1994, because both M/s Career Launcher and Shri Niraj Prasad are two different business entities engaged in providing two different services under the same service agreement. Shri Niraj Prasad is providing services on behalf of M/s CL hence, the activities, role and responsibilities of Shri Niraj Prasad, the Servic .....

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..... ervice would be covered under the definition of business auxiliary service . The relevant portion of the order is reproduced below:- The submission of the party regarding taxing the same amount, twice i.e. once in the hands of client (M/s CL) and secondly in the hands of the party appears attractive and convincing at the first instance, but is devoid of substance. Considering the contention of the party that the amount of Service Tax payable on the gross value of the taxable services has already been paid by M/s Career Launcher, I observe that M/s Career Launcher are registered with the Service Tax department for providing of Commercial Training and Coaching service which are taxable as per Section 65(105)(zzc) of the Finance Act, 1994. I find that M/s Career Launcher had themselves classified the services rendered by them under the category Commercial Training and Coaching service and had taken Registration from the Service Tax department, and had regularly been paying Service Tax on the collections received as fees from the students under the CTC services only. Over the point of payment of Service Tax in the appropriate category, I find that the party has totally misconstrued the .....

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..... Mitcon Consultancy & Engg. Services Ltd. 2017 (4) G.S.T.L. 167 (Tri.-Mumbai);; (iv) Requiring the Appellant to pay Service Tax on business auxiliary service would amount to double taxation inasmuch as Career Launcher had paid tax on the entire amount recovered from the students and in support of this submission, learned Counsel placed reliance upon a decision of the Tribunal in M/s Samadhan Systems Pvt.Ltd. v. Commissioner of C.Ex., Jaipur-I Service Tax Appeal No.1079 of 2011 decided on 9 January 2018; and (v) The Appellant is entitled to the same relief as was granted to other similarly placed assesses. Elaborating this submission, learned Counsel pointed out that the Commissioner(Appeals) by the order dated 25 October 2012, which attained finality and is in regard to a similar issue, set aside the order of the adjudicating authority that required the Appellant therein to pay Service Tax on business auxiliary service as it resulted in double taxation. Learned Counsel also placed reliance upon the judgment of the Supreme Court in Damodar J. Malpani v. Collector of Central Excise 2002 (146) E.L.T. 483 (S.C.). 10. Learned Authorized Representative of the Department supported the .....

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..... by the adjudicating authority and the portion of the order dealing with this aspect has been reproduced above. A perusal of the said paragraphs indicate that the adjudicating authority found as a fact that both Career Launcher and the Appellant were two different business entities working under a service agreement and the responsibility of the Appellant was appropriately covered under the business auxiliary service . 15. A perusal of the agreement between Career Launcher and the Appellant reveals that the Appellant was entitled to 75% of the net revenue amount deposited by it in the bank account of Career Launcher towards the fees collected from the students, while Career Launcher was entitled to the remaining 25%. This arrangement is a typical revenue sharing model arrangement. The Appellant was not to receive fixed amount per annum or per month from Career Launcher but only a certain per centage of the net revenue. In such a situation, it cannot be said that the Appellant was a service provider and Career Launcher was a service recipient. No service was, therefore, provided by the Appellant to Career Launcher. This view finds support from the decision of the Tribunal in Mormugao .....

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..... orted in 2005 (40) S.T.R. 973 it was held that mere money flow from one person to another cannot be considered as a consideration for a service. The relevant observations of the Tribunal in this regard are extracted below: 11. …..Consideration is, undoubtedly, an essential ingredient of all economic transactions and it is certainly consideration that forms the basis for computation of service tax. However, existence of consideration cannot be presumed in every money flow….. The factual matrix of the existence of a monetary flow combined with convergence of two entities for such flow cannot be moulded by tax authorities into a taxable event without identifying the specific activity that links the provider to the recipient. 12. ….Unless the existence of provision of a service can be established, the question of taxing an attendant monetary transaction will not arise. Contributions for the discharge of liabilities or for meeting common expenses of a group of persons aggregating for identified common objectives will not meet the criteria of taxation under Finance Act, 1994 in the absence of identifiable service that benefits an identified individual or individuals .....

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..... business auxiliary service in so far as it related to a provision of service on behalf of a client and provided in relation to education. 20. To appreciate this contention it would be appropriate to reproduce the said Notification which is as follows:- In exercise of the powers conferred by sub-section (1) of section 93 of the Finance Act, 1994 (32 of 1994), the Central Government, being satisfied that it is necessary in the public interest so to do, hereby exempts taxable service provided to a client by any other person in relation to the business auxiliary service, insofar as it relates to, - (a) procurement of goods or services, which are inputs for the client; (b) production or processing of gods for, or on behalf of, the client; (c) provision of service on behalf of the client; or (d) a service incidental or auxiliary to any activity specified in (a) to (c) above, and provided in relation to agriculture, printing, textile processing or education from the whole of service tax leviable thereon under section 66 of the Finance Act: (emphasis supplied) 21. The only dispute between the parties is as to whether the taxable service was provided in relation to education. The adjudicat .....

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..... eclectic. ▪ information about or training in a particular subject : health education. 25. Chambers English Dictionary assigns the meaning of the word education as follows:- Educate ed u-kat, v.t. to bring up and instruct; to teach; to train. -adj ed ucable. - ns. educabil ity; educatabil ity; educa tion bringing up or training, as of a child: instruction: strengthening of the powers of body or mind: culture. 26. Encyclopedia, Edited by David Crystal assigns the meaning of the word education as follows:- Education what takes place when human beings learn something, often from others but sometimes for themselves. It may happen during the day in specially constructed buildings with qualified teachers following structured, approved courses based on books, equipment, or activities, or more informally away from institutions in homes, streets, or meeting places. It is not confined to traditional school subjects such as mathematics or history, though these will usually constitute an important part of it, nor is it offered only by paid teachers, for parents and elder brothers and sisters may well play a central part in it. Increasingly, education is seen as something which should deve .....

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..... he Department and the premises of the Appellant are included in the Centralized registration. Service Tax has been paid on the entire amount of fees deposited by the students. It has, therefore, been contended that if the Appellant is required to pay any Service Tax, it would amount to double taxation, which is not permissible. 31. The adjudicating authority did not accept this contention of the Appellant and the relevant paragraphs have been reproduced. According to adjudicating authority, two separate services exist namely service provided by Career Launcher as commercial training and coaching service and a separate service as business auxiliary service provided by the Appellant to Career Launcher. 32. We express our inability to accept view taken by the adjudicating authority. Career Launcher has paid Service Tax on the entire amount of fees collected from the students. It is on a revenue sharing basis, that part of this fee is remitted to the Appellant by Career Launcher. The Appellant, therefore, cannot be required to again pay Service Tax on this fee. As noticed above, in fact no service is provided by the Appellant to Career Launcher because in terms of the agreement, the re .....

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..... ng centres like the Appellant will not be required to pay Service Tax under the category of business auxiliary service , if Service Tax has been paid on the entire amount by the agencies with whom the agreement has been entered into. 34. There is considerable force in the submission advanced by the learned Counsel for the Appellant. A bare perusal of the order passed by Commissioner (Appeals) in Appeal No.287 on 25 October 2012 reveals that the demand of Service Tax under the category of business auxiliary service by a similarly situated assessee has been set aside. The relevant portion of the order contained in paragraphs 4.2 and 4.2.1 of the order of the Commissioner (Appeals) are reproduced below:- 4.2 …………………Thus, the amount of ₹ 3,45,18,649/- received by the appellant from M/s CLI, on which the department has demanded the service tax, is nothing but a part of the entire transaction of ₹ 5,22,67,103/- on which the service tax has already been paid by M/s CLI. It is clear from the documents on record that the service tax has been paid on the entire amount i.e. the tax to be paid by M/s CLI as well as by the appellant s .....

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..... is not the case of the department that M/s CLI has not paid the service tax on the entire fee collected at Agra & Bareilly centres. Keeping this in view the demand of service tax on the same transaction under the category of Business Auxiliary Service is not sustainable. 36. This order, it has been stated, has attained finality and nothing to the contrary has been pointed out by the learned Authorized Representative of the Department. 37. Once the Department permitted this order to attain finality, it cannot, be permitted to urge that the Appellant should be required to pay Service Tax on business auxiliary service . Reliance can be placed on the decision of the Supreme Court in Damodar J. Malpani in support of this issue and paragraphs which deal with this contention are reproduced below:- 3. It appears from the records that several letters were written by the appellants to the Excise Authorities requesting that a sample of the appellants product may be chemically analysed at the appellants cost for the purpose of determining whether the appellants product or process in any way differed from the product and process of M/s. Chandulal K. Patel and Company. However, the Excise A .....

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..... the learned Counsel appearing on behalf of the Revenue Authorities as to why different stand had been taken in the cases of M/s. Chandulal K. Patel & Company and the appellant. Since the matter had not been squarely dealt with on facts at any stage by any of the authorities below, it was not possible for learned Counsel to give us the reasons for drawing this distinction between the two manufacturers and differently classify what were alleged to be materially the same product. 7. In the circumstances we deem it appropriate to set aside the order of the Tribunal and remand the matter back to the Tribunal for considering whether the product and process followed by M/s. Chandulal K. Patel & Co. is the same as that of the appellants product for the chemical analysis if not already done. The Tribunal will thereafter consider the question of classification of the appellants product having regard to the classification of Karta Chhap Zarda the chemical analysis report and any other material that may be placed before it by the respective parties. 38. Thus, for all the reasons stated above, it is not possible to sustain the order dated 28 August 2012 passed by the Commissioner. It i .....

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