TMI Blog2023 (12) TMI 853X X X X Extracts X X X X X X X X Extracts X X X X ..... cts of which have been reproduced below, clarified that Service Tax was liable to be paid when any scientific or technical consultancy service is rendered whether by Public Funded institutions or by private agencies. Further it was clarified that Service Tax is not payable when Public funded research institutions received grants in aid from the Government for conducting research/ project work and service tax is payable only if service is rendered on payment basis. In the instant case, the Appellant is entering into a MOU with their Clients as per which consideration is being paid towards Research Development and conduct of workshops by IIT, Madras. The Appellant has received consideration in the form of grants for research activities from JK Tyres, Cadbury India Ltd., Tata Steel, etc. during the aforesaid period. Besides, the Appellant is also receiving amounts in Foreign Currency from overseas clients like World bank, Chevron Products Corporation, Hewlett Packard Company, Proctor and Gamble, etc. From the above it is clear that the Appellant is conducting research work for various clients and workshops are being conducted for dissemination of research findings to academic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vate industries, industrial associations and other professional bodies, for organising seminars/ technical sessions and conferences and a tariff was fixed for them and collected by the Appellant - the contention of the appellant agreed upon that some of these conferences / meetings may be open to the public and students and some of the events may be related to cultural activities. But, taking an overall view that there is no convention service is not supported by evidence and facts. So, the demand in respect of convention services is required to be upheld. Availment of CENVAT Credit on Travelling and Postal Expenses, etc. - HELD THAT:- The lower adjudicating authority has disallowed the CENVAT Credit concluding that these services are not input services under Rule 2(l) of CENVAT Credit Rules, 2004. However, it is found that the appellant is rendering consultancy services and also discharging Service Tax. As such, there are no reason for disallowing the CENVAT Credit on these services. Invocation of Extended period of limitation - HELD THAT:- In the instant case, the Appellant is an Autonomous Organisation under the Ministry of Science and Technology and cannot be attri ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed in rendering Scientific and Technical Consultancy Service are registered with Service Tax department with Registration No.CHEI04464FSTC001. The officers of Internal Audit Section, Service Tax Commissionerate visited the premises of the Appellant during May and June 2008 and during verification certain irregularities such as non--payment of service tax on the services rendered and wrong availment of CENVAT credit were noticed. Hence, the matter was referred to Survey, Intelligence and Research unit of Service Tax Commissionerate for a detailed investigation. 3.1 Investigation revealed that the Appellant was liable to pay Service Tax on the amounts received from Private Companies / Private Sponsors, towards the Sponsored research provided by the Appellant. In respect of researches sponsored by private parties, in as much as the report on the research was provided for further use by the Sponsors in their manufacturing activities, it appeared that there was a service provider-- service recipient relationship established between the Appellant and the respective sponsor and therefore it appeared that the appellant was liable to pay service tax on such sponsored researches. The tota ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f Finance Act, 1994. After due process of law, the Adjudicating Authority confirmed the above demands, levied interest and imposed penalties under Section 78 and Section 77 of the Finance Act, 1994. 4.1 Aggrieved by the above Order, the appellant is on appeal before this forum. 4.2 The Ld. Advocate Shri I. Dinesh appeared for the Appellant submitted that the Appellant was under the bona fide belief that receipts from grants for activity relating to pure research would not be covered under the Service tax net and that all materials relating to grants for sponsored Research were well within the domain of the department. The impugned order ought to have noted that the Sponsored research undertaken by the Appellant does not come within the purview of Scientific and Technical Consultancy as defined in Section 65(105)(za) of the Finance Act, 1994. The impugned order errs in not noting the distinction between Sponsored research and Industrial Consultancy. The two activities are wholly different and the differences have neither been noted nor appreciated in the impugned order. 4.3 Further, it was submitted that the impugned order brings to tax receipts for the period October 200 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... other ancillary expenses. (c) A half--yearly report is to be submitted to the sponsor on the status of the project. (d) The final report will be submitted to the client on the research conducted. (e) As and when a commercial element is found in the research, a separate agreement is entered between the parties on exploring the same in a commercial means for which Service tax is charged and duly discharged. (f) Unspent / unutilized grant have to be returned back to the sponsor who funded the project. The projects are sponsored by Industries and Alumni. A bare perusal of the projects would make it clear that the research is towards educational purposes only. In any event, the clauses cannot be taken out of context and read in isolation, but to be seen in totality and the Agreement understood in the right perspective. 4.5 The above explanation makes it clear that there is no consideration paid by the third parties / sponsor to conduct research on any specific subject. The amount spent is only towards imparting education and knowledge. Also, it is pertinent to note that the Appellant doesn t advise, provide consultancy services to the sponsors in as much as the quarter ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... provided gratis. Therefore, the impugned order has erred in imposing Service tax under Section 65(32)--Convention Service without keeping in mind the nature of activity intended to be covered by the provision as well as that actually engaged in. In fact, the CBEC has issued Circular No. 86/4/2006--ST stating that institutions such as IIT cannot be classified as Commercial concerns in view of the activities carried on therein. A Convention as defined under Section 65(32) of the Finance Act, 1994 refers to those events where public participation is restricted. However, in the present case, the events conducted in the Convention hall are substantially open to Public and the provision is thus not attracted. It is pertinent to take note that Section 65(105)(zc) was brought in w.e.f 16.07.2001 which initially covers the services rendered to a client which was then substituted to any person w.e.f 16.05.2008 the impugned period involved pre--amended and amended provisions of Section 65(105)(zc). Therefore the confirmation of demand under Convention service is erroneous and contrary to law. 4.9 It was averred that the impugned order has confirmed the disallowance of CENVAT credit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Appellant are available for scrutiny. The impugned order thus erred in invoking the extended limitation in terms of the proviso to Section 73(1). 4.11 The Ld. Counsel has also relied on the following judicial pronouncements: -- (i) Sical Distiparks Vs. Commissioner of Central Excise, Chennai [2012 (28) S.T.R. 525 (Commr. Appl.)] (ii) Commissioner of Central Excise Vs. Nita Textiles and Industries [2013 (295) E.L.T. 199 (Guj.)] (iii) SOTC Travel Services Pvt. Ltd. Vs. Principal Commissioner of Central Excise, Delhi-I [2021 (55) G.S.T.L. 332 (Tri. - Del.)] (iv) Abhishek Alkobev (P) Ltd. Vs. Commissioner of Central Excise- [2022 (62) G.S.T.L. 178 (Tri. - All.)] (v) Commissioner of Central Excise Vs. Northern Operating Systems (P) Ltd. [2022 (61) G.S.T.L. 129 (S.C.)] (vi) National Remote Sensing Agency Vs. Commissioner of Customs, Central Excise Service Tax, Hyderabad-IV [2020 (6) TMI 618 CESTAT HYDERABAD] 5.1 The Ld. Authorized representative Shri Rudra Pratap Singh representing the department reiterated the findings of the lower Adjudicating Authority. The Ld. Authorized Representative has contended that a scrutiny of various projects underta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... issioner of Customs, Central Excise and Service Tax, Hyderabad IV [2020 (34) GSTL 429 (Tri.-- Hyd.)] and also in the case of National Remote Sensing Agency Vs. Commissioner of Customs, Central Excise and Service Tax, Hyderabad IV [2020 (78) GSTR 278 (CESTAT--Hyd.)] to affirm that the appellant is rendering Scientific and Consultancy Services and so demand raised is justified. 6. Heard both sides and carefully considered the submissions and evidences on record. 7. The following issues arise for decision in this appeal: (i) Whether the demand of Service Tax on grants / funds / consideration received by the appellant in respect of projects under sponsored research under Scientific and Technical Consultancy Services is justified and whether there is any provision of service in respect of sponsored research classifiable under Scientific and Technical Consultancy Service? (ii) Whether the demand of Service Tax on activity / events undertaken by the Appellant at its Convention center is sustainable? (iii) Whether the Appellant is eligible to avail input service credit on Travel, Postage and freight relating to Scientific and Technical Consultancy services rendered? And ( ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r of consultants who undertake the job of rehabilitating manufacturing units or any sick organization. They employ experts in various disciplines. The person having technical knowledge as well as managerial knowledge or expertise gives advice for such rehabilitation. Thus, even if a technocrat gives advice through other organizations, the same will be liable for Service Tax as the services are rendered indirectly. 8.4 We find that the appellant is rendering two types of services viz., Consultancy and Sponsored Research Projects. The appellant is discharging Service Tax in respect of Consultancy Services provided. In case of sponsored research projects, the appellant has submitted that the project was undertaken with the prime motive of furthering knowledge through study and research and the focus was solely on the generation and imparting of knowledge. These projects are funded by grants either by private parties or the Government and consideration is received from the sponsor towards the research activities undertaken by the appellant. The appellant has argued that there is no service rendered in respect of these sponsored projects or organizing workshops either to the Governme ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mni and Grants received from the Government and other funding agency such as British Council, Asia Specific Center or Energy and Environments and other branches of IIT for conducting workshops and meetings. The appellant summarized the modus operandi of activities relating to sponsored research as follows: i. Applications are received from various entities such as Government, Private Agencies, Alumni and other entities engaged in the furtherance of study and research for carrying out research in specific and demarcated areas. ii. After detailed discussion regarding the subject and object of the proposed study, the sponsor agrees to sponsor by way of grant, and ICSR agrees to conduct research in an agreed field/ area of study. A formal agreement is entered into by the parties in this regard. iii. The grant offered covers the incurrence of expenditure in relation to faculty cost, staff cost, equipment cost and cost of overheads, infrastructure and premises cost and other expenditures incurred by ICSR. iv. Normally, there is a specific clause to the effect that if the actual expenditure incurred by IIT is less than the grant supplied by the sponsor, the excess shall be ref ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eld that the institute does not confirm to the definition of State and as it was rendering services regarding training and consultancy in the field of environment its services were held as taxable. In the case of National Remote Sensing Agency supra it was held that the supplier of goods and services to be distinct from the person receiving the grants in aid. Such supplier of goods and services will not be automatically exempted from payment of Service Tax or Excise Duty unless there is a specific exemption Notification in respect of such goods or services, though National Remote Sensing Agency is receiving the grants in aid from the Government. In the present appeal what is required to be decided is whether any service is rendered in respect of sponsored research projects and whether such a service can be classifiable under Scientific and Consultancy Services in terms of Section 65(92) of the Finance Act, 1994. 8.8 Further, we find from appeal records that the Appellants have rendered Scientific and Technical Consultancy Services during the period from October 2005 till September 2010 in both Government Sponsored Research Projects and Projects Sponsored by Industries, Alumni, e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for which consultation fees are received, then service tax would be applicable. 8.10 In the instant case, the Appellant is entering into a MOU with their Clients as per which consideration is being paid towards Research Development and conduct of workshops by IIT, Madras. The Appellant has received consideration in the form of grants for research activities from JK Tyres, Cadbury India Ltd., Tata Steel, etc. during the aforesaid period. Further, we find that the Appellant has received consideration in the form of Grants towards conduct of workshops from various clients against reasons mentioned against each: Name of Client Reasons for receiving consideration for workshop Nokia Research Centre For enabling students to attend international conferences. BHEL To meet expenses for holding an international workshop on coal gasification ACC Technology assessments in health care and to disseminate research findings to academic community and other researchers BTCL To ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... from the Government for conducting research/ project work. Had the nature of service was in the form of consultancy service for which consideration was received, then service tax could have been payable as per the said clarification. Therefore, we are of the considered opinion that the Service Tax is not payable when Public funded research institutions like IIT receive grants or aid from the Government for conducting research / project work. 8.12 In view of the above detailed discussion, we come to the conclusion that in respect of sponsored research, there is no provision of service. The services provided are in the nature of furtherance of education and promotion of sharing of knowledge. Many times, the projects include organising workshops, international conferences and conducting seminars. As such, the impugned Order-in-Original No. 11/2013 (RST) dated 31.05.2013 demanding Service Tax in respect of sponsored research projects cannot be sustained. We order so accordingly. 9.1 Regarding demand of Service Tax on Convention services, we find that the CBEC Circular No. 86/04/2006-ST does not pertain to clarification on Convention services and hence not applicable to the facts ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tended period, we find that in a similar case of Indian Institute of Technology (IIT) Vs. Commissioner of Service Tax-II, Mumbai reported in [2016 (42) S.T.R. 406 (Tri. - Mumbai)], wherein it was held as follows: 6.----------We find that the appellant M/s. IIT is a reputed Technical Education Institute of Government of India, therefore, there cannot be mala fide intension for the reason that there is no individual who can be benefitted by taking wrong Cenvat credit. Therefore, mala fide intension does not exist. The judgments relied upon by the Ld. Counsel are all related to Government agencies and penalties were dropped on this count which are applicable to the present case also. We also seen that issue involved is wrong availment of Cenvat credit due to reasons that either some of the input services were not used in the taxable output services or input services are not admissible input services in terms of definition of input services. We considered that the institution is one single entity and carrying out various activities related to education as well as scientific analysis simultaneously where some of the services are taxable and some are exempted or not liable to servic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... imitation. We do not agree with this contention. The assessee could have genuinely believed that they were not liable to pay service tax and not disclosed facts to the department or sought any advice or guidance from the department regarding taxability of their services. In this factual matrix, by no stretch of imagination can we hold that the assessee has committed fraud or collusion or wilful misstatement or suppression of facts with an intent to evade payment of service tax. Under these circumstances, we find the extended period of limitation cannot be invoked in this case. The demand, if any, within the normal period of limitation can only survive. 11.3 Similarly, we find other decisions cited by the Appellant in Para 4.8 are relevant to their cause. In the instant case, the Appellant is an Autonomous Organisation under the Ministry of Science and Technology and cannot be attributed with any malafide intention for non-payment of service tax in as much as they are already registered with Service Tax for various services and regularly paying Service Tax and filing periodical returns and being so, their records were always available for audit and scrutiny. The Appellant were ..... X X X X Extracts X X X X X X X X Extracts X X X X
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