Extension of Limitation cannot be invoked when there is no intention to evade payment of Service Tax

The CESTAT, Ahmedabad ruled that a charitable trust, M/s. Sophisticated Instrumentation, was not liable for service tax under the 'Commercial Training or Coaching Services' category. The tribunal found that the trust operated in good faith, believing they were not covered by the service tax provisions, and had not intentionally evaded payment. Consequently, the extended five-year limitation period for demanding service tax was deemed unjustified and the appeal was allowed on these grounds.

The CESTAT, Ahmedabad in the case of M/s.Sophisticated Instrumentation v. C.C.E & S.T.-Vadodara-I [Service Tax Appeal No. 11477 of 2013 dated September 22, 2023], allowed the appeal and ruled that the assessee is a charitable trust and not covered under the definition of commercial training or coaching center as per Section 65(27) of the Finance Act, 1994 and thus invocation of an extended period of limitation by five years is not justified. 

Facts

M/s. Sophisticated Instrumentation ("the Appellant") isa charitable trust, managed by Charutar Vidya Mangal ("Parent Organization"), a non-profit organization functioning as a Public Charitable Trust. The Appellant received income, through a grant from the Department of Science and Technology, Government of India or fees paid by the Parent Organization for providing training facilities to the students of the Institute of Science and Technology for advance studies and research and students of Parent Organization. However, students do not incur any fees for training.

The Commissioner of Central Excise and Service Tax ("the Respondent") raised a demand for payment of service tax on the amount received as revenue in lieu of service rendered by the Appellant during the financial year 2006-2007. The Commissioners (Appeal) vide order OIA-PJ/461/VDR-I/2012-13 dated February 25, 2013 ("the Impugned Order")confirmed the demand of Rs. 2,73,022/- stating that the income earned by the Appellant falls within the purview of Commercial Training or Coaching Services ("CTCS").

Aggrieved by the Impugned Order, the Appellant filed the appeal before the CESTAT, Ahmedabad. 

Issue

Whether the extended period of limitation can be invoked on the ground that the assessee was unaware of the chargeability of service tax with respect to specific income earned?

Held

The CESTAT, Ahmedabad in Service Tax Appeal No. 11477 of 2013held as under:

• Observed that, the definition of CTCS as defined under Section 65(27) of the Finance Act, 1994 was silent on the nature of institute which is covered under the definition of CTCS specifically with respect to Appellant being a charitable trust, which was cleared by adding the explanation vide Finance Act, 2010 stating that any kind of organization providing coaching service or imparting training and deriving income through these activities would fall under the head of CTCS, thus service tax could be levied on such organisations w.e.f. July 1, 2003.
• Opined that, the appellant was under the bona fide belief that they were not covered under the head of CTCS, thus were not required to pay service tax. 
• Held that, the appellant has not willfully suppressed any fact to evade payment of service tax. Therefore, the extended period of limitation of five years could not be invoked in this case, hence appeal is allowed on the ground of limitation. 

Relevant Provisions

Clause 27 of Section 65 of the Finance Act, 1994

"(27) "commercial training or coaching centre" means any institute or establishment providing commercial training or coaching for imparting skill or knowledge or lessons on any subject or field other than the sports, with or without issuance of a certificate and includes coaching or tutorial classes."

Section 76 of the Finance Act, 1994

"(b) in sub-clause (zzc), the following Explanation shall be inserted and shall be deemed to have been inserted with effect from the 1st day of July, 2003, namely:—

'Explanation.—For the removal of doubts, it is hereby declared that the expression "commercial training or coaching centre" occurring in this sub-clause and in clauses (26), (27) and (90a) shall include any centre or institute, by whatever name called, where training or coaching is imparted for consideration, whether or not such centre or institute is registered as a trust or a society or similar other organisation under any law for the time being in force and carrying on its activity with or without profit motive and the expression "commercial training or coaching" shall be construed accordingly"