Service tax not leviable on commercial coaching or training services

In M/s Asian School of Media Studies v. Commissioner of Central Goods and Service Tax [Final Order Nos. 70251-70252 / 2021 dated November 11, 2021] Hon'ble Customs, Excise and Service Tax Appellate Tribunal, Allahabad ("CESTAT") held that the service of providing professional/ vocational training courses and providing certificates to the students, on the basis of which the students are getting jobs or are trained to work as an entrepreneur / self-employed, falls under the exclusion clause of Section 65(27) of the Finance Act, 1994 ("the Finance Act").

Asian School of Media Studies ("the Appellant") along with other schools, falling under the premises of Marwah studios are conducting professional/vocational training courses and providing certificates to the students, on the basis of which the students are getting jobs or are trained to work as an entrepreneur/self-employed. It appeared to the revenue that the Appellant are not recognized by law and therefore are liable to pay Service tax during the period of April, 2009 to 2015-16.

The Appellant contended that they are imparting education/vocational training, which is authorised by the respective university, and in collaboration with the universities the courses have been conducted and vocational trainings are given to the students.

Hon'ble CESTAT observed that, the Appellants have imparted education/vocational training in collaboration with the universities and the students have been given qualification or degree which is recognized by law.

Further observed that, right from beginning till June 30, 2017 the activity of the Appellant in providing educational/vocational training to their students, is as per the predefined curriculum in collaboration with the respective universities.

Relied upon the case of Gateway of Entrepreneurship and Management Studies Trust v. CCE [2018 (3) TMI 503] and held that the Appellant falls under the exclusion clause of definition of ‘commercial training or coaching centre' under Section 65(27) of the Finance Act and is therefore exempted from Service tax even without the benefit of Notification No. 10/2003-ST dated June 20, 2003.

Our Comments:-

Hon'ble Kerala High Court in the case of Malappuram Distt. Parallel Colleges Association v. Union of India [2006 (2) STR 321 (Ker.) dated August 31, 2015] held that provisions of the Finance Act, 1994 authorizing levy of Service tax on parallel colleges are arbitrary and violative of Article 14 of the Constitution of India and further held that levy of Service tax for services rendered by parallel colleges, which indirectly falls on students, but by simultaneously providing exemption to regular affiliated colleges allowing students therein to study free of tax, is patently discriminatory and violative of Article 14 of the Constitution of India.

Similarly CESTAT, Chennai in Trichy Institute of Management Studies v. CCE [Final Order No. 286-287/2011 dated September 07, 2011] held that the levy of Service tax in respect of the training and coaching provided by the appellants which form an essential part of a course or curriculum of a university, leading to issuance of certificate or diploma or degree to the students recognized by law is not justified, even though the same is obtained by the students of the institution run by the appellants through distance education programme.

In our view, relying on the decision of various precedents, it can be construed that levy of Service tax in respect of the training and coaching, which form an essential part of a course or curriculum of a university, leading to issuance of certificate or diploma or degree to the students recognized by law is not justified.