CBEC Not Empowered To Modify the Scope of Exemption Notification issued by the Central Government: CESTAT

The Delhi Bench of the Customs, Excise and Service Tax Appellate Tribunal (CESTAT) has held that the Central Board of Excise and Customs (CBEC) is not empowered to modify the scope of an exemption notification that the Central Government has issued.

The two-member bench of Rachna Gupta (Judicial Member) and P.V. Subba Rao (Technical Member) has observed that the exemption notification is issued by the central government in the exercise of the powers conferred under Section 93 of the Finance Act. Therefore, the exemption notification is a delegated legislation made under the power of granting exemption available to the central government and not to anybody else, including the Central Board of Excise and Customs.

The appellant/assessee is in the business of providing commercial training and coaching to students appearing in the IIT (JEE) and AIEEE exams. The coaching provided by the appellant is subject to service tax.

The appellant paid service tax only on the amount it charged for coaching and had not paid service tax on the cost of study materials provided by it. A show cause notice was issued to the appellant, demanding service tax on the amount collected towards the study materials. The exemption for the cost of study materials under Notification No. 12/2003-ST dated June 20, 2003, was available only if the materials were standard textbooks, which are priced.

The CBEC's Circular dated June 20, 2003, paragraph 2.91 stated that in the case of commercial training and coaching institutes, the exemption in respect of study materials would be available only on the sale value of standard textbooks, which are priced. Any study material or written text provided by the study institute as a part of its service that does not satisfy the criteria will be subjected to service tax.

The show cause notice, therefore, demanded service tax from the appellant, invoking an extended period of limitation under the provisions of Section 73(1) of the Finance Act of 1994, along with interest under Section 75.

The tribunal held that the order passed denying the benefit of an exemption notification, relying on the CBEC Circular dated June 20, 2003, cannot be sustained.

Case Title: M/s Lakshya Education Solutions Pvt. Ltd. Versus The Commissioner (Appeals), Customs, Central Excise & Service Tax

Citation: Service Tax Appeal Tax No. 50233 Of 2016

Date: 10.11.2022

Counsel For Appellant: None

Counsel For Respondent: Authorised Representative Harsh Vardhan

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