Service Tax Demand Not Sustainable On Imparting Education With Intensive Preparation For Competitive Exams: CESTAT

The Hyderabad Bench of Customs, Excise and Service Tax Appellate Tribunal (CESTAT) has held that the appellant-Society is not liable to pay service tax on their activity of imparting education as per the Intermediate curriculum, with intensive preparation for competitive exams.

The bench of Anil Choudhary (Judicial Member) and A.K. Jyotishi, (Technical Member) has observed that post 2011, there is change in legal provisions and the only requirement is that the coaching or training should lead to grant of a certificate, but it is not necessary that the institute itself shall award such certificate. For the period post 30.06.12-negative list. The Tribunal extended the benefit of negative list entry under Section 66D and set aside the demand.

The appellant/assessee is a society registered under Andhra Pradesh Societies Registration Act, 2001 with the objective of promoting education, sports, literary and cultural activities in the state of Andhra Pradesh. The Appellant society had obtained necessary permissions from the Board of Intermediate education Andhra Pradesh for setting up of junior inter colleges for providing intermediate education. The Appellant has been simultaneously preparing the intermediate students for competitive examinations like IITJEE, EAMCET etc.

The department has initiated the proceedings on the ground that the activity of coaching provided by the Appellant Society to its intermediate students for entrance examinations like IITJEE, EAMCET is appropriately classifiable under 'commercial training or coaching service' for the period up to 30th June 2012, which is a taxable service under clause (zzc) of sub-section (105) of Section 65 of the Finance Act, 1994.

For the period from 1/7/2012, according to the department, the activities are taxable service as defined under section 65B (44) of the Finance Act 1994. The period involved in this appeal is 2011-12 to 2014-15 and the demand confirmed is Rs.4,86,07,157 along with interest and penalties.

The assessee contended that the students are admitted for a two year intermediate course and they are also provided with coaching for entrance examinations like EAMCET, IIT etc. The society is imparting exclusive coaching for EAMCET/IIT (for already inter-passed students) to some other students on which they are paying service tax and there is no dispute on this. In respect of students admitted in Intermediate colleges, the appellant claimed exemption under Notification No. 33/2011-ST dated 25/04/2011, as the coaching provided by the Appellant is leading to grant of Intermediate certificate recognized by law. This notification was in force up to 30/06/2012. For the period from 01/07/2012 onwards, the appellant claimed exclusion under negative list entry in Sec 66D(l) (in force up to 14/05/2016) and also under Sl.No.9 of the Mega Exemption Notification No. 25/2012 ST dated 20/06/2012.

The department contended that the campuses of appellant are nothing but tuition/coaching centres for competitive exams for students at state level and national level for admission after their completion of intermediate education. The appellant are giving intensive coaching to students by arranging extra study hours, conducting weekly exams, proving extra facilities and care, supplying exhaustive course material and charging huge amounts for such coaching over and above fees to be charged for Intermediate Education as prescribed by Board of Intermediate Education (BIE), AP etc. The “Regular Intermediate” Course can alone lead to granting of certificates recognised by law. The other courses viz., Intermediate + IIT-JEE (along with AIEEE + BITSAT), Intermediate + EAMCET + AIEEE + BITSAT are basically designed for coaching to IIT, JEE, Birla Institute (BITSAT), NIT (AIEEE) and these are not leading to grant of any certificate recognised by law. Hence, the demand is sustainable.

The tribunal while allowing the appeal of the assessee held that the service tax demand is not sustainable on imparting education with intensive preparation for competitive exams.

Counsel For Appellant: S. Jai Kumar

Counsel For Respondent: A.V.L.N. Chary

Case Title: BRK Educational Society Versus Commissioner of Central Excise & Service Tax, Guntur

Case No.: Service Tax Appeal No. 30844 of 2017

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