The Customs, Excise and Service Tax Appellate Tribunal (CESTAT), Chandigarh Bench ruled that coaching liable to service tax entire fees collected from students.
The court held that the appellant had a bona fide belief that they are liable to pay service tax only on the amount retained by them i.e. 80% of the gross receipts and they are not liable to pay service tax on 20% of the total fees collected from the students. Since the appellant has been filing the ST Returns except for the period of half year ending in September, 2008, in view of this, penalty imposed under Section 78 is not justified.
Facts
The appellant/assessee was registered with the Service Tax department w.e.f. 04.11.2008 for providing “Commercial Training or Coaching Services”. The appellant was providing services as a franchise of M/s Shokeenda Electro Ltd, 5A, Pitampura, New Delhi (SEL). The appellant Mrs.Swarnjit Kaur w/o Sh. Jasbir Singh was the proprietor of the computer centre. SEL had appointed the appellant as franchisee at Samrala in May 2008. As per the agreement with SEL, the appellant was giving 20% of the total fees collected from the students as a franchise free/royalty to SEL.
The appellant had filed ST-3 returns for the period ending March 2009 & September 2009 and had already deposited service tax amounting to Rs.41,987/-.
A show cause notice was issued to the appellant demanding service tax of Rs.1,31,758/- along with interest for the services provided during the period April 2008 to August 2009. After following the due process, the Deputy Commissioner confirmed the demand of service tax along with interest and imposed penalties under Section 77 and Section 78 of the Act.
The appellant filed appeal before the Commissioner (Appeals) reduced the demand of service tax along with interest.
Arguments
The assessee argued that the entire service tax for which the demand has been confirmed stands paid to SEL as per their invoices and no demand persists against the appellant and if the demand is confirmed, it will amount to double taxation on the amount which has been remitted to franchisor along with service tax. The appellant is eligible for Cenvat Credit of the amount of service tax paid on the amount of franchise free/royalty which will neutralize the demand payable by the appellant.
The department contended that the findings of the impugned order and further submits that in the impugned order, the Commissioner (Appeals) has categorically held that for leviability of service tax, as per provisions of Section 67 of the Act, which provides ‘that the value of taxable service shall be the gross amount charged by the service provider for such services rendered by him.’ The appellant is liable to pay service tax on the gross amount of Rs.6,15,495/- collected by them and no deduction on account of royalty of Rs.2,13,200/- paid to SEL is available to them.
Relevant Provisions
The sub-section 1(i) of Section 67 provides that in case where the provision of service is for a consideration in money, the service tax chargeable on any taxable service with reference to its value, shall be the gross amount charged by the service provider for such service provided or to be provided by him.
Conclusion
CESTAT has upheld the order to the extent of demand of service tax to the tune of Rs.25,720/- along with interest and penalty of Rs.1000 under Section 77, but dropped the penalty under Section 78.
Case Details
Case Name: M/s Benipal Computers v/s Commissioner of Central Excise & Service Tax
Citation: Service Tax Appeal No. 3737 of 2012
Counsel for Petitioner : Sh. Om Parkash, Advocate
Counsel for Respondent : Sh. Aneesh Dewan and Sh. Harish Kapoor, Authorized Representatives
Court: CESTAT, Chandigarh
Judge: Sh. S. S. GARG, MEMBER (JUDICIAL) and Sh. P. ANJANI KUMAR, MEMBER (TECHNICAL)
Decision Date: 09/08/2024
