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2012(1) ECS (83) (Tri-Ban)

CUSTOMS, EXCISE AND SERVICE TAX APPELLATE TRIBUNAL


SOUTH ZONAL BENCH AT BANGALORE
Bench Division Bench
Court-1

M/s. The Institute of Chartered Financial Analysts of India, Hyderabad


Versus
CC & CE, Hyderabad-II
Date of hearing: 22/05/2012; 23/05/2012
24/05/2012; 28/05/2012
29/05/2012
Date of decision:.31/07/2012
Appeal no. Appellant, Respondent, O-in-Original/Order in-apple details
are as order:
Appeal no.
ST/32/2007

St/39/2007
St/40/2007
St 46/2007
St 365/2007
St/392/2007

Appeliant
M/s. The Institute
of
Chartered
Financial Analysts
of
India,
Hyderabad
M/s. The ICFAI
University,
Dehradun
M/s. The ICFAIAN
Foundation,
Hyderabad
M/s. The ICFAI
University, Tripura
Cc,ce&st,
Hyderabad-II
Cc,ce&st,
Hyderabad-II

Respondent
Cc&ce,
Hyderabad-II

Oio/oia no.
OIO No. 08/2006Service Tax dt.
29/09/2006

--do--

--do--

--do--

--do--

--do--

--do--

m/s.
Badruka
Institute of Foreign
Trade, Hyderabad
M/s. Institute of
Insurance & risk
Management,

OIA
No.
18/2007(H-II)
S.Taxdt. 31/5/2007
OIA
No.
18/2007(H-II)
S.
Tax dt. 31/5/2007

St/194/2008

Hyderabad
M/s. Indian School Cc&ce, Hyderabad- OIO No. 01/2008
of
Business, Iv
Dt. 27/02/2008
Hyderabad

Appearance
Mr. V. Sridharan and Mr. G. Shivadass, Advocates for the assesses.
Mr. P.R.V. Ramanan, Special Consultant and Mr. R.K. Singla,
Commissioner (AR) for the Revenue.

Coram:
Honble Mr. P.G. Chacko, Member (judicial)
Honble Mr. M. veeraiyan, Member (Technical)

Final Order Nos. 514-520/2012


[Order per: P.G. Chacko]
1.

The first four appeals were filed by the respective assessees against a common
order passed by the Commissioner of Central Excise, Hyderabad-II. These
appeals are directed against demands of service tax and education cess (with
interest) confirmed against the assessees and penalties imposed on them by the
adjudicating authority. The demands of service tax are under the head
commercial training or coaching service and for the periods shown below:

Appeal No.

Appellant

Period

ST/32/2007 The
ICFAI 7/2003
Society,
3/2005
Hyderabad

ST/39/2007 The

ICFAI 12/2003

Service
tax Penalties
+education
cess
demanded
to Rs.18.92
Rs.
18.92
crores
crores u/s 78
Rs.
1000/u/s 77 Rs.
150 per day
u/s 76
to Rs. 8,69,716/Rs. 8,69,716

University,
Dehradun

3/2005

ST/40/2007 The
ICFAIAN 7/2003
Foundation,
3/2005
Hyderabad

to Rs. 9.44 cr.

ST 46/2007 The
ICFAI 8/2004
University,
3/2005
Tripura

to Rs. 1,62,205/-

u/s 78 Rs.
1000/- u/s 77
Rs. 150 per
day u/s 76
Rs. 9.44 cr.
u/s 78
Rs.
1000/u/s 77
Rs. 150 per
day u/s 76
Rs.
1,62,205/- .
u/s 78
Rs.
1000/u/s 77
Rs. 150 per
day u/s 76

The two appeals of the Department are directed against different orders passed
by the Commissioner (Appeals), Hyderabad setting aside the demand of service
tax confirmed under the same head against the respondents by the original
authorities. The particulars of these appeals are given below:
Appeal
No.

Appellant

ST/365/ CST,
2007
HyderabadII

ST/392/ CST,
2007
HyderabadII

Period

Service tax + Respondent


education
cess
7/2003 to Rs.
Badruka
9/2005
22,77,288/Institute
of
Foreign
Trade,
Hyderabad
3/2003 to Rs.
3/2006
4,76,013/-

Penalties

Rs.
22,77,288/u/s 78 Rs.
1000/- u/s
77 Rs. 150
per day u/s
76
Institute
of Rs.
Insurance & 4,76,013/Risk
u/s 78 Rs.
Management, 1000/- u/s
Hyderabad
77 Rs. 150
per day u/s
76

The remaining appeal of another assessee is against an order of the


Commissioner demanding service tax under the same head, imposing penalties
etc. as shown below:-

Appeal No.

Appellant

Period

ST/194/2008 Indian School 7/2003


of
Business 3/2007
Hyderabad
2.

Service tax + Penalties


education cess
demand
to Rs. 21:82 cr.
Rs. 12.25 cr.
u/s 78 Rs.
1.05 cr. u/s 76

The earlier Final Orders passed by this Bench in all these appeals were set aside
by the Honble Supreme Court vide Order dt. 14/05/2010 in Civil Appeal No.579
of 2010/Commissioner vs. ISB), Order dated 25.10.2010 in Civil Appeal No. 9539
of 2010 (Commissioner vs. BIFT), order dt. 04/02/2011 in Civil Appeal no. 5453
of 2010 (Commissioner vs. IIRM) and order dt. 14/02/2011 in Civil Appeals nos.
4820-4823 of 2009 (Commissioner vs. the ICFAI institutions) and all the cases
were remanded for fresh decision. As per these remand orders, the Tribunal has
to reconsider the substantive issue in the light of explanation added (with
retrospective effect from 01/07/2003) to clause (zzc) of section 65(105) of the
Finance Act, 1994 by the Finance Act, 2010. One of the remand orders (Order
dt. 14/02/2011 in the cases of the ICFAI institutions) reads as follows:
Delay condoned,
Counsel appearing for the appellant has drawn our attention to the
judgment passed by Three Judges Bench of this Court in Commissioner of
S.T., Chennai Vs. Great Lakes Institute of Management Ltd., reported in
2010(19) STR 481(SC). The issues that arise for consideration in the
present appeals are similar with that of the aforesaid appeals which was
decided by Three Judges Bench of this court. While allowing the appeal
filed by the Commissioner of Sales Tax, Chennai, the Three Judges
referred to the newly inserted Explanation in section 65(105) (zzc) of
Finance Act, 1994 by Finance Act, 2010 which was made effective from
1st of July, 2003.
In view of the fact that the aforesaid Explanation has been inserted
in the Act, this court set aside the order of the Tribunal and remitted the
matter back to the Tribunal to consider the case de no in the light of the
Explanation inserted in the Act.
Since we are also concerned with the same issues in these
appeals, we also pass a similar order allowing the present appeals and
directing the Tribunal to examine the case de novo in the light of the
aforesaid Explanation inserted in the Act. It is made clear that all issue
that could arise could be urged and the same shall be decided by the
Tribunal afresh.
[Underlining supplied]

The other remand orders of the apex court are also to the same effect. The
scope of remand is clear from the remand orders and accordingly the Tribunal is
required to reconsider the substantive issue in the light of the explanation added,
with retrospective effect, to Section 65(105)(zzc) of the Finance Act, 1994 as
also to decide afresh on all other issues. Accordingly we have examined the
records of all the cases.

3.

The institute of Charted Financial Analysts of India (ICFAI, for short ),


Hyderabad, is a society registered under the Andhra Pradesh (Telengana Area)
Public Societies Registration Act, 1350 Fasli as per the Registration Certificate
No. 1602/1984 issued by the registrar of Societies, Hyderabad. The ICFAIAN
Foundation is also a society registered under the same Act as per the
Registration Certificate No. 1800/1998 issued by the Register of Societies
Hyderabad. The ICFAI University, Dehradun was established in 2003 under the
ICFAI University Act, 2003 of the state of Uttaranchal and the same was
sponsored by the ICFAI Society, Hyderabad. The ICFAI University, Tripura was
established in 2004 under the ICFAI University Tripura Act of the State of Tripura
and the same was also sponsored by the ICFAI Society, Hyderabad. M/s.
Badruka institute of foreign Trade (BIFT, for short), Hyderabad is an institution
belonging to the Seth Ghasiram Gopikishen Badruka Educational Society
registered under the aforesaid Public Societies Registration Act of 1350 Fasli as
per the registration Certification No. 10 of 1966 issued by the Register of
societies, Hyderabad. The institute of Insurance and risk management (IIRM, for
short), Hyderabad and the Indian school of Business (ISB, for short) are
companies incorporated in 2002 and 1997 respectively under section 25 of the
Companies act, 1956 as per the Certificates of Incorporation.

4.1.

In a common show-cause notice dt. 19/05/2005 issued to the 4 ICFAI entities


and a 5th one called the ICFAI University, Raipur, the Department demanded
various amounts of service tax with education cess on the fees collected from
students in the name of ICFAI UNIVERSITY and accounted for in the books of
accounts of the various ICFAI entities during the period from 7/2003 to 3/2005.
This show-cause notice which invoked the proviso to section 73(1) of the Finance
Act, 1994 on the alleged ground of suppression and misrepresentation of facts
by the ICFAI entities also proposed penalties on them under section 76 to 78 of
the Act besides demanding interest on service tax under section 75 of the Act.
The show-cause notice alleged that the ICFAI entities were undertaking
commercial training or coaching in a variety of areas such as finance, banking,
insurance, accounting, law, management, commerce, information technology etc.
but not issuing to the students any certificate or diploma or degree recognized by
any law for the time being in force. It alleged that the ICFAI entities were not
eligible for exemption from payment of service tax under Notification No.
10/2003-ST dt. 20/06/2003 and hence liable to pay service tax under section
65(105)(zzc) of the Finance Act, 1994 read with section 65(27) of the Act.

According to the show-cause notice, a total amount of Rs. 35, 269. 88 lakhs as
fees was collected from the students by the informal consortium of ICFAI
entities from 7/2003 to 3/2005 and a total amount of Rs. 30, 84, 62, 460/- was
payable towards service tax and a total amount of Rs. 26, 30, 342/- towards
education cess. In the proportion in which the above amount of fees was
apportioned and accounted for in the books of accounts of the five ICFAI entities,
the above amount of service tax was also apportioned and demanded from
them. The demands were contested by the notices but eventually came to be
confirmed against them in Order-in Original No. 8/2006 dt. 29/09/2006. We have
not seen any appeal from the ICFAI University, Raipur but the other 4 ICFAI
entities are in appeal before us. In this context, it may also be mentioned that the
ICFAI University, Raipur ceased to exist with the judgment of the honble court dt.
11/02/2005, in the case of Prof. Yashpal and another vs. State of Chhattisgar
and others wherein Section 5(which empowered the State government. to
incorporate and establish, by Notification in the Gazette, self-financed private
universities for higher education) and Section 6 (which permitted such
universities to affiliate colleges or other institutions or to set up more campuses
than one with prior approval of the State government) of the Chattishgar Niji
Kshetra Viswsvidyalaya (Sthapana aur vinyaman) Adhiniyam, 2002 were struck
down as unconstitutional and all Notifications issued by the State government in
the Gazette in the purported exercise of power under section 5 ibid notifying
private Universities including the ICFAI University Raipur were also quashed.
4.2.

A Show-cause notice dt. 19/01/2006 was issued to BIFT demanding service tax
with education cess on the gross amount of Rs. 2, 70, 08, 524/- collected by
them as tuition fees from students for allegedly imparting training/coaching on a
commercial basis in the field of management and international business during
the period 7/2003 to 9/2005. It also proposed penalties etc. The demand and
other proposals were contested by the party. In adjudication of the dispute, the
original authority confirmed the demand of service tax and education cess
against the assessee, also demanded interest thereon, and imposed penalties.
The Order-in- Original was set aside by the Commissioner (appeals) in an appeal
filed by the assessee. Hence the Departments appeal No. ST/365/2007.

4.3.

A show-cause notice dt. 20.06.2006 was issued to IIRM for recovery of service
tax with education cess under the head commercial training or coaching service
on a gross amount of Rs. 46 , 66, 900/- collected as fees from
PGDI(Postgraduate Diploma in Insurance) students from 7/2004 to 3/2006 and
under the head convention service on a gross amount of Rs. 55, 05, 244/collected for organizing conferences, lectures , seminars etc. during the period
from 3/2003 to 3/2006, and for imposing penalties. This show-cause notice was
contested by the party. The adjudicating authority set aside the demand raised
under convention service but confirmed the demand of service tax with
education cess raised under commercial training or coaching service. It also
imposed proportionate penalties on IIRM. Aggrieved by the adverse part of the
Order-in-Original, the assessee preferred an appeal to the Commissioner

(Appeals) and the latter allowed the appeal. Hence the Revenues appeal
No.ST/392/2007.
4.4.

The appeal of ISB is directed against the order passed by the Commissioner in
adjudication of two show-cases notices dt. 27/09/2006 and 17/09/2007 for the
periods 7/20033/2006 and 4/2006 3/2007 respectively for recovery of service
tax with education cess on the fees collected by ISB from students of
Postgraduate Programme(PGP) in Management and Exective Education
Programme(EEP) during the respective periods, and for imposing penalties. The
Commissioner confirmed the demands and imposed penalties.

5.

Before proceeding to record the submissions of the parties to the dispute we


would reproduce the relevant provisions of the Finance Act, 1994 which are focal
to the dispute.
Section 65(26)-commercial training or coaching means any training or
coaching provided by a commercial training or coaching centre.
Section 65(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
sports, with or without issuance of a certificate and includes coaching or
tutorial classes but does not include pre-school coaching and training
center or any institute or establishment which issues any certificate or
diploma or degree or any educational qualification recognized by law for
the time being in force.

Section65(105)(zzc)- taxable service means any service provided or to


be provided, to any person by a commercial training or coaching centre in
relation to commercial training or coaching.
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 organization 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 serviceshall be
construed accordingly.

The Finance act, 2010 added the above explanation with retrospective effect
from 01/07/2003. The purpose of this amendment is discernible from the relevant
Budget instructions on commercial training or coaching service which read thus:
The Finance Bill, 2010 seeks to clarify the legislative intent by redefining
the scope of commercial training and coaching service by way of insertion of an
explanation. The word commercial means any training or coaching that is
provided for a consideration irrespective of the presence or absence any profit
motive. The amendment also seeks to explain liability of coaching centres,
irrespective of their registration as trust or society. This amendment will have
retrospective effect from July, 2003 ..
It was the above retrospective amendment to section 65(105) (zzc) of the
Finance Act, 1994 that was a noted by the Honble Supreme court in its remand
orders. The apex court has required the Tribunal to take fresh decision on the
substantive issue (whether the assessees were liable to pay service tax under
the head commercial training or coaching service on the fees collected by them
from students during the respective periods) and allied issues in the light of the
above retrospective amendment of the law.
6.

Before us, the learned counsel for the assessees made an attempt, at the bar, to
restrict the scope of the apex courts remand orders by submitting that the
explanation added to section 65(105)(zzc) of the Finance Act 1994 had a bearing
only on the expression commercial appearing in clauses 26 and 27 of section
65 of the Act and therefore the findings recorded on other issues by the Tribunal
in its earlier Final Orders in these cases should treated as final. This argument
was vehemently opposed by the learned Special Consultant for the department
who pointed out that the remand orders of the apex court had made it clear that
all issues that could arise could be urged and the same shall be decided by the
Tribunal afresh. He further submitted that the final orders passed by this Bench
were set aside by the apex court and therefore nothing contained in those orders
survived to be treated as conclusive findings. After considering the rival
arguments we are in full agreements, with the view expressed by the learned
Special Consultant for the Revenue. As per the directives of the honble Supreme
Court we have to decide afresh on all the issues on merits. The substantive issue
has to be decided by taking into account the aforesaid explanation to section
65(105) (zzc) of the Finance Act 1994.

7.

Heard both sides. Though, in the appeals of the ICFAI institutions, the territorial
jurisdiction of the respondent was challenged, this objection has not been
pressed before us. It is not in dispute that all the fees were centrally collected in
the name of ICFAI University and deposited in the accounts of ICFAI society,
Hyderabad or ICFAIAN foundation, Hyderabad. In view of this method of
centralized billing and collection of fees, adopted by the ICFAI institutions which
were not registered for service tax purposes, we uphold the jurisdiction of the
Commissioner of Central Excise, Hyderabad who passed the impugned order.
This view is also supported by the Tribunals decision in the case of Nokia Pvt.
Ltd. vs. Commissioner [2006(1)STR233].

8.

Other submissions/arguments made by the learned counsel for the assessees


are summarized below.
(a)

The ICFAI institutions, the ISB, the BIFT and the IIRM are all educational
bodies and not commercial training or coaching centres. The ICFAI
University, Raipur the ICFAI University, Dehradun and the ICFAI
University, Tripura were established under the respective State Acts solely
for the purpose of imparting education. These universities, duly
recognized as private universities under the University Grants
Commission Act, 1956 offered various academic courses with their own
curricula, prescribed syllabi, prepared study materials for the various
courses and also published books and other materials which were
required to be used by the students as text or reference books. The
various courses conducted by these universities were recognized by other
universities like the Indira Gandhi National Open University (IGNOU). The
degrees awarded by these universities were recognized by the University
Grants Commission (UGC) under the UGC Act, 1956. The ICFAI
Universities also had their own evaluation systems. A student undergoing
any course has to secure the minimum percentage of marks in the
examinations conducted by these universities, to get a certificate/pass in
the examinations. The ICFAI society, Hyderabad and the ICFAIAN
foundation, Hyderabad are non-profit societies established under the
Andhra Pradesh (Telengana Area) Public Societies Registration Act for
the purpose of imparting education. The memorandum of association of
each of the societies expressly provides so. The ISB the BIFT and the
IIRM were established as not-for-profit companies under section 25 of
the Companies Act. They are exempt under Section 10 of the Income Tax
Act 1961 also. The memorandum and articles of association of each of
these companies include establishment & running of educational
institutions as the main objective. The ISB has affiliation with the worlds
leading business school viz. Kellog School of management, Warton
School and London Business School. The ISB offered postgraduate
programmes in management (PGPs). And also short term programmes
for working executives (EEPs). Thus all the assessees are educational
bodies solely imparting education to students and hence their activities
cannot be brought to levy under the head commercial training and
coaching service.

(b)

The legislature treats educational institutions/bodies as different from


commercial training or coaching centres. This is clear from clause 20
(definition of cab), clause 90a (definition of renting of immovable
property) and clause 115 (definition of tour operator) of section 65 of the
Finance Act 1994. These definitions, which contain references to
educational body and commercial training or coaching center, bring out

a clear distinction between the two, indicating that the legislative intent is
to treat an educational institution/body imparting skill or knowledge or
lessons on any subject or field, differently from a commercial training or
coaching centre. [Whartons Law Lexicon, Oxford/Chambers Dictionaries
etc. referred to for distinguishing between education and training]. The
assessees being educational institutions are not liable to pay service tax
under section 65(105)(zzc) Educational bodies are exempt from the levy.
(c)

What is sought to be taxed under the above provision is only the act of
coaching or training provided to the students for preparing them for
entrance examinations. [Reliance placed on the Tribunals decision in the
case of Administrative Staff College of India vs. Commissioner [2009(14)
STR 341 (Tri. Bang.] upheld by the Supreme Court in the casw
Commissioner vs. Administrative Staff college of India [2012(20) STR 117
(SC)]. Reliance also placed on paragraphs 2.2.2. And 2.2.3. of CBECs
Circular No. 59/8/2003-ST dated 20/06/2003]

(d)

The Finance Act 2010 only expanded the scope of Section 65(105)(zzc)
by including all activities of coaching and training not recognized by law
(irrespective of whether the institution is providing any other course
recognized by law) with in the tax net. Prior to that, any unrecognized
training or coaching given by a commercial training or coaching centre
which also offered other courses recognized by law were not subject to
levy of service tax under Section 65(105)(zzc). Therefore the assessees
activities of the old period did not attract the levy. [Reliance placed on para
3.3 of CBECs Circular No. 334/3/2011 dt. 28/02/2011.]

(e)

The question whether the assessees were liable to pay service tax on the
fees collected by them should be considered with reference to their core
activity which was in the nature of imparting education to the students and
not in the nature of commercial training or coaching. The explanation to
section 65(105)(zzc) cannot have any bearing on this question.

(f)

It is true that the ICFAI University, Raipur ceased to exist on 11/02/2005


with the judgment of the Honble Supreme Court striking down section 5 &
6 of the Chattisgrah act. But the students of this university were
transferred to the ICFAI University, Dehradun and were considered as
students of that university. This step was taken as enabled by the Honble
Supreme Court through its judgment dt. 11/02/2005 and its clarificatory
order dt. 7/09/2005. Therefore the department cannot claim any benefit on
the strength of the fact that the ICFAI University, Raipur ceased to exist on
11/02/2005.

9.

(g)

The ISB, the IIRM and the BIFT are in any case, eligible for the benefit of
Notification No.9/2003-ST dt. 20/06/2003 as they would satisfy the
definition of vocational training institute. They could not claim this benefit
in the earlier proceedings because the emphasis at that time was on their
plea that they were outside the levy on account of not being commercial
centres.

(h)

The demands of service tax and education cess are hit by limitation. The
assessees have always maintained the bona fide belief that they were not
liable to pay service tax under section 65(105)(zzc) on their educational
activities and therefore they cannot be held to have suppressed or
misrepresented any facts or contravened any provision of law with intent
to evade payment of tax. Moreover, whenever the assessees were
required to furnish any information to the department, they promptly did
so. The above bona fide belief of the assessees was also strengthened by
certain decision rendered by this Tribunal in favor of similar institutions, for
instance Great Lakes institute of Management Ltd. Vs. CST, Chennai
[2008(10)STR 202 (Tri. Chennai)]. The decisions rendered on the issue by
the Tribunal prior to the insertion of the explanation ibid were in favor of
the assessees. In these circumstances, the extended period of limitation
under the proviso to section 73(1) of the Finance act 1994 was not
invocable in these cases. For the same reason, Section 78 of the act was
not to be invoked to impose penalties on the assesses.

The submissions/arguments made by the learned Special Consultant for the


Revenue are summarized below.
(a)

The so-called ICFAI University, in the name of which, fees were


collected, courses conducted and certificate issued, was an informal
consortium of the ICFAI Society, the ICFAIAN Foundation and the three
ICFAI Universities Raipur, Dehradun and Tripura. This consortium was not
a legally recognized entity. The off-campus courses were conducted by
the ICFAI Society, Hyderabad and the ICFAIAN Foundation, Hyderabad.
The numbers of students who took the off-campus courses was 24,308 in
2003-04 and 33,512 in 2004-05 whereas the numbers of students who
took in-campus and distance learning courses at the three universities
were as small as 25(2003-04) and 17(2004-05) at Raipur, 15(2003-04)
and 175(2004-05) at Dehradun; 10 at Tripura. The courses were not in the
nature of general or basic education but specialized courses where the
focus was on practical application of the knowledge and skills acquired.
No degrees or certificates were conferred by any of these universities.
Though the ICFAI University Raipur was authorized to confer
degrees/certificates, no degree or certificate was ever conferred by it
before it ceased to exist in February 2005. All the degrees and certificates

were conferred by the above consortium called ICFAI University which


was not a body recognized by law. When the three year courses for which
the certificates were issued by the consortium commenced, none of the
constituent universities existed. Indeed, even if any degree or certificate
had been issued by the ICFAI University, Raipur at any time prior to
11/02/2005 (the date of the apex courts judgment in prof. Yashpals
case), the same would have been rendered ab initio null and void by the
judgment of the apex court. The degrees/certificates issued in the name of
ICFAI University which was not a legally recognized university cannot be
considered to be degrees/certificates recognized by law. But the fact
remains that the ICFAI institutions (appellants) were imparting skill or
knowledge or lessons on any subject or field other than sports and
collecting fees from the students. Their websites also clearly indicate this
factual position. For instance, the website of the ICFAI University, Tripura
says that it was established in 2004 to impart training in management,
science & Technology, law and education to students, working executives
and professionals in India. The website of the ICFAI University, Dehradun
says that it was formed on 8/7/2003 to impart training in management
science & technology, law and education to students working executives
and professionals in India. Therefore the appellants squarely fall within
the meaning of commercial training or coaching centre appearing in
section 65(26) and (27) and retrospectively explained in explanation to
section 65(105)(zzc).
(b)

The ISB was also working in the same manner and they are also covered
by the definition of commercial training or coaching centre. The PG
courses in management, the Executive Educational programmes and the
short term courses conducted by ISB were nothing but courses that
imparted skills, knowledge or lessons in the field of management and
other specialized areas. Fees were collected from the students as
consideration for these services. Therefore, these activities would also
qualify to be commercial training or coaching service for the levy of
service tax in terms of the explanation to section 65(105)(zzc) ibid. That
the diplomas or certificate issued by the ISB were accepted by institutions
abroad does not alter ISBs tax liability. As the diplomas/certificate issued
by the ISB were not recognized by law, this assessee cannot claim
exclusion from section 65(27) even as it stood prior to the addition of
explanation to section 65(105)(zzc).

(c)

The assessee cannot escape tax liability on the premise that they are
educational institutions conducting purely educational courses or
programmes. The exclusion part of the definition of commercial training or
coaching centre under section 65(27) contains a reference to educational
qualification. Any institute or establishment which issues any certificate or
diploma or degree or any educational qualification recognized by law for
the time being in force could claim to be outside the ambit of the said

definition. This would imply that any institute or establishment which


issues any certificate or diploma or degree or any educational qualification
not recognized by law for the time being in force would get covered by the
definition of commercial training or coaching centre. It would follow that
certain educational institutions can fall under the definition.
(d)

The degrees/certificates/diploma issued by the ISB or by the consortium of


the ICFAI institutions were not recognized by statutory authorities such as
the UGC, AICTE etc. and hence cannot be said to be recognized by the
law for the time being in force. [Reliance placed on CBECs circular No.
107/1/2009-ST dt. 28/01/2009.]

(e)

The ISB cannot claim support from the Tribunals decision in Great Lakes
Management Institutes case (supra) as the cited decision was set aside
by the apex court.

(f)

The plea for exemption under notification no. 9/2003-ST was never raised
by the ISB. The benefit cannot be granted at this stage.

(g)

The ICFAI institutions never came forward to supply relevant information


to the department even for a long period after the investigations
commenced in November 2003. It was only in April- May, 2005 that they
submitted full details of the amounts collected by them as fees and other
charges from students from 7/2003 to 3/2005. The show-cause notice was
issued without delay in 5/2005 itself. In their correspondence with the
department, they misrepresented facts by submitting that ICFAI
University was conducting various courses while it was not an entity
established under, or recognized by, law. During the period of dispute,
there was no decision of the CESTAT that could have driven the ICFAI
institution to bona fide belief that they were not liable to pay service tax
under the head commercial training or coaching service on the fees
collected from students. Therefore their plea of bona fide belief is
untenable and they should be held to have suppressed/misrepresented
material facts with intent to evade payment of service tax. The extended
period of limitation was rightly invoked in the ICFAI cases inasmuch as
they did not get registered, did not file ST-3 returns and did not pay
service tax and suppressed/misrepresented material facts for evading this
tax liability.

(h)

The ISB also behaved more or less in the same manner. A major part of
the demand raised on them is within the normal period of limitation. The
rest of the demand is also enforceable as the extended period of limitation

has been rightly invoked on the basis of suppression of facts found


against them.
(i)

In the case of CCE, Visakhapatnam vs. Mehta & Co. [2011-TIOL-17-SCCX], the Honble Supreme court held that, where the assessee suppressed
material facts with intent to evade payment of duty, the department was
entitled to issue show-cause notice to them within five years the date of
acquisition of knowledge of such facts by the department. In terms of this
ruling of the apex court, the show-cause notice issued in the ICFAI and ISB
cases are not hit by limitation. In respect of the ISB, in any case, the
demand for the period from 28/09/2005 to 31/03/2006 covered by the first
show-cause notice and the demand for the period from 18/09/2006 to
31/03/2007 covered by the second show-cause notice are within the
normal period of limitation.

10.

The Commissioner (AR) appearing for the appellant in ST/365 & 392/2007
reiterated the grounds of the appeals and also adopted (mutatis mutandis) the
above arguments of the learned Special Consultant.

11.

The learned counsel for the assessees, in his rejoinder, made the following
submissions.
(a)

The practical application of knowledge and skills is part of the curriculum


and does not take away the basic character of the activity of providing
education. In any case, the conduct of specialized courses cannot be
considered as training or coaching.

(b)

ICFAI University represents the multi-State network of universities


established in different States. The degrees/certificates clearly indicated
this fact through a footnote. Each university is a separate and independent
legal entity. The ICFAI University, Dehradun and the ICFAI University,
Tripura jointly named themselves as ICFAI University and never took up
any activity on their own.

(c)

The submission of the learned Special Consultant that no


degrees/certificates were conferred by any of the universities is factually
incorrect. Degrees/certificates were conferred in the name of ICFAI
University. Had such conferment of degrees/certificates been in violation
of any notification issued by the Chattisgrah Government the UGC would
have taken action against ICFAI University. There was no such action by
the UGC. In any case, the validity of the degrees/certificates issued by
ICFAI University is protected on the principal of de facto recognition.
[Reliance placed on the judgment dt. 19/02/2010 passed by the Punjab

&Haryana High Court in CWP no. 4021 of 2009(Ms Neelam Devi &
another vs. Haryana Nurses Registration Council and others.]
(d)

As the students of the ICFAI University, Raipur were absorbed as students


of the ICFAI University, Dehradun in terms of the apex courts judgment
dt. 11/02/2005 as clarified by order dt. 7/9/2005 in any case, the core
activity of imparting education remained unaffected.

(e)

There is nothing exceptional about the centralized collection of fees and


transfer of the same to the accounts of the different universities or about
maintenance of common facilities for the benefit of all the universities.

12.

We have given careful consideration to the submissions. The substantive issue


which has arisen before us in these de novo proceedings is whether the
assessees can claim exemption from service tax liability under section
65(105)(zzc) read with the definition of commercial training or coaching under
Section 65 (26) and the definition of commercial training or coaching center
under section 65(27) of the Finance Act 1994 (as this provision stood during the
period of dispute) in respect of the fees/charges collected by them from the
students who underwent various courses offered by the assessees during the
period of dispute.

13.

The above issue has got to be examined on the facts of these cases in the light
of the explanation added by the Finance Act 2010 to Section 65(105)(zzc) of
the Finance Act,1994 with retrospective effect from 01/07/2003 . As per this
explanation, the expression commercial training or coaching centre,
appearing in section 65(26) and (27) of the Finance Act 1994 shall include
Any centre or institute by whatever name called,
Where training or coaching is imparted for consideration, with or
without profit motive,
Whether or not such centre or institute is registered as a trust or a
society or similar other organization under any law for the time
being in force.

Certain aspects which before the above amendment were material to


consideration of the question whether a given centre or institute would fit in the
definition of commercial training or coaching centre section 65(27) and whether
its activities would fit in the definition of commercial training or coaching under
section 65(26) have been rendered immaterial by the amendment. Whether or
not the centre or institute is registered as a trust or a society or a similar
organization under any law is immaterial now. The name of the centre or institute

is immaterial. Whether the activity of the centre or institute is with or without profit
moitive is also immaterial.Upon the above amendment, what matters is whether
the centre or institute has imparted training or coaching for a consideration . If it
has done so, it will get covered by the definition of commercial training or
coaching centre and its activity will get covered by the definition of commercial
training or coaching. The consideration for training or coaching per se
determines the commercial character of the activity. To the same effect is the
Budget instruction noted in para (5) of this order. What is reflected in the
amendment seems to be a conceptual change with regard to the term
commercial used in section 65(26) and (27). The change of Law, which is
substantial, has come about with retrospective effect from 1-7-2003, We must
now proceed to determine whether the ICFAI entities, the ISB, the BIFT and the
IIRM had been imparting training or coaching to their students for a consideration
during the respective period of disputes.
14.

It has been argued on behalf of the assessees that they are educational
institutions and were imparting education, and not training or coaching to the
students. Per contra, it has been argued on behalf of the Revenue that
education necessarily includes the process of imparting knowledge or lessons
on any subject and hence the same would get covered within the ambit of the
expression training or coaching appearing under clauses (26), (27) and (105)
(zzc) of Section 65 of the Finance Act,1994. In this connection the learned
Special Consultant has relied on P. Ramamatha Aiyers THE MAJOR LAW
LEXICON wherein some connotations of the word education have been
provided. The Learned Counsel has refered to WHARTONS LAW LEXICON
. It cannot be disputed that the act of imparting skill or knowledge or lessons on
any subject or filed (other than sports) is the stated purpose of commercial
training or coaching vide section 65(27) of the Act. Both the law lexicons cited
before us present various shades of meaning of education. According to one
meaning appearing in MAJOR LAW LEXICON, education means the act of
process of imparting or acquiring particular knowledge or skills and it is the
result produced by instruction, training or study. This meaning is seen culled
out from Padmanav Dehury vs. State of Orissa [AIR 1999 orissa 99]).
WHARTONS LAW LEXICON quotes Swami Vivekananda: The end of all
education, all training, should be man-making. The end and aim of all training
is to make the man grow. The training by which the current and expression of
will are brought under control and became fruitful is called education. As
rightly submitted by the learned Special Consultant, education can be seen as
the result of study, instruction, training, coaching, etc.and the websites of at
least two ICFAI varsities have been shown to acknowledge this. Therefore a
line cannot be drawn to separate education from training or coaching. It is
also pertinent to note that section 65(27) as it stood during the period of
dispute excludes institutes/establishments which issue any certificate or
diploma or degree or any educational qualification recognized by law for the
time being in force. The converse of this
would be that
institutes/establishments which do not issue any certificate/diploma/degree or
any educational qualification recognized by lawfor the time being in force as

well
as
institutes/establishments
which
issue
certificates/diplomas/degrees/educational qualifications not recognized by law
stand included in the definition of commercial training or coaching centre
under section 65(27) of the Act. Institutes and establishments issuing
educational qualifications can certainly be called educational institutions. But
the ICFAI entities before us were imparting lessons or skills or knowledge in
various subjects to students by collecting fees and other charges but they did
not issue to them any certificate, diploma, degree or other educational
qualification recognized by law for the time being in force on account of which
they were not covered by the exclusion clause of section 65(27) and remained
within the definition of commercial training and coaching centre. Institutions
which--

are established by, or under, or in accordance with any law to


impart education;

Offer one or more courses of study with specific curriculum for each
course and specific syllabus for each subject;

Conduct examinations periodically and evaluate them;

Organize extracurricular activities to develop skills in arts sports


etc;

Create various fora to help the students imbibe social and


democratic values;

Issue certificates or diplomas or degree recognized by law, to the


successful students.

Are generally perceived as educational institutions. In our view, only such


institutions were covered by the exclusion clause of the definition of commercial
training and coaching centre under section 65(27) of the Finance Act, 1994 as
this provision stood during the period of dispute.
15.

Any certificate/diploma/degree issued in the name of ICFAI university as a


consortium or conglomerate of the ICFAI institutions cannot be held to have been
issued by any of these institutions and also cannot be considered to be a
certificate/diploma/degree recognized by law inasmuch as the so-called ICFAI
University has not been shown to be a legally constituted body authorized by
law to issue the same. We have, thus, found great force in the submissions made
by the learned Special Consultant. As regards other assessees, it has not been
established that the degrees/certificates/diplomas issued by them to their
students during the relevant period were recognized by law. Acceptance of any
such degree/certificate/diploma by any varsity or other institution abroad cannot
mean recognition thereof by Indian law. Thus a conspectus of facts presented to

us would clearly disclose the real character of the assessees activity-training or


coaching for a consideration.
16.

It was argued by the learned counsel that the ICFAI Universities, Dehredun and
Tripura, were established under the respective State Acts and recognized by the
UGC and should ipso facto be considered to be establishments authorized to
issue certificates, degrees, etc. Though it is true that these universities were, by
UGCs notifications, included in the list of private/self financed universities under
section 2(f) of thje UGC Act, there is no eveidence of any of them having issued
any certificate, diploma, degree or other educational qualification to the students
from whom they collected fees and other charges during the period of dispute. It
was not even shown that these so-called universities were authorized by or
under the State Acts, to issue certificates/diplomas/degrees/other educational
qualification to the students. It was claimed that the certificates, degrees, etc,
were issued to the students by these universities in the name of ICFAI
UNIVERSITY. We have already rejected this claim as untenable, given the fact
that what was called ICFAI UNIVERSITY was a legally unrecognized consortium
or conglomerate of ICFAI societies and universities, with no legal sanction to
issue such certificates, degrees, etc. Therefore none of the so-called universities
can claim immunity to levy of service tax under Section 65(105)(zzc) of the
Finance Act 1994 on the ground of being covered by the exclusion clause of the
definition of commercial training or coaching centre under section 65(27) of the
act.

17.

For the reasons already stated we hold that the assessees were providing to
their students training or coaching for a consideration and would ipso facto fall
within the ambit of commercial training and coaching centre envisaged in the
explanation to Section 65(105)(zzc) of the Finance Act 1994. As this explanation
has retrospective effect from 1-7-2003, the activities undertaken by all the
assessees during the periods of dispute would get covered within the meaning of
the phrase training and coaching imparted for consideration occurring in the
text of the explanation. In other words the explanation to section 65(105) (zzc) of
the Act has very wide scope to encompass the activities of the assessees and
render them exigible to service tax under section 65(105) (zzc) of the Act. In the
result the assessees have no case on merits.

18.

We have also considered the decisions cited by the learned counsel, such as
Administratravie Staff College of India (supra). All those decisions were rendered
before the crucial retrospective amendment of Section 65(105) (zzc) of the
Finance Act,1994 and, hence, are of no precedential value. The same in the
situation with regard to the various circulars relied on by the counsel.

19.

The learned counsel representing ISB, BIFT and IIRM has (without prejudice to
his submissions on the substantive issue) raised an alternative plea by claiming
the benefit of exemption under Notification No. 9/2003-ST dt. 20/06/2003 which

benefit is available to a vocational training institute as defined in the


Notification. This plea was, admittedly not raised at any stage before, even
though the case of the assessees travelled upto the apex court. It is interesting to
note that the learned counsel who sought to narrow down the scope of the apex
courts remand orders, nevertheless, wanted us to consider the above plea also.
The dichotomy of arguments notwithstanding, we are of the view that the
alternative plea can be considered in these proceedings in terms of the remand
orders. As it is a virgin plea which has got to be substantiated by the parties
concerned, the same will have to be examined by the adjudicating authorizes
concerned.
20.

We have also examined the plea of limitation raised by the assessees/appellants.


These appellants had not disclosed the relevant facts and materials to the
department during the period of dispute. They had not taken steps to obtain
registration with the department, nor to file ST-3 returns of the fees/charges
collected from the students, nor to pay service tax. It was only during the course
of investigations by the department that these appellants disclosed the relevant
facts and, that too, under compulsion and in a piecemeal manner. This state of
affairs has been clearly brought out through the learned Special Consultants
submissions recorded in para 9(f) of this order in respect of the ICFAI cases. We
have seen more or less the same state of affairs in respect of other assessees
also. The show-cause notices and the relied-upon documents loudly disclose the
suppression of the facts by these parties whose intent to evade payment of
service tax is evident from the records. In the case of Mehta & Co.(supra), the
Honble Spremw Court held that the extended period of 5 years prescribed under
the proviso to Section 11 A (1) of the Central Excise Act (which provision is pari
materia with the proviso to section 73(1) of the Finance Act,1994) could be
reckoned from the date of acquisition of knowledge by the department. The ratio
of the decision is squarely applicable to the present cases.
No final decision of this Tribunal or any High Court or the Supreme Court in
support of the assessees views with regard to commercial training and coaching
service defined under Section 65(105)(zzc) of Finance Act 1994 has been
shown to have existed during the period of dispute. Therefore there is no
substance in their plea of bona fide based on decisions.
Therefore we hold that the proviso to section 73(1) of the Finance Act 1994 was
rightly invoked in these cases. In any case a major part of the demand on ISB is
within the normal part of the demand is within the normal period and, in the case
of the assessees also, a considerable part of the demand is within the norma
period.

21.

On the very grounds sustained in support of invocation of the extended period of


limitation in these cases, it has to be held that Section 78 of the Finance Act
1994 was also rightly invoked to impose penalties on the assessees. However, in

our view, the penalties imposed under section 76 and 77 are liable to be set
aside in the facts and circumstances of these cases.
22.

To summarize our findings

i.

The liability of the assessees to pay service tax under Section 65(105)(zzc)
(read with its explanation) of the Finance Act, 1994 on the fees/charges
collected from their students during respective period of dispute is affirmed;

ii.

The extended period of limitation was rightly invoked in these cases and,
therefore, no part of the demand of service tax on any of the assesses can be
held to be time-barred;

iii.

Section 78 of the Finance Act 1994 was rightly invoked in these cases, but
the penalties imposed on the assesses under section 76 and 77 of the Act are
liable to be set aside;

iv.

The alternative claim of the ISB, the BIFT and the IIRM for exemption under
Notification no.9/2003-ST dt.20/06/2003 is liable to be considered on merits
by the adjudicating authorities concerned. Each of these assessees should be
given a reasonable opportunity of being heard on this issue. Needless to say
that, in the event of the issue being held against the assesses, they would be
liable to pay the service tax(with educational cess) as already quantified by
the adjudicating authorities as also to pay interest thereon under Section 75
of the Act besides the penalties under Section 78 of the act. No penalty shall
be imposed on these assessees under Section 76 and 77 of the Act.

23.
(a)

(b)

In the result, it is ordered as follows:Appeals, ST/32, 39, 40 & 46/2007 are disposed of by sustaining the demand
of service tax with education cess raised under Section 73(1) substring the
demand of interest raised under section 75, sustaining the penalties imposed
under section 78 and setting aside the penalties imposed under section 76
&77 of the Finance Act 1994.
Appeals, ST/365 & 392/2007 and ST/194/2008 are disposed of by way of
remand in terms of para 22(iv) of this order.
(pronounced on 31.07.2012)