The Customs, Excise and Service Tax Appellate Tribunal (CESTAT) has held that Commercial Training or Coaching Services and provisions of Hostel cannot be bundled under section 66F of the Financial Act, 1994.
The appellants were engaged in providing ‘Commercial Training or Coaching Service’. They were providing coaching services for recruitment to National Defence Academy, Combined Defence Service, and Service Selection Board, etc.
The appellants in addition to providing coaching were also selling textbooks published by M/s MKC publication. For the facility of some of the service recipients, the appellants were also providing hostel facilities.
On 01 February 2017 business premises of the appellant were searched by the officers of Revenue and they have also recorded statements of Director the other appellant. Between February 2017 and October 2017 the appellant deposited service tax amounting to Rs.72,68,569/- for the period from 01 April 2012 to 31 March 2017 along with interest of Rs.27,98,931/- and penalty at the rate of 15% to the tune of Rs.10,90,285/.
During the period from 2012-13 to 2015-16, as per balance sheet and P & L Accounts appellant collected towards tuition fee Rs.4,04,34,904/-. In addition, the appellant received Rs.3,25,64,500/- towards the sale of books and forms. During the same period, hostel charges recovered by the appellant were Rs.2,62,51,328/-.
On 20 November 2017 appellants were issued with a show-cause notice with a proposal to consider all the receipts by the appellant towards tuition fee, sale of books & forms and hostel charges in terms of Section 66F of Finance Act, 1994 as bundled service for the period from 2012-13 to 2016-17 with computation of total consideration by the appellant to be around Rs.10 crores and with the demand of service tax of Rs.1,30,52,226/-.
On examination of the same, the department rejected the contention of the appellants that the sale of books and hostel charges cannot be bundled with the provision of commercial training or coaching service. It was also held that the sales value of books was the value of study material and held that it needs to be added to the consideration. He has allowed cum duty benefit to the appellant and reduced the confirmation of demand to Rs.1,15,30,093/-. He further reduced the penalty under Section 78 but did not interfere with the penalty imposed on the other appellant.
The Tribunal comprising of Judicial Member, Archana Wadhwa, and Technical Member, Anil G. Shakkarwar pronounced the order based on an appeal by M/s Major Kalshi Classes Pvt. Ltd.
The Tribunal noticed the clarification issued by the Central Board of Excise & Customs (renamed the Central Board of Indirect Taxes and Customs (CBIC) in 2018), and observed that if a large number of service receivers of such bundle of services reasonably expect such services to be provided as a package then such a package would be treated as naturally bundled.
it was also stated in the CBIC clarification that if the majority of service providers in a particular area of business provide a similar bundle of services then they should be bundled.
before the Tribunal, the Revenue has not brought forward any evidence that the majority of service providers in the field of commercial coaching or training service provided hostel facilities.
The Tribunal, allowing the plea of the assessee, held that the provisions of commercial training or coaching service and provisions of the hostel cannot be bundled under the provisions of Section 66F of the Finance Act, 1994.
While allowing the appeal the Tribunal also said that The hostel facility is provided for less than Rs.100/- per day and therefore, it is entitled to exemption under Notification No.31/2011 dated 25 April 2011 and Serial No.18 of Notification No.25/2012-ST.
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