Modular Employment Scheme is a “Vocational Training Activity” & Not a “Business Auxiliary Service”; No Service Tax Applies: CESTAT [Read Order]

The Customs, Excise and Service Tax Appellate Tribunal (CESTAT), Chandigarh has held that the Modular Employment Scheme conducted by the Confederation of Indian Industry (CII) is a “Vocational Training Activity” and not a “Business Auxiliary Service”, and hence the same shall be exempted from Service Tax.

The verdict came in response to the appeal filed by M/s. Confederation of Indian Industry, Chandigarh against the order passed by the Commissioner of Central Excise & Service Tax, Chandigarh demanding Service Tax from the appellant assessee under the category of “Business Auxiliary Service” for the period of 2009-2010 and 2010-2011.

The appellant, represented by Shri Rajesh Kumar argued that the Modular Employment Scheme was a vocational training activity/programme, which was an integral part of the Ministry of Labour’s initiatives to provide skill development to the youth. As an approved assessing body for the scheme, the appellant conducted examinations and assessments for the students enrolled in the programme.

The respondent revenue, Commissioner of Central Excise & Service Tax, represented by Ms. Shivani reiterated the findings and stated that Service tax is applicable to the Modular Employment Scheme conducted by the appellant under the category of “Business Auxiliary Service”.

The CESTAT, while examining the matter, agreed with the appellant’s contention that the Modular Employment Scheme is indeed a vocational training activity and falls outside the ambit of Service Tax.

The activity of the appellant, being in line with the Government’s vocational training initiatives was exempted from Service Tax by Notification No. 24/2004-ST dated 10.09.2004 and later through Notification No. 23/2010-ST dated 29.04.2010.

The bench highlighted the fact that the appellant’s role in conducting assessments for vocational training did not qualify as a “taxable service” under “Business Auxiliary Service”. As such, the demand of service tax on the Modular Employment Scheme for the relevant period was deemed unsustainable and hence set aside by the bench.

The CESTAT pointed out the lack of specificity and clarity in the show cause notice (SCN) issued, which failed to specify the category under which service tax was being demanded on the receipts under the Modular Employment Scheme. The demand was deemed vague and liable to be dropped, the bench held.

Furthermore, the bench also noted that the demand for service tax was raised beyond the statutory limitation period. The appellant had a bonafide belief that they were not liable to pay service tax and the department was well aware of their working and compliance with tax regulations.

The bench thus held that invoking the extended period of limitation was deemed unjustified.

In conclusion, the two-member bench consisting of Mr. S. S. Garg (Judicial Member) and Mr. P. Anjani Kumar (Technical Member) affirmed the status of Modular Employment Scheme as a vocational training activity, making it exempt from Service Tax.

Hence, the order passed by the Commissioner of Central Excise & Service Tax was set aside and the appeal was allowed.

To Read the full text of the Order CLICK HERE

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