Coaching Centre Not a Recognised Educational Institution: CESTAT upholds Service Tax under ‘Commercial Training or Coaching Service’ for Normal Period

The New Delhi Bench of the Customs, Excise and Services Tax Appellate Tribunal (CESTAT) upheld the levy of the service tax under “Commercial Training or Coaching Service” for the normal period and noted that the appellant was not a recognised educational institution as defined in law.

The appellant-assessee, Soft Dot Hi Tech Educational and Training, is claimed to have been running study centres under distance education mode for various Universities for imparting education in various courses such as B.Com, BBA, and MBA and it is the Universities that award the degrees or diplomas to students undertaking education at such centres.

The Revenue issued a Show Cause Notice (SCN) alleging non-payment of service tax under “Commercial Training or Coaching Services”, which is taxable under 65(105)(zzc) of the Finance Act, 1994.

The appellant contended that the services rendered by the centres fell within the exclusion clause in Section 65(27) of the Act, and they were in association with recognised universities and were awarding degrees, diplomas and certificates. Therefore, the appellant should be deemed a recognised educational institution.

However, the revenue contended that the appellant was not a university or recognised institute, and merely a study center of institutions, and it did not grant it the status of a recognised educational institution under law.

The Tribunal held that the appellant provided coaching services in the manner of distance education. Since the appellant did not meet the requirements of a recognised educational institution under the Finance Act, the services rendered were liable to service tax under “Commercial Training or Coaching Services.”

The Tribunal also noted that the appellant directly receives the fees from the students, and the consideration is not received from the Universities.

The bench comprising Dilip Gupta (President) and P.V.Subba Rao (Technical Member) found that the extended period of limitation invoked in the SCN was not sustainable due to the absence of suppression or willful misstatement. Accordingly, it upheld the demand of service tax only for the normal period of limitation.

The appeal was thus allowed, and the coaching centre was not a recognised educational institution, and upheld the service tax under ‘Commercial Training or Coaching Service’.

The assessee was represented by Atul Gupta along with Anmol Gupta and Varun Gaba, while Jaya Kumari represented the Department.

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