Training for Government Agencies May Still Fall Under Commercial Coaching Depending on the Agreement: CESTAT [Read Order]
CESTAT held that training programs conducted for government departments under formal agreements are taxable as Commercial Training or Coaching Services.
The Bangalore Bench of the Customs, Excise, and Service Tax Appellate Tribunal (CESTAT) ruled that training programs conducted for government departments can fall under the category of commercial training or coaching services if they meet the conditions defined in law.
Jungle Lodges and Resorts Limited, the appellant, entered into an agreement dated 16 November 2009 with the Department of Environment and Forest, Andaman and Nicobar Administration, for conducting training programs in eco-tourism and habitat management.
The department alleged that these activities were taxable as “Commercial Training or Coaching Service” under Section 65(27) of the Finance Act, 1994. It issued a show cause notice demanding service tax along with interest and penalties.
The adjudicating authority confirmed the demand and the Commissioner (Appeals) upheld it. The appellant challenged the decision before the Tribunal.
The appellant’s counsel argued that the training was provided to government officials as part of an eco-tourism development program initiated by the Ministry of Environment and Forests. The activity was undertaken in compliance with directions from the ministry and was not a commercial coaching program for the general public.
The counsel further argued that the objective was capacity building in eco-tourism management, not profit-making or commercial education, and so it could not be classified as commercial training or coaching.
The revenue counsel argued that the definition of “Commercial Training or Coaching Service” under Section 65(27) covers any training or coaching provided by an institute for consideration, irrespective of whether the recipient is a private entity or a government department. Since the appellant conducted structured training for a fee under a formal agreement, the activity satisfied the conditions of taxable service.
The two-member bench comprising P.A. Augustian (Judicial Member) and R. Bhagya Devi (Technical Member) observed that the appellant entered into a formal agreement to conduct training and received consideration for the program.
The tribunal explained that the nature of the recipient does not change the classification if the service meets the statutory definition. It pointed out that the activity was systematic and organized, falling within the scope of “Commercial Training or Coaching Service.”
The tribunal upheld the service tax demand under the category of commercial training or coaching while setting aside the extended period and penalties.
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