CBEC Not Empowered To Modify The Scope Of Exemption Notification: CESTAT

New Delhi: The Delhi Bench of the Customs, Excise and Service Tax Appellate Tribunal (CESTAT) in the case M/s Lakshya Education Solutions Pvt. Ltd. Versus The Commissioner (Appeals), Customs, Central Excise & Service Tax observed and has held that the Central Board of Excise and Customs (CBEC) is not empowered to modify the scope of an exemption notification which has been issued by the Central Government.
The two-member bench comprising of Judicial Member, Rachna Gupta and the Technical Member, P.V. Subba Rao observed and has stated that the exemption notification is issued by the central government in the exercise of the powers conferred under Section 93 of the Finance Act.
Thus, the exempted notification is a delegated legislation made under the power of granting exemption available to the central government and not to anybody else, which includes the Central Board of Excise and Customs.
In the present case, the assessee/appellant is in the business of providing commercial training and coaching to students appearing in the IIT (JEE) and AIEEE exams. Thus, the coaching which is being provided by the appellant is subject to service tax.
The bench observed that the appellant paid service tax only on the amount it charged for coaching and had not paid service tax on the cost of study materials provided by it.
Thus, a show cause notice was issued to the appellant, demanding service tax on the amount collected towards the study materials. It was stated that the exemption for the cost of study materials under Notification No. 12/2003-ST dated June 20, 2003, was being available only if the materials were standard textbooks, which are priced.
It was stated in the CBEC’s Circular dated June 20, 2003, paragraph 2.91 in the case of commercial training and coaching institutes, the exemptions made in respect of study materials which would only be available on the sale value of standard textbooks, which are priced. Any written text or study material which is being provided by the study institute as a part of its service that does not satisfy the criteria will be subjected to service tax.
Therefore, the show cause notice, the demanded service tax from the appellant, invoked and has extended period of limitation under the provisions of Section 73(1) of the Finance Act of 1994, along with interest under Section 75.
Accordingly, the tribunal held that the order passed denying the benefit of an exemption notification, the court relying upon the CBEC Circular dated June 20, 2003, which cannot be sustained.