‘Commercial Training and Coaching’ – Mandatory Training of Insurance Agents – not liable to pay Service Tax: CESTAT
The appellant is providing training to candidates who intend to become Insurance Agent. The candidates are sponsored by the insurance company, who pays the appellant instead of candidates themselves paying the appellants. To become the insurance agent, it is mandatory in the law for him to undergo a training programme which is imparted by the appellant and thereafter to clear an exam conducted by Insurance Regulatory and Development Authority (IRDA). IRDA has been established under Section 3 of the Insurance Regulatory and Development Authority Act, 1999. IRDA has been conferred powers under Section 42 of the Insurance Act, 1938 to prescribe rules for Licensing of Insurance Agents. IRDA is further empowered to prescribe requisite qualification, training and examination by the Insurance Agent under Section 114A of the Insurance Act, 1938. As per IRDA (Licence of Insurance Agent) Regulation, 2000 approves and notifies certain institutions as approved institutions within the meaning of Regulation 2(b) of said Regulation. The appellant is an approved institution as per IRDA Regulation. To obtain a licence, Regulation 3(1) prescribed that the candidate is to apply by making an application, Regulation 3 (ii) prescribed that the candidate should possess the practical training as specified under Regulation 5, a licence can be issued . As per Regulation 5 provides that a training is mandatory which is to obtain by the candidate from approved institutions as prescribed under the said rules. Thereafter under Rule 6, the candidate has to pass an examination conducted by Insurance Institute of India, Mumbai or some other body which issues a certificate to practice as an Insurance Agent.
In these set of facts, the appellant is imparting practical training to the candidates who desirous to become Insurance Agent and issues a certificate for completion of training and on the basis of that certificate the candidate is entitled to appear in the examination conducted as per Regulation 6 of the said Regulation, thereafter who passes the exam becomes the Insurance Agent.
The appellant did not pay service tax on their activity on the premise that they are not liable to service tax on their activity. But investigation conducted by the Revenue, it was revealed that the applicant is a Commercial Training and Coaching Institute as defined under Section 65(27) of the Finance Act, 1994. Therefore, they are liable to pay service tax.
In these set of facts proceedings were initiated against the appellant and for the period 1st July 2003 to 9th September 2004, a Show Cause Notice dated 1.7.2008 was issued to the appellant for demand of service tax along with interest and proposal for various penalties under Section 76, 77 & 78 were also made. Adjudication took place, the proposals made in the Show Cause Notice were confirmed by converting into the demand of service tax along with interest and imposing various penalties on the appellant under the Finance Act.
Aggrieved for the said order, the appellant is before the Tribunal.
Appellant’s Plea : The Counsel on behalf of the appellant submits that the appellant although a Commercial, Training and Coaching Institute is not covered for levy of service tax under Section 65(27) of the Finance Act, 1994. To support this contention, he drew attention to Section 65(27) of the Act and says that appellant is imparting training for which a certificate is issued which is recognised by law. Therefore, they are under the exclusion clause of Section 65(27) of the Act. In these set of facts, he prays that impugned order is required to be set aside. He further submits that the appellant is entitled for the benefit of Notification No. 10/2003-ST dated 20th June 2003 which provides an exemption to commercial training or coaching centre which forms an essential part of a course or curriculum of any other institute or establishment, leading to the issuance of any certificate or educational qualification. He further submits that in alternate the appellant is entitled for the benefit of Notification No. 9/2003-ST dated 20th June 2003 which provides exemption to vocational training institute. To support this contention he relied on the decision in the case of Pasha Educational Training Institute Vs. CCE, Hyderabad – 2009-TIOL-288-CESTAT-BANG to say that in the case of the competitor of the appellant in similar set of facts, this Tribunal held that the training to the candidate is a vocational training. Therefore, the institute is Vocational Training Institute and eligible for exemption under Notification No. 9/2003 ibid.
He further submits that a similar issue came up before the Hon’ble High Court of Delhi in the case of Indian Institute of Aircraft Engineering Vs. Union of India – 2013-TIOL-430-HC-DEL-ST, wherein the Hon’ble High Court has held that such type of training which is governed by a law is not covered under the definition of Section 65(27) of the Finance Act, 1994.
Revenue Defence : On the other hand, the AR for Revenue opposes the contention of the Counsel and submits that the activity undertaken by the appellant is squarely covered by Section 65(27) of the Finance Act, 1944 and does not exclude the appellant from levy of service tax. He submits that the appellant is not issuing any certificate of training recognised by law, therefore they are not covered under the exclusion clause of Section 65(27) of the Finance Act. He submits that a similar issue was referred to the Larger Bench of this Tribunal in the case of Great Lakes Institute of Management Ltd. Vs. CST, Chennai –2013-TIOL-1480-CESTAT-DEL-LBwherein this Tribunal held that such type of institute which are not issuing training certificate recognised by law are Commercial Coaching and Training Institute, therefore, the appellant is liable to pay service tax. He further submits that the appellants are issuing only a certificate of completion of training and not conducting any exam and issuance of certificate of Training is not recognised by law. In these circumstances, he cannot take the shelter of the decision of Hon’ble High Court of Delhi in the case of Indian Institute of Aircraft Engineering. He further submits that the exam conducted by Insurance Institute of India, Mumbai has no concern with the training imparted by the appellant as that has not prescribed any syllabus for conducting the training. To support this contention, he relied on the decision of the Hon’ble Kerala High Court in the case of St. Antony’s Educational & Charitable Society Vs. Union of India – 2006-TIOL-22-HC-KERALA-ST.
The Tribunal found that that a similar issue came before the Hon’ble High Court of Delhi in the case of Indian Institute of Aircraft Engineering. The High Court has examined the issue and observed as under:
“20. The position which thus emerges is that :-(A) That successful completion of Aircraft Maintenance Engineers course from an approved training school by itself does not authorize such candidate to certify the airworthiness of an aircraft or its repair or maintenance. For the same, an examination to be conducted by the DGCA is to be passed.(B) For appearance in the said examination, it is not essential to undergo the course offered by the approved training school and others are also eligible to take the said examination.21. Nonetheless, the law dealing with the subject of aircrafts has not left the institutes imparting such courses/training and which course completion/training makes the successful candidates eligible to one year exemption, unregulated. It is not as if anyone can start, offering such course and imparting training. The Act, Rules and CAR provide for approval of institutes such as the petitioner’s. DGCA regulates the course content offered by such institute and gives relaxation to the successful candidates from such institutes in the matter of taking the examination to be conducted by the DGCA for grant of authority/license to render services of aircraft repair and maintenance and to certify the aircraft’s airworthiness. Though qua the fee etc. to be charged by such institutes there does not seem to be any restriction but the powers under the Act and the Rules in exercise of which such CAR has been issued are wide enough to also issue a direction with respect to the fee etc. to be charged by such institute.22. The question which falls for consideration is whether the aforesaid would amount to ‘recognition by law’ of the Course Completion Certificate and On Job Training Certificate given by such institute.23. The expression ‘recognized by law’ is a very wide one. The legislature has not used the expression “conferred by law” or “conferred by statute”. Thus even if the certificate/degree/diploma/qualification is not the product of a statute but has approval of some kind in ‘law’, would be exempt.24. “Recognize’ is defined, in the Black’s Law Dictionary, 8th Edition as confirmation of an act done by another person as authorized, formally acknowledging the existence; and, in Concise Oxford Dictionary as acknowledging the existence, validity or legality of.26. There can be no doubt that such recognition through the Rules framed as aforesaid and through issuance of CAR, is a recognition by law, which is defined in Black’s Law Dictionary, 8th Edition as the aggregate of legislation, judicial precedents and accepted legal principles and the set of rules or principles dealing with a specific area of legal systems. The Rules and the CAR aforesaid dealing with aircrafts, there can be no doubt, are law. The Supreme Court in Narsingh Pratap Singh Deo v. State of Orissa – AIR 1964 SC 1793 held that a law generally is a body of rules which have been laid down for determining legal rights and legal obligations which are recognized by Courts. Similarly, in R.S. Nayak v. A.R. Antulay – (1984) 2 SCC 183 it was held that law includes any Ordinance, By-law, Rule, Regulation, Notification, Custom or Usage having force of law. The Rules and CAR aforesaid have been enacted in exercise of legislative power as aforesaid.27. The reasoning in the impugned Instruction dated 11th May, 2011 that because the qualification awarded by the Institute does not culminate in automatic issuance of license/ by the DGCA to certify the repair, maintenance or airworthiness of an aircraft and for authorization which purpose a further examination to be conducted by the DGCA is to be taken, in our view mixes up and confuses, ‘qualification’ with ‘a license to practice on the basis of that qualification’. An educational qualification recognized by law will not cease to be recognized by law merely because for practicing in the field to which the qualification relates, a further examination held by a body regulating that field of practice is to be taken. Immediate instance can be given of the qualification in the field of law. Though by amendment of the recent years, the right to practice law on the basis of the said qualification has been made subject to clearing/passing a Bar Exam to be held by the Bar Council of India, the same does not make the qualification of law not recognized by law. The recognition accorded by the Act, Rules and CAR supra to the Course Completion Certificate issued by the Institutes as the petitioner cannot be withered away or ignored merely because the same does not automatically allow the holder of such qualification to certify the repair, maintenance or airworthiness of an aircraft and for which authorization a further examination to be conducted by the DGCA has to be passed/cleared.
Thereafter, Hon’ble High Court concluded that the training conducted by the appellant in that case having a recognition of law and is not covered under commercial or coaching training centre as defined under Section 65(27) of the Finance Act, 1994.
The Tribunal has further gone through the decision of Pasha Educational Training Inst.wherein similar set of facts, in the case of the competitor of the appellant this Tribunal held that the appellant was imparting the vocational training and held that the appellant was entitled for benefit of exemption under Notification No. 9/2003-ST dated 20th June 2003. The reliance by the AR in the case of St. Antony’s Educational & Charitable Society is also of no help as in the case in hand, it is already observed that the training imparted by the appellant is having recognition of law.
So, the Tribunal concluded that the facts of this case are similar to the facts of the case ofPasha Educational Training Inst. and Indian Institute of Aircraft Engineering (supra) wherein it was held that the training imparted by the appellants were not covered under the definition of Section 65(27) of the Finance Act, 1994.
Held: in this case also the training imparted by the appellants does not fall under the ambit of Section 65(27) of the Finance Act, 1994 as the training imparted by the appellant is having the recognition of law and covered under exclusion clause of Section 65(27) of the Finance Act, 1994, therefore the appellant is not liable to pay service tax at all.
The impugned order is set aside and the appeal allowed with consequential relief if any