Commissioner of Central Excise,Customs and Service Tax vs Garg Aviations Ltd.

This appeal has been preferred by the revenue u/s 35G of the Central Excise Act, 1944 against the order dated 7 October 2013 passed by the Customs, Excise and Service Tax Appellate Tribunal, New Delhi. The issue that arose before the Tribunal was whether service tax could be levied on the assessee. The Tribunal, in view of the decision of the Delhi High Court in M/s. Indian Institute of Aircraft Engineering Vs. Union of India and Others, has concluded that service tax could not be levied on the assessee. The following questions of law have been framed:

(i) Whether, the respondent is liable to service Tax on Flying Training Institute and Aircraft Engineering Institutes under Commercial Training or Coaching Services?

(ii) Whether, the course Completion Certificate offered by such Institutes, to successful students, qualifies as any certificate of diploma or degree or any educational qualification recognized by law for the time being in force or not?

The assessee, namely M/s Garg Aviations Limited is a company registered under the Companies Act, 1956 and is running a Flying Training Institute and Aircraft Maintenance Engineering Institute at Kanpur. It is engaged in providing training and coaching to individuals in the field of flying of aircraft for obtaining Commercial Pilot License from the Director Civil Aviation (DGCA), New Delhi. It is also engaged in providing training for obtaining Basic Aircraft Maintenance Engineering Licence.

A similar issue arose before the Delhi High Court in Indian Institute of Aircraft Engg. (supra). The Delhi High Court held as follows:

The petition impugns,

(i) the Instruction No.137/132/2010-ST dated 11.05.2011 of the respondent No. 2 Central Board of Excise & Customs (CBEC) to the effect that Flying Training Institutes providing training for obtaining Commercial Pilot Licence (CPL) and Aircraft Engineering Institutes for obtaining Basic Aircraft Maintenance Engineering Licence (BAMEL) come in the category of coaching centres as laid down in Section 65(27) of the Finance Act, 1994 and therefore assessable to service tax; and,

(ii) the show cause notice dated 30.03.2012 issued by the respondent No. 4 The Additional Commissioner of Service Tax to the petitioner.

The Delhi High Court then observed:

Section 65(27) as it stood till 30th April, 2011 excluded from the domain of commercial training or coaching centres, training centres or establishments issuing any certificate or diploma or degree or any educational qualification recognized by law. Even after 30th April, 2011, though the part of Section 65(27) making such exclusion has been deleted but the Notification dated 25th April, 2011 supra issued in exercise of powers u/s 93 of the Finance Act has exempted coaching or training leading to grant of a certificate or diploma or degree or any educational qualification which is recognized by any law from the whole of Service Tax leviable u/s 66 of the Finance Act.

We have wondered, what could be the reason for exempting from payment of service tax those training or coaching centres, even though commercial, whose certificate/degree/diploma/qualification is recognized by law. The only plausible reason, according to us, can be to exclude from ambit of service tax those training or coaching centres which are otherwise regulated by any law in as much as recognition of certificate/degree/diploma/qualification conferred by such training or coaching centres will necessarily entail regulation by the same law of various facets of such training or coaching centres.

Seen in that light, there can be no doubt whatsoever that the activities of the petitioner are very much regulated by the Act and the Rules aforesaid and the instructions/regulations issued thereunder from time to time.

The Delhi High Court concluded as follows:

We are of the view that the Act, the Rules and the CAR, having provided for grant of approval to such institutes and having laid down conditions for grant of such approval and having further provided for relaxation of one year in the minimum practical training required for taking the DGCA examination, have recognized the Course Completion Certificate and the qualification offered by such Institutes. The certificate/training/qualification offered by Institutes which are without approval of DGCA would not confer the benefit of such relaxation. Thus, the certificate/training/qualification offered by approved Institutes, has by the Act, Rules and the CAR been conferred some value in the eyes of law, even if it be only for the purpose of eligibility for obtaining ultimate licence/approval for certifying repair/maintenance/airworthiness of aircrafts. The Act, Rules and CAR distinguish an approved Institute from an unapproved one and a successful candidate from an approved institute would be entitled to enforce the right, conferred on him by the Act, Rules and CAR, to one year relaxation against the DGCA in a Court of law. The inference can only be one, that the Course Completion Certificate/training offered by such Institutes is recognized by law.

26 & 27. ** ** **

We are therefore of the view that the Instruction aforesaid holding the petitioner to be assessable to Service Tax is contrary to Section 65(27) and the Notification dated 25th April, 2011. Accordingly the said Instruction and the show cause notices given to the petitioner are quashed. The Rule is made absolute and the writ petition is disposed of.

Learned counsel appearing for the revenue has not been able to persuade the Court to take a different view. The appeal filed by the revenue will not hence, give rise to any substantial questions of law. The appeal is, accordingly, dismissed.