CA-CPT, ICWA Foundation Coaching Eligible For Service Tax Exemption: CESTAT Hyderabad

The Customs, Excise and Service Tax Appellate Tribunal (CESTAT), Hyderabad has held that coaching imparted for CA-CPT, ICWA Foundation and Intermediate (10+2) examinations is exempt from service tax under the 2011 exemption notification.

It held that these courses lead to educational qualifications recognised by law and that the notification does not confine the benefit to the final stage of an educational programme.

A coram of Judicial Member Angad Prasad and Technical Member P. Anjani Kumar ruled,

"The Notification exempts coaching leading to grant of certificate, diploma, degree or educational qualification recognized by law. The notification nowhere restricts the exemption only to final stage of educational programme. The CA Act and the regulations framed thereunder constitute complete statutory scheme governing CA education. CPT is the mandatory first stage of the statutory course. A candidate cannot proceed to IPCC unless he successfully clears CPT. Thus, CPT is not an independent or optional examination but forms an inseparable component of the statutory educational qualification. Similarly, ICWA-Foundation is also a statutory stageprescribed under the Cost Accountancy Regulations. Merely because the certificate issued at the CPT stage enables progression to the next level, it cannot deprive it of the character of an educational qualification recognized by law"

The bench set aside service tax demands of ₹35.40 lakh, along with interest and penalties, raised against Master Minds under the category of "Commercial Training or Coaching Service."

The appellant, a coaching institute, provides training to students preparing for Chartered Accountancy (CA), Cost Accountancy (ICWA) and Intermediate (10+2) examinations.

The Department accepted the exemption for coaching relating to CA-IPCC, CA Final and ICWA Final. However, it denied the benefit for coaching provided for CA-CPT, ICWA Foundation and Intermediate (10+2), taking the view that these courses did not satisfy the conditions of the 2011 exemption notification. This resulted in service tax demands.

The appellant argued that every stage of the CA and ICWA courses is governed by statute and forms an integral part of the professional qualification. It submitted that the 2011 exemption notification only requires the coaching to lead to an educational qualification recognised by law. It does not distinguish between qualifying examinations and final examinations.

The appellant also pointed out that the Department had accepted the exemption for subsequent periods. It had even refunded excess tax, making its contrary stand for the disputed period untenable.

The revenue reiterated the findings recorded in the impugned orders.

After examining the statutory framework governing CA education, the tribunal found that the Chartered Accountants Act and the regulations framed under it constitute a complete statutory scheme. It noted that CA-CPT is the mandatory first stage of the course. A candidate cannot proceed to the next level without clearing it.

The tribunal reached the same conclusion for ICWA Foundation. It observed that it is a statutory stage prescribed under the applicable regulations. Merely because these stages enable students to progress to the next level does not deprive them of their character as educational qualifications recognised by law, the tribunal held.

The bench also relied on earlier decisions, including Sri Chaitanya Educational Committee, which interpreted the 2011 exemption notification in favour of coaching that leads to recognised educational qualifications.

The tribunal observed, "The notification does not employ the expression 'final qualification'. It merely requires that the coaching should lead to an educational qualification recognized by law. Reading an additional condition into the exemption notification would amount to re-writing the notification, which is impermissible."

Holding that the exemption had been wrongly denied, the tribunal set aside the impugned orders. It allowed the appeals with consequential relief, including refund, if otherwise admissible in law.

For Appellant: Advocate Y. Sreenivasa Reddy, 

For Revenue: J. Rajanish, Authorised Representative