Astronomy Coaching Not Exempt As 'Culture' Under Mega Exemption Notification: CESTAT New Delhi

The New Delhi Bench of the Customs, Excise and Service Tax Appellate Tribunal (CESTAT) on 25 June held that coaching and training services in astronomy do not fall within the expression "culture" under the Mega Exemption Notification and are therefore liable to service tax.

Judicial Member Binu Tamta and Technical Member P.V. Subba Rao dismissed the appeal filed by Space Technology and Education Pvt. Ltd., while directing the Department to recalculate the company's tax liability after extending the benefit of cum-tax valuation under Section 67(2) of the Finance Act, 1994. The Bench held:

“Applying the principle of noscitur a sociis, which contemplates that a statutory term is recognized by its associated words, we are of the firm view that the term 'culture' cannot be extended to include the activity of astronomy.”

The dispute arose after the Department alleged that Space Technology and Education Pvt. Ltd. had provided taxable coaching services in astronomy without obtaining service tax registration, filing ST-3 returns or paying service tax. It issued a show cause notice demanding Rs. 2.58 crore in service tax for FY 2013–14 to FY 2016–17 by invoking the extended limitation period.

Before the Tribunal, the company argued that its services were exempt under Entry 8 of Mega Exemption Notification No. 25/2012-ST dated 20 June 2012, which exempts "services by way of training or coaching in recreational activities relating to arts, culture, or sports." It contended that astronomy has historically formed a significant part of Indian civilisation and traditions and should therefore be regarded as a component of "culture."

The Department opposed the plea, arguing that astronomy is fundamentally a scientific discipline based on mathematics, physics and chemistry and cannot be equated with the cultural or artistic activities contemplated under the exemption notification.

The Tribunal observed that the dispute turned on the interpretation of the expression "culture" in Entry 8 of the notification. It reiterated that exemption notifications must be interpreted strictly and that courts cannot expand their scope through implication or broad construction.

It also noted that, in ordinary understanding and in the context of recreational activities, the expressions "art" and "culture" generally refer to activities such as dance, music, theatre, literature, painting and similar creative pursuits, and cannot be interpreted so broadly as to include scientific disciplines. It held:

“the term 'culture' has to be interpreted in the light of the preceding term 'art' used in the notification. These terms by no stretch of imagination would incorporate the activities relating to 'science', which is distinguishable.”

Further, the Bench observed that although astronomy may historically have influenced civilisation and social development, that alone does not bring astronomy training within the scope of cultural activities contemplated under the exemption notification.

It also referred to clarifications issued by the Central Board of Excise and Customs, which stated that the exemption applies to coaching in activities such as dance, music, painting, sculpture, theatre and sports. It held that the clarification was consistent with the wording and legislative intent of the notification and reinforced the conclusion that astronomy coaching services do not qualify for exemption.

On limitation, the Tribunal rejected the company's plea of bona fide belief, noting that it had neither obtained service tax registration nor filed statutory returns despite operating commercially for several years.

Accordingly, the CESTAT dismissed the appeal on merits but remanded the matter solely for recalculation of the tax liability after extending the benefit of cum-tax valuation under Section 67(2) of the Finance Act, 1994.

For Appellant: Ms. Shagun Arora and Ms. Shrishti Yadav, Advocates

For Revenue: Shri Rakesh Kumar and Shri S.K. Meena, Authorised Representatives