Bombay Flying Club registered as charitable institution – Offered training courses in Aircraft Maintenance Engineering, Pilot training & overhauling work of aircrafts – Appellant’s courses not considered of Vocational Training for notification 24/2004-ST – AAR ruling applied in view of identical facts and questions of law – Activity of pilot training taxable under “Commercial Coaching or Training Services” – activity of overhauling of aircrafts taxable under “Management, Maintenance & Repair Se<

Bombay Flying Club registered as charitable institution – Offered training courses in Aircraft Maintenance Engineering, Pilot training & over-hauling work of aircrafts – Appellant’s courses not considered of Vocational Training for notification 24/2004-ST – AAR ruling applied in view of identical facts and questions of law – Activity of pilot training taxable under “Commercial Coaching or Training Services” – activity of overhauling of air-crafts taxable under “Management, Maintenance & Repair Services” – Pre-deposit ordered of 1.5 crores ordered.

The appellant, engaged in providing training in Aircraft Maintenance Engineering, also undertook maintenance and repair of aircrafts owned by its members. The department contended that the above services were taxable as “Commercial Coaching or Training Services” and “Management, Maintenance and Repair Services”. Accordingly, four show cause notices were issued demanding an amount of Rs.2.56 crore. The appellant stated that it was under a bonafide belief that the activities undertaken by them were statutory functions and being a charitable organisation, there was no commercial aspect to its activities and consequently, they never recovered any service tax. It also contended that the demand for service tax under the category of “Management Maintenance or Repair” for the overhauling of aircrafts of its members was bad in law as the said service was not provided under a contract or agreement. The memorandum of the appellant company wherein they have undertaken to provide the said service to its members is not a contract or agreement. The department on its part relied on the CBEC circular, clarifying that the said activity was liable for service tax under the purview of “Commercial Training or Coaching” service and that exemption under Notification No.24/2004-ST was not available to such training programmes. The department also put their reliance on the AAR ruling in the case of CAE Flight Training (India) Ltd.2010 (18) STR 785 (AAR) which held that the activity undertaken was liable for service tax as “commercial training or coaching”.

Held:

Commercial Coaching or Training services: Referring to sections 65(26) and 65(27) of the Finance Act, 1994 relating to definitions of commercial training or coaching, the Tribunal held that the appellant was not covered under the exclusion clause. It also held that the appellant was not eligible for any duty exemption in terms of Notification No.24/2004–ST dated 10.09.2004 and Notification No.03/2010–ST dated 27.02.2010 (after amendment). Due weightage was placed on the CBE&C circular no.137/132/2010–ST dated 11th May, 2011 and on the AAR ruling. Thus, the activity of pilot training was considered as taxable. Management, Maintenance & Repair Services: Referring to the definition u/s. 65(64), the Tribunal stated that the statute does not stipulate any separate contract or agreement, written or otherwise, with the service recipient so as to bring the activity under the tax net. The fact that the activity was stated in the memorandum in the objects clause showed that there was understanding with the members. Thus, the activity of overhauling of aircrafts was also held as taxable. Bonafide belief was considered and Rs.1.71 crore being within normal period, pre-deposit of Rs.1.5 crore was ordered.