Larger Bench explains interpretation of “commercial training or coaching” u/ss 65(26), 65(27) in the light of reasons recorded in the decision of Magnus Society’s case. Effect of explanation appended to section 65(105)(zzc) with effect from 01-07-2003 also commented upon.
Facts:
This reference application was made to consider the issue pertaining to interpretation of “commercial training or coaching” and taxable service u/s. 65(105)(zzc) since the division bench expressed doubts on vitality of reasons recorded in the decision of Magnus Society vs. CC&CE [2009] 18 STT 193 (Bang- CESTAT) which tried to make a distinction between activities of an institution imparting a particular skill such as in computers, computer operations, spoken English or accountancy on one hand and a proper format of education imparted by institutions imparting “higher learning” such as MBA, management, computer science and such other disciplines; and concluded that institutions imparting higher learning like MBA, etc., cannot be characterised as commercial training or coaching centres; that institutions preparing students for entrance examination to various universities could be called commercial training or coaching centre; but not so in respect of institutions recognised by law.
Held:
The reference answered is summarised below:
• On analysing relevant statutory provisions it can be inferred that any institute or establishment providing commercial training or coaching where training or coaching is provided for consideration and irrespective of its constitutive or organisational basis or architecture; i.e., whether or not such centre or institute is registered as a trust, a society or other similar organisation under any law for the time being in force; and carrying on its activity with or without a profit motive, engaged in imparting skill or knowledge or lessons on any subject or field (excluding sports), irrespective of whether on culmination of the training or coaching regimen, a certificate is issued; and including coaching or tutorial classes, is a commercial training or coaching centre. Pre-school training and coaching centre or any institute or establishment which issues any certificate, diploma, degree or any other educational qualification recognised by law for the time being in force, are only excluded from the sphere of the defined entity.
• What “commercial training or coaching” means must be ascertained exclusively from the relevant provisions of the Act and applying the appropriate interpretative principles in case of grammatical, syntactic or contextual ambiguity. From the legislated definition, training or coaching therefore means imparting skill, knowledge or lessons on any subject or field. Parliament has not restricted the scope of “training or coaching” as is defined by super adding any conditions such as in terms of pedagogic methodology, course or training content, syllabus, duration, periodicity, tenure/ duration or like conditions. There is thus no scope for restrictive interpretation. A good faith interpretation of section 65(27) requires that wherever skills/ knowledge/lessons are imparted on any subject or field, the activity must be considered to be “training or coaching”. When Parliament enacts a generic and unambiguous definition mandating, that imparting skills/knowledge/lessons on any subject or field shall amount to “training or coaching”, the generic definition is required to be given effect to, legislatively ordained, without demur. Accordingly, dissecting the expression “training or coaching”, as defined in section 65(27) of the Act to identify distinctions on the basis of contemporaneous or potential advancements in educational methodologies, hierarchies or pedagogy would result in subversion of the legislative purposes underlying enactment of the definition of the provision of section 65(27). Where legislature has signaled a generic description, the judicial branch may not resort to mini-classification.
• Therefore subject to the excluded entities, expressly in section 65(27), any other institute or establishment which imparts skill/knowledge/lessons on any subject or field (excluding sports), would be a commercial training or coaching centre providing commercial training or coaching; a taxable service u/s. 65(105) (zzg), irrespective of the nature of training regime; the course content; and irrespective of whether the training or coaching is in respect of one or more disciplines of learning, skills or knowledge or a broader raft of academic disciplines. The Bench refused to consider the meaning of the term ‘commercial’ in the light of authorities cited by the counsel on the ground that, Parliament has introduced the retrospective ‘Explanation’ in section 65(105)(zzc) of the Act and this Explanation clarifies assumed ambiguities in ascertainment of the expression ‘commercial’. The Tribunal also did not analyse the several administrative constructions of statutory provisions in various circulars/notifications.
Note: Reader may refer to the decision of New Delhi CESTAT in the case of N.I.B.S. & Corporate Management [2013] 36 taxmann.com 117 (New Delhi – CESTAT) wherein Tribunal has taken a prima facie view that the word ‘commercial’ in definitions at sections 65(26) and 65(27) and 65(105)(zzzc) cannot be considered to be superfluous and the Explanation added by Finance Act, 2010 may not be a sufficient reason to take a view that the impugned training to be a “commercial training”.
