2026-VIL-1363-CESTAT-HYD-ST
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SERVICE TAX CESTAT Cases

Service Tax - Scope of Entry No. 9(b) of Notification No. 25/2012-ST dated 20.06.2012 - Services relating to conduct of examination - Appellant conducted various National Level Talent Search Examinations and Olympiad and claimed exemption under Entry No. 9(b) of Notification No. 25/2012-ST as services provided to an educational institution by way of services relating to conduct of examination by such institution - Recovery of service tax on ground that the examinations conducted were optional talent search examinations not forming part of prescribed curriculum of schools and therefore not covered under exemption notification - Whether the services rendered by appellant are covered under Entry No. 9(b) of Notification No. 25/2012-ST or exemption can be denied by importing a condition that examinations should necessarily form part of prescribed curriculum or be Board Examinations - HELD - The Notification uses the expression "services relating to conduct of examination" and not narrower expressions like "services relating to conduct of curriculum examinations" or "Board Examinations". Plain reading shows the legislature consciously employed broad language. The Adjudicating Authority erred in importing an additional condition that examinations should form part of prescribed curriculum which amounts to judicial legislation - The words "relating to" are of wide amplitude and have consistently been interpreted by Courts to include all activities having direct and proximate nexus with principal activity. Preparation of question papers, printing and supply of examination material, OMR sheets, evaluation of answer scripts, tabulation of marks and declaration of results are all integral components of the process of conducting an examination. Once these services are rendered to an educational institution for conducting examinations, they fall squarely within Entry No. 9(b) - The schools are the recipients of service as they identify participating students, collect examination fees, forward list of students, conduct examinations within their premises and deduct tax at source. Merely because benefit of examination ultimately accrues to students cannot alter identity of recipient of service. Recipient is determined by contractual and commercial relationship and not by identifying ultimate beneficiary – Further, the optional nature of participation does not alter identity of recipient of service where educational institution itself engages the service provider for conducting examinations - The exemption notification is beneficial in nature and must be given liberal construction in accordance with object sought to be achieved. When exemption notification speaks of services relating to conduct of examination and not of examinations conducted pursuant to statutory mandate, interpretation limiting its scope is not permissible - The services rendered by appellant are covered by Entry No. 9(b) of Notification No. 25/2012-ST as services provided to educational institutions relating to conduct of examinations. The finding recorded by the Adjudicating Authority denying the exemption is set aside – The appeal is allowed - Service Tax - Extended period of limitation - Invocation on allegation of suppression of facts with intent to evade payment - Whether the extended period of limitation under Section 73(1) of the Finance Act, 1994 was validly invoked on the allegation of suppression of facts with intent to evade payment of Service Tax – HELD - For the Department to invoke extended period of limitation, there must be an active and deliberate act on part of the assessee to evade payment of tax. Mere non-payment of tax without element of intent or suppression is not sufficient to attract extended limitation period - The appellant had maintained regular books of accounts, disclosed receipts in financial statements and Income Tax Returns, and furnished requisite information during investigation. The entire demand was worked out from records maintained by the appellant itself – Further, during the relevant period, divergent judicial opinions existed regarding taxability of examination-related services and the issue travelled to various High Courts. Such divergence of legal opinion itself demonstrates that the dispute was interpretational in nature. Mere adoption of a legal interpretation subsequently found to be incorrect does not amount to suppression of facts or willful mis-statement so as to justify invocation of extended period - The extended period of limitation was wrongly invoked. The demand extending beyond the normal period is liable to be set aside - Service Tax - Penalty - Validity when underlying tax demand is not sustainable - Penalties were imposed under Section 78 (equivalent to tax amount), Section 77 and upon the director of the appellant based on allegation of suppression with intent to evade payment of tax - Whether the penalties imposed under Sections 77 and 78 can survive when the underlying tax demand itself is found to be not sustainable and the extended period invocation is found to be without authority of law - HELD - The penalty under Section 78 was entirely founded upon the allegation of suppression with intent to evade payment of tax. The penalties under Section 77 and upon the Director are only consequential to the principal demand. When the tax demand itself is liable to be set aside, the penalties automatically fall. The material on record clearly establishes that the appellant entertained bonafide belief regarding the applicability of exemption notification. The dispute concerns interpretation of statutory provisions and exemption notifications. There is nothing on record to suggest any deliberate attempt to evade tax. Therefore, even on independent ground, penal consequences would not have been justified - The penalties imposed under Section 77 and 78 as well as upon the Director are not sustainable - Once the demand itself is held to be not sustainable, the penalty cannot survive.
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