Chanakya Mandal vs Union Of India And Ors
2017 Latest Caselaw 1840 Bom

                                                                 906-WP.4235.2011.doc


  IN THE HIGH COURT OF JUDICATURE AT BOMBAY
          CIVIL APPELLATE JURISDICTION
                    WRIT PETITION NO. 4235 OF 2011
                                WITH
                  CIVIL APPLICATION NO. 2587 OF 2013

 Chanakya Mandal                      }
 A trust registered under the         }
 provisions of the Bombay             }
 Public Trust Act, through its        }
 trustee Avinash                      }
 Dharmadhikari, having its            }
 registered office at:- 1557,         }
 Sadashiv Peth, Near Navi             }
 Peth Vitthal mandir,                 }
 Pune 411 030.                        }       Petitioner

                  versus

 1. Union of India            }
 (summons to be served on     }
 the learned Government       }
 Pleader appearing for State  }
 of Maharashtra under         }
 Order XXVII, Rule 4 of       }
 the Code of Civil Procedure, }
 1908)                        }
                              }
 2. The Secretary,            }
 Ministry of Finance,         }
 Government of India,         }
 New Delhi                    }
 (summons to be served on     }
 the learned Government       }
 Pleader appearing for State }
 of Maharashtra under         }
 Order XXVII, Rule 4 of       }
 the Code of Civil Procedure, }
 1908)                        }
                              }
 3. Superintend (HPU-III)     }
 Central Excise, Pune         }
 (summons to be served on     }
 the learned Government       }

                               Page 1 of 17
 J.V.Salunke,PA




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                                                                      906-WP.4235.2011.doc


 Pleader appearing for State              }
 of Maharashtra under                     }
 Order XXVII, Rule 4 of                   }
 the Code of Civil Procedure,             }
 1908)                                    }


 Mr. Anil V. Anturkar - Senior Advocate
 i/b. Mr. Sugandh B. Deshmukh and
 Mr.Ajinkya Udane for the petitioner.

 Mr. M. Dwivedi with Mr.                Vipul     A.
 Bajpayee for the respondents.


                               CORAM :- S. C. DHARMADHIKARI &
                                        PRAKASH. D. NAIK, JJ.

DATED :- APRIL 18/19, 2017

ORAL JUDGMENT :- (Per S. C. Dharmadhikari, J.)

1. By this petition under Article 226 of the Constitution of

India, the petitioner seeks a writ of mandamus or any other writ,

order or direction in the nature thereof so as to declare that the

explanation added to section 65(105)(zzc) by the Finance Act 14

of 2010 dated 8th May, 2010 with retrospective effect from 1st

July, 2003 is unconstitutional and ultra vires Article 14 of the

Constitution of India.

2. The petitioner before us proceeds on the footing that the

above explanation is added to section 65(26) and (27) of the

Finance Act, 1994. Rather, it is an explanation added to the

definition of the term "taxable service". We are concerned with

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that part. The term that is defined for the purpose of

understanding a taxable service, namely "commercial training or

coaching", "commercial training or coaching centre". That is

evident from a reading of the Act itself, is for the purpose of the

expressions, which are used in the term "taxable service". It is

that expression which refers to the commercial training or

coaching centre.

3. Therefore, the Board of Excise and Customs ("CBEC" for

short) may be making a reference to section 65(26) and (27), but

the explanation is not added thereto.

4. The petitioner before us is a Trust registered under the

Bombay Public Trust Act, 1950. The petitioner Trust claims that

it provides, not necessarily by charging a fee, the necessary

training and coaching so as to enable the students to appear for

the Indian Administrative Services and other civil services

examinations.

5. The petitioner states that in terms of a brochure, copy of

which is annexed as Annexure 'B' to the petition, the Trust

carries on the activities and more particularly set out in the said

brochure. The brochure shows as to how the petitioner Trust has

conceived the courses for complete development. In fact, a

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complete development centre for self motivated youth is what is

essentially spelt out from these activities. The courses are for

UPSC examination, MPSC examination etc. The brochure would

indicate as to how this Trust enables these students to gain a

certain degree of confidence and face these competitive

examinations. The petitioner points out that profit generation is

not the motive or the main or predominant aim. Therefore,

admission to the institution is never denied at any time on the

ground that the student is not in a position to pay the fees. The

particulars of students enrolled in the last three years have been

set out in Annexure 'C' to the petition. Thus, the case of the

petitioner is that it cannot fall within the net of service tax.

However, on 27th August, 2010, a letter was addressed by the

Superintendent of Central Excise, Pune-III to the petitioner, copy

of which is annxed as Annexure 'D' to the petition. This letter

refers to a circular dated 28th January, 2009 of the Central Board

of Excise and Customs. That circular refers to the levy of service

tax on educational institutions. The letter refers to the

amendment in regard to non-levy of service tax on institutions,

which are not profit making. However, after the Finance Act of

2010, an explanation has been inserted as set out above. That

has been inserted with retrospective effect. It is in these

circumstances that the attention of the petitioner was invited to

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this amendment and the petitioner was called upon to furnish the

details of the fees collected for the respective courses from 2005-

06. The petitioner also refers to a letter dated 15 th October, 2009.

Thus, these were all reminders to the petitioner. The petitioner

responded to the same by addressing a letter dated 28 th October,

2010 and giving the information as demanded. The petitioner

placed on record two points for consideration of the authority,

namely that the petitioner is a educational public Trust and

hence, service tax was not leviable on its activities, at least in

2010. This point was previously discussed with the officers of the

second respondent while forwarding the documents. The

petitioner then invites the attention of this court to Annexure 'F'

to this petition, which, according to the petitioner, seeks to bring

into focus the amendments and effected to the Act. By this

communication, copy of which is at page 118 of the paper book,

the petitioner was reminded that as far as the unsigned

statements/data submitted, it is not clear whether all amounts

pertaining to commercial training or coaching have been

considered. The data needs to be submitted only after it has been

signed by a responsible person. There has to be a complete

reconciliation with the figures reflecting in the balance-sheet.

The petitioner was directed to convey the name and designation

of a responsible person whose statement can be recorded under

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section 14 of the Central Excise Act, 1944 as made applicable to

service tax under section 83 of Chapter V of the Finance Act,

1994.

6. The petitioner then purported to comply with this reminder

by pointing out that the information which has been forwarded is

complete and therefore, it was maintained that no further

compliance with the requisitions contained in this letter is

necessary.

7. Then, the petitioner highlighted the provisions of the

Finance Act, 1994 and we would come to them a little later. The

petitioner also relied upon Annexure 'H' which is a copy of the

circular dated 28th January, 2009 issued by the Board. Thus, the

petitioner maintains throughout that the essential criteria would

be whether the educational institution predominantly work for

profit or otherwise. In no case it can be termed as a trade or a

business, but at best an occupation. Therefore, the profit is

generated incidentally and that is not the only purpose for which

the institution is established and functions accordingly. It is to

impart education, which is a noble activity.

8. The petitioner has, in the process, relied upon certain

decisions of the Customs, Excise and Service Tax Appellate

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Tribunal (CESTAT) and which have taken a view that institutions

like the petitioner cannot be brought within the purview of the

service tax leviable under the Finance Act, 1994.

9. Concededly, this view is taken by certain tribunals prior to

2010 and we need not refer to that in great details. The

petitioners are also highlighting the fact that they are registered

under the provisions of section 12 of the Income Tax Act, 1961.

10. Mr. Anturkar learned senior counsel appearing for the

petitioner invited our attention to section 65(26) and (27) of the

Finance Act, 1994. He read out to us the passages and

paragraphs from the order of the tribunal functional at Chennai,

taking a particular view of the levy. Mr. Anturkar does not

dispute that in 2010 the Act was extensively amended and to

insert an explanation. However, Mr. Anturkar would contend

that this amendment is not retrospective. If it is held to be

retrospective, then, merely because the legislature holds a

particular view, it cannot overturn or reverse a binding judgment

of a court of law. It has to alter the basis or foundation of the law

on which the judgment has been delivered. That has not been

done and simplicitor overruling of a binding decision rendered by

a competent court is impermissible.

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11. Mr. Anturkar, alternatively, submits that the language of

this explanation and particularly the words employed "hereby

declared" would demonstrate as to how the legislature intended

not to give retrospective effect to the 2010 amendment. The

amendment is thus but prospective.

12. Further alternatively, he would contend that if the

amendment is construed as having retrospective effect, then, that

clearly violates the mandate of Article 14 of the Constitution of

India. Mr. Anturkar would submit that if the predominant intent

is not to earn profit, then, the activity can be said to be charitable

or philanthropic only. Further, educational institutions do not

work or operate with any business motive and to generate a

profit. Despite several amendments and introducing the

explanation, the fundamental character of such institutes must

be considered as that has never been altered.

13. It is urging as above that Mr. Anturkar submits that the

writ petition be allowed. Mr. Anturkar relies upon a five Judge

Bench judgment in the case of Shri Prithvi Cotton Mills Ltd. and

Anr. vs. Broach Borough Municipality and Ors.1.

1 1969 (2) SCC 283

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14. On the other hand, Mr. Dwivedi appearing for the

respondents would submit that there is no merit in the writ

petition and it should be dismissed. Mr. Dwivedi has pointed out

that Mr. Anturkar's submissions proceed on an erroneous basis

that there is an explanation introduced to the definition. The

definition of the term "commercial training or coaching" as

appearing in section 65(26) means any training or coaching

provided by a commercial training or coaching centre and that is

defined in section 65(27) to mean any institute or establishment

providing commercial training or coaching for imparting skill or

knowledge or lessons on any subject or field other than sports,

with or without issuance of a certificate and includes coaching or

tutorial classes. Mr. Dwivedi submits that the further flaw in Mr.

Anturkar's submissions is that the petitioner's activities are not a

source of income. There is no connection or relevance to profit.

Mr.Dwivedi submits that coaching for any examination or

imparting skill are definitely falling within the purview of the

term "commercial training or coaching" and if not, at least the

definition of "coaching centre". The show cause notice demands

the tax after an adjudication. Mr. Dwivedi refers to the civil

application moved in this writ petition and which refers to this

factual aspect. Thus, he would submit that the other show cause

notice dated 19th April, 2011, which is pending adjudication

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would be adjudicated in accordance with law. The demand now

crystalised is limited to the show cause notices which have been

already adjudicated. Mr. Anturkar's submissions have no basis

for though the explanation has been introduced with

retrospective effect from 1st July, 2003 by the Finance Act 2010

dated 8th May, 2010, still, the assessment and recovery of service

tax would be in accordance with the provisions contained in the

Central Excise Act, 1944. The Central Excise Act, 1944 puts a

fetter on the power to demand the tax. Therefore, there is no

basis for the apprehension that the petitioner will be called upon

to pay the amounts from the inception of the services. It is only

in accordance with law that the demand is raised, crystalised and

quantified. In these circumstances, Mr.Dwivedi submits that the

petition has no merit and be dismissed.

15. With the assistance of both advocates, we have perused the

writ petition and the annexures thereto. We have also perused

the decisions brought to our notice by Mr. Anturkar and

Mr.Deshmukh. We do not think that in the facts and

circumstances of the case the legislature has reversed any

binding decision. The legislature had before it an already enacted

statute, namely, the Finance Act, 1994. The Finance Act, 1994

contains Chapter V and titled as "Service Tax". Section 64 of that

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sets out the extent, commencement and application. Section 65,

which has been substituted by Finance Act, 2003 with effect from

14th May, 2003 contains the definitions. The two definitions with

which we are concerned are set out in section 65(26) and 65(27).

They read as under:-

"65(26) "Commercial training or coaching" means any training or coaching provided by a commercial training or coaching centre

65(27) "commercial training or coaching centre" means any institute or establishment providing commercial training or coaching for imparting skill or knowledge or lessons on any subject or field other than the sports, with or without issuance of a certificate and includes coaching or tutorial classes."

16. Therefore, the legislature refers to a commercial training or

coaching. It means any training or coaching provided by a

commercial training or coaching centre. The commercial training

or coaching centre means any institute or establishment

providing commercial training or coaching for imparting skill or

knowledge or lessons on any subject or field other than the

sports, with or without issuance of a certificate and includes

coaching or tutorial classes. However, Mr. Anturkar's

submissions overlook the other important provision of this

statute and namely the definition of the term "taxable service".

That is to be found in section 65(105). The term "taxable

service" means any service provided or to be provided. The

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words "provided or to be provided" were inserted with effect from

16th June, 2005 by Finance Act, 2005. Then, we have sub-clause

(zzc), which read as under:-

"65(105) "taxable service" means any service provided or to be provided -

(zzc) to any person, by a commercial training or coaching centre in relation to commercial training or coaching."

17. Therefore, taxable service means any service provided or to

be provided to any person, by a commercial training or coaching

centre in relation to commercial training or coaching as defined

above.

18. An explanation has been inserted by Finance Act, 2010 and

it says, for the removal of doubts, it is hereby declared that the

expression "commercial training or coaching centre" occurring in

this sub-clause and in clauses (26) and (27) and (90a) shall

include any centre or institute, by whatever name called, where

training or coaching is imparted for consideration, whether or not

such centre or institute is registered as a Trust or a society or

similar other organisation under any law for the time being in

force and carrying on its activity with or without profit motive

and the expression "commercial training or coaching" shall be

construed accordingly. Therefore, the explanation removes any

doubts with regard to the nature of the activity and its character.

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There was a confusion whether such activity and commenced by

any Trust or society, which has obtained registration under any

statute such as the Bombay Public Trust Act, would be covered by

the definition. There was a scope then for argument that those

institutions or Trusts do not operate or function with a profit

motive or with business generation in mind. Therefore, the

legislature steps in and explains this definition as above. This

amendment is inserted by the Finance Act, 2010 (14 of 2010)

dated 8th May, 2010 with retrospective effect from 1 st July, 2003.

Pertinently, Mr. Anturkar does not challenge, by putting in issue,

the power of the legislature to enact such a provision

retrospectively. That the tax can be imposed by introducing such

a provision or the general power to amend the statute with

retrospective effect has not been questioned. Once the statute

itself clarifies that the retrospective effect is from 1 st July, 2003,

then, we do not see any basis for the argument of Mr.Anturkar.

Now, the essential feature or the intent, namely, to make profit or

otherwise is wholly irrelevant. Pertinently, Mr. Anturkar does

not dispute that the petitioner is coaching the students. A

educational coaching is covered by the expression "coaching

centre" as defined in section 65(26) and (27). That it is not on

commercial basis or predominantly for profit is the only

argument canvassed throughout. On some occasions in the past,

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it was accepted but after the insertion of the explanation even

that is unavailable. Now, irrespective of profit motive and so long

as such service is rendered for consideration, it falls within the

purview of the tax. As held by the Hon'ble Supreme Court in the

case of Commercial Tax Officer and Ors. vs. M/s. Bishwanath

Jhunjhunwala and Anr.2 it is the language of the provision which

must be taken as decisive. Where the language is unambiguous

and clear, full effect has to be given to the amended provision. In

paras 12 and 13 of this judgment, the Hon'ble Supreme Court held

as under:-

"12. What, therefore, we have to seek is the clear meaning of the said Notification. If there be no doubt about the meaning, the amendment brought about by the said Notification must be given full effect. It the language expressly so states or clearly implies, retrospectivity must given with effect from 1 st November, 1971, so as to encompass all assessments made within the period of six years therefore, whether they have become final by reason of the expiry of the period of four years or not.

13. By reason of the said Notification, with effect from 1st November, 1971, Rule 18(80)(5)(ii) has to be read as barring the Commissioner (or other authority to whom power in this behalf has been delegated by the commissioner) from revising of his own motion any assessment made or order passed under the Act or the rules if the assessment has been made or the order has been passed more than six years previous to 1 st November, 1971. Put conversely, with effect from 1st November, 1971, Rule 18(80)(5)(ii) permits the Commissioner (or other authority) to revise of his own motion any assessment made or order passed under the Act or the rules provided the assessment has not been made or the order passed more than six years previously. This being the plain meaning, the said Notification must be given full effect. Full effect can be given only if the said Notification is read as being applicable not only to assessments which were incomplete but also to assessments which had reached finality by reason of the earlier prescribed

2 AIR 1997 SC 357

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period of four years having elapsed. Where language as unambiguous as this is employed, it must be assumed that the Legislature intended the amendment provision to apply even to assessments that had so become final; if the intention was otherwise, the Legislature would have so stated."

19. Further, as stated by the Hon'ble Justice G. P. Singh in the

Principles of Statutory Interpretation, Seventh Edition page 172-

173 that an explanation may be added to include something

within or exclude something from the ambit of the main

enactment or the connotation of some word occurring in it. It is

possible that it may have been added in a declaratory form to

retrospectively clarify a doubtful point of law. Still further, there

can be a limited retrospectivity as well and all of this is permitted

by law. It is too well settled to require any reiteration that in

matter of taxation the legislature enjoys greater freedom and

latitude and it is allowed to pick and choose districts, objects,

persons, methods and even rates of taxes if it does so reasonably.

In this case, the legislature has indeed acted reasonably and

taxed the service provided by training and coaching centre and

classes.

20. There is substance in the contention of Mr. Dwivedi that

Mr.Anturkar's submissions overlook the fact that the Finance

Act, 1994 under Chapter V introduced service tax. That is

imposed on taxable services. The taxable services themselves are

defined. In these circumstances and going by the character and

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nature of the levy, we do not think that we can accept

Mr.Anturkar's submissions. Now, such clarificatory provision

can operate with retrospective effect. That has been given

retrospective effect in terms of the powers conferred on the

legislature is apparent. In these circumstances, this is not an

exercise of overruling any binding judgment of a competent court.

This is altering the basis or foundation of the law on which the

judgment is delivered. In the circumstances, the first contention

must fail.

21. Equally, once there is a power to make retrospective

amendment and of the above nature, then, one cannot pick one or

two words from the explanation and read them in isolation. The

explanation would have to be read as a whole. So read, it clarifies

the definition of the term "commercial training centre" or

"coaching". Once commercial training or coaching centre is

defined and which definition is clarified by this explanation, then,

the earlier views of the Benches of CESTAT would not hold the

field. No assistance can be derived from the same. Further, as

clarified by Mr. Dwivedi, there is no scope for any apprehension

that the petitioner would be taxed by going backward for a decade

or more. The service tax has to be computed, assessed and

recovered in terms of the clear provisions of law and the power to

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levy, asses and recover is referable to the Central Excise Act,

1944. Therefore, the provisions of section 11A and its sub-

sections and other sections of the Central Excise Act, 1944 would

apply. If so applied, there is no basis for the apprehension that

the tax would be recovered by extending the retrospective effect

given to this explanation. The effect may be from 1 st July, 2003,

but to recover the tax from that date, there should be a power and

there should be no fetter on that power. If there is any fetter or

restriction on that power, then, that would operate. The show

cause notice would have to be adjudicated in accordance with law.

At such adjudication, the petitioner would be provided all

opportunities to defend itself and a adverse adjudication order

can be challenged in appeal as provided by the statute. In these

circumstances, when there are inbuilt safeguards and checks on

the power to recover the tax, then, all the more we do not see any

reason to entertain this writ petition.

22. As a result of the above discussion, the writ petition fails.

Rule is discharged. There would be no order as to costs.

23. In the light of the disposal of the writ petition, the civil

application does not survive and stands disposed of as such.

(PRAKASH.D.NAIK, J.) (S.C.DHARMADHIKARI, J.)

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