Pranav B Prem

The Kolkata Bench of the Customs, Excise, and Service Tax Appellate Tribunal (CESTAT), comprising Technical Member K. Anpazhakan, has held that vocational training services provided under government-approved skill development initiatives are exempt from service tax. The Tribunal clarified that such services fall squarely within the scope of Sl. No. 9A of Notification No. 25/2012-S.T. dated 20.06.2012.

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The appellant, M.M. Group, is a registered Vocational Training Provider (VTP) under the Skill Development Initiative Scheme (SDIS) of the Ministry of Labour and Employment, Government of India. The VTP registration was granted by the Directorate of Industrial Training, Government of West Bengal. The appellant was engaged in providing vocational training and skill development services in partnership with various government bodies and under schemes implemented through state-level societies such as the Paschim Banga Society for Skill Development (PBSSD).

Believing that their services were exempt from service tax under the aforementioned notification and Section 66D of the Finance Act, 1994, the appellant had filed Nil service tax returns during the relevant period. However, the department issued a show cause notice demanding service tax of ₹11,51,025 for the period October 2012 to March 2015, alleging that the appellant had provided taxable services under the head “Commercial Training and Coaching Services” without paying tax. The department also proposed interest and penalties, invoking the extended period of limitation under Section 73(1) of the Finance Act, 1994.

The appellant contested the notice and submitted that their services were fully exempt under Sl. No. 9A of Notification No. 25/2012-ST, which covers "vocational education courses offered by an institute affiliated to the National Skill Development Corporation (NSDC) or approved by the Government." They also submitted that they were providing training under SDIS-MES courses approved by the Directorate General of Employment & Training (DGE&T), Ministry of Labour and Employment, Government of India. Additionally, they produced the VTP registration certificate, enrollment data, training material, and references to the Ministry’s guidelines to support their claim.

The original adjudicating authority—the Assistant Commissioner—rejected their submissions and confirmed the demand. The order concluded that the appellant failed to establish a direct connection between their training activities and government approval. The Commissioner (Appeals) also dismissed the appeal, holding that the appellant had not provided sufficient documentation to show that the services were covered under approved vocational courses as required by the exemption notification.

When the matter came before the CESTAT, the Tribunal took note of the materials submitted by the appellant, particularly the letter issued by the Directorate of Industrial Training, which confirmed the appellant's registration as a VTP under the SDI Scheme and listed specific approved courses. The Tribunal also noted that the SDIS-MES programme is a centrally sponsored initiative under the Ministry of Labour and Employment, and the training partners under this scheme are recognized as being part of the government-approved mechanism for imparting vocational education.

The Tribunal emphasized that the exemption under Notification No. 25/2012-ST, Sl. No. 9A, applies to “vocational education courses offered by an institute affiliated to NSDC or approved by the Government.” In the present case, the appellant was clearly approved under the SDIS framework and conducted training under recognized modules. The Tribunal also referred to CBEC Circular No. 164/15/2012-ST, which clarifies that training partners under government-approved schemes are entitled to service tax exemption.

In its findings, the Tribunal observed: “It is clear that the programme undertaken by the appellant is approved by the Government. Hence, the activity undertaken by them is eligible for exemption from payment of service tax under Sl. No. 9A of Notification No. 25/2012-ST.”

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The Tribunal further noted that the department failed to disprove the evidence submitted by the appellant and instead proceeded to confirm the demand purely on technical grounds without adequately appreciating the nature of the training services rendered. Ultimately, the Tribunal set aside the orders passed by the lower authorities and allowed the appeal in full, granting the assessee exemption from service tax liability.

Appearance

Smt. Shreya Mundhra, Advocate, for the Appellant

Shri S.K. Jha, Authorized Representative, for the Respondent

Cause Title: M/s. M.M. Group V. Commissioner of C.G.S.T. and Central Excise

Case No: Service Tax Appeal No. 75950 of 2022

Coram: Hon’ble Shri K. Anpazhakan [Member (Technical)]