The Customs, Excise and Service Tax Appellate Tribunal (CESTAT), New Delhi, has held that coaching and training in astronomy cannot be treated as a recreational activity relating to “culture” for the purpose of claiming exemption under Entry 8 of Mega Exemption Notification No. 25/2012-ST. 

The bench of Binu Tamta (Judicial Member) and P.V. Subba Rao (Technical Member) ruled that astronomy is a scientific discipline and does not fall within the scope of arts, culture, or sports contemplated under the exemption notification. 

The dispute arose after the Service Tax Department alleged that the company was conducting astronomy coaching programmes on a commercial basis without obtaining service tax registration, filing ST-3 returns, or paying service tax.

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Following an investigation, the Department issued a show cause notice demanding ₹2.58 crore in service tax for the period FY 2013-14 to FY 2016-17, along with interest and penalties, invoking the extended limitation period under Section 73(1) of the Finance Act, 1994. The adjudicating authority confirmed the demand, leading to the present appeal before CESTAT. 

The appellant contended that its astronomy coaching qualified for exemption under Entry 8 of Notification No. 25/2012-ST, which exempts: “Services by way of training or coaching in recreational activities relating to arts, culture, or sports.”

According to the appellant, astronomy has historically been an integral part of Indian civilisation and culture. Ancient Indian texts such as the Surya Siddhanta and references in the Vedas demonstrate that astronomy forms part of India’s cultural heritage. Therefore, coaching in astronomy should be regarded as coaching relating to “culture.” The company also argued that it held a bona fide belief regarding the applicability of the exemption and therefore the extended limitation period, interest, and penalties should not apply. Alternatively, it sought the benefit of treating the consideration received as cum-tax under Section 67(2). 

The Department argued that astronomy is fundamentally a scientific discipline involving mathematics, physics, and chemistry, and cannot be equated with recreational activities relating to arts or culture.

It further submitted that exemption notifications must be interpreted strictly. Astronomy is distinct from astrology and cultural practices. The appellant never obtained service tax registration or filed statutory returns despite operating commercially, thereby suppressing material facts warranting invocation of the extended limitation period. 

The Tribunal reiterated the settled principle that tax exemption notifications must receive a strict interpretation, relying upon the Constitution Bench judgment of the Supreme Court in Commissioner of Customs v. Dilip Kumar & Co.

According to the Tribunal, the burden lies on the assessee to establish that it squarely falls within the exemption. Any ambiguity in an exemption notification must operate in favour of the Revenue rather than the taxpayer. 

The Bench rejected the appellant’s attempt to broaden the meaning of the word “culture.”

It observed that while astronomy may have historically influenced Indian civilisation, the expression “culture” used in Entry 8 must be interpreted in the context of the accompanying words “arts” and “sports.”

Applying the doctrine of noscitur a sociis, the Tribunal held that associated words derive colour from each other. Therefore, the expression “culture” in the notification refers to activities such as Dance, Music, Theatre, Literature, Painting, Sculpture, andSimilar recreational artistic pursuits

It cannot be expanded to include scientific disciplines such as astronomy merely because they possess historical or cultural significance. 

The Tribunal also relied upon the CBEC’s clarification explaining the scope of the exemption.

The clarification specifically states that the exemption covers coaching relating to Dance, Music, Painting, Sculpture, Theatre, and Sports

The Tribunal held that this departmental clarification is consistent with the statutory language and confirms that astronomy coaching falls outside the exemption. 

The Tribunal rejected the plea of bona fide belief.

It noted that the appellant was never registered under the Service Tax law; did not file ST-3 returns; and conducted commercial coaching activities for several years without informing the Department.

These circumstances constituted suppression of material facts, justifying invocation of the extended limitation period of five years under the Finance Act, 1994.

Consequently, the Tribunal upheld the demand of interest and penalties as well. 

While dismissing the appeal on merits, the Tribunal accepted the appellant’s alternative plea under Section 67(2).

It held that the assessee is entitled to the cum-tax benefit, meaning the consideration received should be treated as inclusive of service tax while recalculating the liability.

The matter was remanded solely for the limited purpose of recomputing the tax demand after granting the cum-tax benefit, while the findings on taxability, limitation, interest, and penalties were affirmed. 

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