Case nº Ruling No. AAR/ST/ 01/2010 in Application No. AAR/06/ST/2009 of Authority for Advance Rulings, February 04, 2010 (case CAE Flight Training (India) Private Limited Vs Commissioner of Service Tax)
|Judge:||For Appellant: Sandeep Kumar Jain, Chartered Accountant Pricewaterhouse Coopers and Capt. G.R. Reddy, General Manager, CAE, Flight Training (India) Pvt. Ltd. And For Respondents: B.K. Singh, Jt. CDR and Sumeet Kumar, SDR|
|President:||P.V. Reddi, J. (Chairman), J.K. Batra and J. Khosla, Members|
|Defense:||Finance Act, 1994 - Sections 7, 65, 65(27) and 96D(2); Aircraft Rules, 1937 - Rules 6A, 6B, 6C and 133A; Aircraft Act, 1934|
|Resolution Date:||February 04, 2010|
J.K. Batra, Member
M/s CAE Flight Training (India) Pvt. Ltd., Bangalore, (hereinafter referred to as CFTI), the applicant, is a joint venture between Flight Training Device (Mauritius) Ltd, a 100% subsidiary of CAE Inc., Canada and Emirates CAE Flight Training LLC, Dubai. The applicant is engaged in providing various Flight Training Services at its facility in Bangalore. It now intends to provide aircraft specific "Type Rating Training" to the trainee pilots as part of its flight training services.
CFTI has stated that the trainee pilots after undergoing the requisite basic flight training at flying schools are granted a Commercial Pilot's Licence (CPL) which enables them to fly only small aircraft such as Diamond and Cessna. The Commercial Pilot's Licence per-se does not allow or permit the holder to fly commercial passenger aircrafts such as B737s and A320s unless the holder undergoes an aircraft-specific type rating training. It is only after they have undergone the aircraft-specific type rating training and after their licence is endorsed to that effect that they are allowed to fly commercial passenger aircrafts. CFTI imparts flight training to the trainees whereby CPL holders are trained on specific aircraft simulators. Such aircraft-specific training is called 'type rating training' and is an extensive course of a minimum 37 days wherein the trainees are imparted specified skills and knowledge about specific aircraft.
CFTI, the applicant, has been providing 'dry' training to the Commercial Pilot's Licence (CPL) holders from various airlines who have already been type rated for specific aircraft. The 'dry' training involves granting the right to use the Full Flight Simulators to airline companies for scheduled hours with their pilots training under the guidance of airline company's own instructors. CFTI has also been providing 'wet' training to pilots on A320 and B737 aircraft simulators wherein training is provided by CFTI's trainers. CFTI has obtained service tax registration under the category "Commercial Training and Coaching Service" in October, 2008 and it is stated by the applicant's representative that on such 'wet training' it has been paying service tax. The applicant has clarified that it is seeking a ruling with regard to service tax liability on full- fledged 37 day wet training conducted by it for 'Type Rating'.
CFTI has started providing type rating training commercially from April 28, 2009 for the first batch of pilots and the course was yet to be completed when the application for Advance Ruling was made before the Authority on 26th June, 2009. The Commercial Pilot's Licence holders intending to undergo aircraft-specific type rating training approach CFTI either directly on their own or through the airlines with whom they are employed (on stipend basis as trainee or otherwise). CFTI has been approved by the Directorate General of Civil Aviation (DGCA) on a provisional basis to conduct aircraft-specific type rating training courses for B737 & A320 aircraft subject to certain conditions. CFTI has claimed that once the trainee pilots have completed the type rating training with it they will be issued a Certificate of Course Completion by CFTI which must be produced under the terms of para 5 of Section J Schedule II of the Aircraft Rules, 1937.
Based on the aforesaid facts the applicant has sought a ruling on the following questions, namely:
Whether CFTI can be considered as an institute imparting training which is specifically excluded from the definition of 'Commercial coaching and training centre' as defined under Section 65(27) of the Finance Act, as an establishment which issues a certificate recognized by law for the time being in force?
Whether CAE Flight Training (India) Private Limited can be considered 'Vocational Training Institute' so as to be exempted from tax under the category of 'Commercial Training & Coaching Service' as provided under Notification No. 24/2004 dated 10.9.2004, in light of the fact that it provides aircraft specific training to CPL holders so as to enable them to qualify for flying specified aircrafts and to subsequently enable them to obtain employment in various airlines?
The application filed by CFTI was allowed by the Authority vide its order dated 22nd October, 2009 under Section 96D(2) of the Finance Act, 1994 after duly considering the comments of the Commissioner of Service Tax, Bangalore.
Sub-clause (zzc) of Clause (105) of Section 65 of the Finance Act, 1994 defines "taxable service" in the context of commercial training or coaching as a "service provided or to be provided to any person, by a commercial training or coaching centre in relation to commercial training or coaching". Clause (27) of the said Section 65 defines "commercial training or coaching center" as follows:
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 or a certificate and include coaching or tutorial classes but does not include preschool coaching and training centre or any institute or establishment which issues any certificate or diploma or degree or any educational qualification recognized by law for the time being in force;
As mentioned above CFTI is engaged in providing several kinds of flight training services. It is already paying service tax on some of these training services. The issue to be considered is whether for the purposes of "type rating training" services CFTI can be said to be covered by the exclusion clause in the definition of "commercial training or coaching centre".
For any institute or establishment to be covered by the exclusion clause of the definition of 'commercial training and coaching centre', it has to satisfy the following elements, namely:
(a) the institute or establishment should issue a certificate, a diploma, a degree or any educational qualification; and
(b) such a testimonial should be recognized by law for the time being in force.
CFTI has claimed that the certificate of course completion proposed to be issued by it would squarely fulfill the requirements of the exclusion clause of the definition of a "commercial training and coaching centre" and consequently keep it out of the scope of levy of service tax for the type rating training provided by it. In this behalf it has adduced the following arguments:
(a) CFTI has been approved by the Directorate General of Civil Aviation (DGCA) as a Type Rating Training Organization (TRTO) for the enhancement of the skill and knowledge of trainees. The DGCA through the Civil Aviation Requirement (CAR) document lays down the minimum requirement relating to the infrastructure, procedure and manpower for the grant of approval for undertaking flying training activities. The CAR is issued under...
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