2010 (9) TMI 509 - AT - Service Tax

Exempted from paying the service tax - The regular colleges are exempted from paying the service tax, the appellants should also be exempted from paying Service Tax being in the nature of parallel colleges and no discrimination should be made between students attending the regular colleges and students attending the institution run by the appellants, as both categories of students obtain similar degrees from the University -As per the decision of the Hon ble Kerala High Court in the case of Malappuram District Parallel College Association v. Union of India 2005 -TMI - 77410 - High Court of Kerala - The impugned order is set aside and the appeal is allowed

Summary

Issues:
1. Whether an institution conducting classes for students enrolled under a distance education program is liable to pay service tax.
2. Whether the levy of service tax on parallel colleges is discriminatory and violative of Article 14 of the Constitution of India.

Analysis:
1. The appellants, a Charitable and Educational Trust, argued that their institution, functioning as a parallel college for students unable to attend regular colleges, should be exempt from paying service tax as they provide coaching for students enrolled in a distance education program of a recognized university. They contended that the students pay fees to both the institution and the university, eventually obtaining a diploma/degree from the university. The appellants cited a Memorandum of Understanding with the university recognizing them as a center for enrolling candidates for the distance education program. They relied on a decision of the Hon'ble Kerala High Court to support their claim.

2. The Tribunal considered the arguments and the cited Kerala High Court decision, which held that the levy of service tax on parallel colleges is arbitrary and discriminatory under Article 14 of the Constitution of India. The Kerala High Court found that taxing services provided by parallel colleges, indirectly affecting students, while exempting regular affiliated colleges, is discriminatory. Following the reasoning of the Kerala High Court, the Tribunal concluded that the service tax on the training and coaching provided by the appellants, integral to a university curriculum leading to recognized certificates/degrees, is unjustified. Therefore, the Tribunal set aside the impugned order and allowed the appeal, ruling in favor of the appellants.