2019 (11) TMI 1258 - AT - Service Tax

Classification of services - Business Auxiliary Services or not - education services rendered by service recipients - the services rendered are in the nature of business or not? - Whether prior to 01.07.2012 the services rendered by appellants-assessee is taxable under Business Support Services as held by Hon ble Member (Technical) or not taxable as held by Hon ble Member (Judicial)? - difference of opinion confines to the period prior to 1.7.2012. HELD THAT - Notification No. 14/2004-ST provided exemption to organizations providing Business Auxiliary Services in relation to education services. So also in the case of commercial or industrial construction services and works contract services when the buildings are constructed for use by educational institutions or hospitals, etc., was clarified by Board to be not subject to levy of service tax as these buildings were not used for commercial or industrial purposes. It can be seen that prior to 2012, there has been several exemptions in relation to education services. After 2012, the classification of various services has been given away with and there is more clarity as to the services which are intended to be taxed. Even a cursory perusal of the mega notification 25/2012 would show that legislature intends to keep away essential services and public utility services from the burden of tax. There is no dispute that the educational institutions run by these Trusts are recognized by Andhra Pradesh Board. Merely because the schools run by these trusts collect fees from the students and also engage in providing integrated intermediate education, it cannot be said that they are not rendering education services. Moreover, the said integrated intermediate coaching is also recognized and conducted on instructions of the Board - The State is duty bound to provide education services to its subjects. Article 21A recognizes education as a fundamental right. As per the said Article, the State shall provide free and compulsory education to children between 6 and 14 years of age. When the State does not have necessary wherewithal to fulfill this obligation, it uses the machinery of private sector to render these services. Thus the fees collected by an institution cannot change the nature of the services rendered by them. In Para 3 to 6, brother Member (Technical) has analyzed the issue of levy of service tax for the period prior to 01.07.2012 and observed that the service recipient are rendering services on an industrial scale and the revenue running into thousands of crores of rupees is not a charity and therefore service recipients are running business - I am not able to agree with this view for the reason that profits made or turnover cannot be a yardstick for deciding the classification of services. For a particular activity to be subject to levy of service tax, it has to fall within the four corners of the definition. When admittedly these Trusts are rendering education services and the courses are recognized by Andhra Pradesh Board, it cannot be said that since fees is collected or that fees collected is high, the education services are in the nature of a business. I agree with the view taken by brother Member (Judicial) that prior to 1.7.2012, the services rendered by the assessee is not taxable under Business Support Services. Time Limitation - HELD THAT - The point of difference referred to me by the Hon ble President is only as to the taxability of services for the period prior to 1.7.2012 and there are no other points of reference. The third Member can either agree or disagree with the Members and cannot enter into any point which is not referred to by the Hon ble President - the said argument raised by the ld. counsel for the appellant before me on the ground of limitation being outside the scope of reference, does not require to be addressed.

Summary

Issues Involved:
1. Taxability of services rendered by the appellant under "Business Support Services" prior to 01.07.2012.
2. Nature of the services provided to educational trusts and whether these can be classified as "business" or "commerce".
3. Applicability of exemptions under the Income Tax Act and service tax notifications.
4. Consideration of limitation and extended period for raising demands.

Issue-wise Detailed Analysis:

1. Taxability of Services Rendered by the Appellant Under "Business Support Services" Prior to 01.07.2012:
The core issue was whether the services provided by the appellant to educational trusts prior to 01.07.2012 were taxable under "Business Support Services" (BSS). The Member (Judicial) held that these services were not taxable, while the Member (Technical) opined otherwise. The Third Member agreed with the Member (Judicial), stating that the services rendered by the appellant were not taxable under BSS for the relevant period. Both Members concurred that post-01.07.2012, the services were not subject to service tax due to the exemption provided by Mega Notification No. 25/2012-ST dated 20.06.2012.

2. Nature of the Services Provided to Educational Trusts and Whether These Can Be Classified as "Business" or "Commerce":
The Member (Technical) argued that the educational trusts were engaged in business activities due to the substantial fees collected and the scale of operations. Conversely, the Member (Judicial) and subsequently the Third Member, emphasized that the educational trusts were charitable in nature, registered under Section 11 of the Income Tax Act, 1961, and primarily engaged in imparting education, which cannot be classified as "business" or "commerce". The Third Member noted that the trusts' activities, including running schools and colleges recognized by the Andhra Pradesh Board, were educational and charitable, thus falling outside the scope of BSS.

3. Applicability of Exemptions Under the Income Tax Act and Service Tax Notifications:
The Third Member highlighted various exemptions provided in relation to education services, such as Notification No. 14/2004-ST and Mega Notification No. 25/2012-ST. The educational institutions run by the trusts were recognized by the Andhra Pradesh Board, and their activities were not considered commercial. The Third Member referenced several decisions and clarifications, including Circular No. 80/10/2004-ST, to support the view that services related to education were exempt from service tax.

4. Consideration of Limitation and Extended Period for Raising Demands:
The appellant argued that the extended period for raising demands was not justified due to the absence of suppression of facts. However, the Third Member stated that the point of difference referred by the Hon'ble President was solely about the taxability of services prior to 01.07.2012, and not about the limitation. Thus, the argument on limitation was deemed outside the scope of reference and was not addressed.

In conclusion, the Third Member agreed with the Member (Judicial) that the services rendered by the appellant to educational trusts prior to 01.07.2012 were not taxable under "Business Support Services". The educational trusts were engaged in charitable activities related to education, and their services were exempt from service tax. The argument on limitation was not considered as it was outside the scope of the referred issue.