2020 (3) TMI 154 - HC - Service Tax

Maintainability of appeal - Classification of services - Whether or not, the Boards and the University are educational institutions. If the Boards and University are found to be educational institutions, the services provided to them are exempt? Maintainability of appeal - HELD THAT - Against an order passed by the Appellate Tribunal, appeal lies to the High Court; however, the order which is subject matter of challenge should not relate to the determination of any question having a relation to the rate of duty of excise or to the value of goods for the purposes of assessment. Since classification of goods or services has a direct relation with the rate of duty, an appeal against an order of the Appellate Tribunal relating to a classification dispute would also lie before the Supreme Court and not the High Court - Since an appeal against a matter which relates to the determination of a question having a relation to the rate of duty or value of goods for the purposes of assessment lies to the Supreme Court and not to the High Court, this court ordinarily, would not entertain such a dispute in exercise of powers under article 226 of the Constitution of India. Whether the dispute involved in the present cases is a classification dispute? - HELD THAT - A dispute can be said to be a classification dispute provided it involves a question regarding the entry under which particular goods or services fall. In the present cases, insofar as the nature of the services is concerned, there is no dispute. The question involved in these cases is whether the institutions to which the services are supplied by the petitioners are educational institutes. In the opinion of this court, the question as to whether an institution is an educational institution or not, is strictly speaking, not a classification dispute - Moreover, in both these cases there is no dispute on facts. On a perusal of the impugned show-cause notices, it is apparent that based on admitted facts, the only dispute raised is a purely legal issue, namely, whether the institutions to which the services are supplied by the petitioners are educational institutions. Moreover, the relevant material on the basis of which such question can be decided is already on record. This court is of the view that the decision of the Supreme Court in UNION OF INDIA OTHERS VERSUS COASTAL CONTAINER TRANSPORTERS ASSOCIATION OTHERS 2019 (2) TMI 1497 - SUPREME COURT would not be applicable to the facts of the present cases, inasmuch as, in that case the court had firstly found that the dispute involved in the case was a classification dispute; and secondly, that even from the contents of the show-cause notices, it could not be said that there are no factual disputes; whereas the present cases do not involve any classification dispute, nor do they involve any disputed questions of fact. Educational services or not - HELD THAT - The main ground on which the petitioners are sought to be denied exemption from service tax in respect of the services provided by them to the Boards/University is that according to the respondents, the Boards/University are not educational institutions - The facts are not in dispute, inasmuch as the nature of services provided by the petitioners in Special Civil Application No.20748 of 2018 are examination related activities like Barcode Scanning, Printing, OMR Scanning, Data Entry, etc. provided to the service recipients mentioned in the impugned show-cause notice and in case of the petitioners in Special Civil Application No. 7414 of 2019, the services provided are in the nature of rent-a-cab in connection with the examinations held by the concerned Boards/University. It is an admitted position that such services are exempted under section 66D(l) of the Finance Act, 1994 as well as under Mega Exemption Notification No. 25/2012-ST dated 20.06.2012 if such services have been provided to the educational institutions . The petitioners have not paid service tax on the services provided to the above institutions claiming exemption under serial No. 9 of Mega Exemption Notification No. 25/2012-ST dated 20.06.2012, as amended, applicable to the services provided to educational institutions. Whether the Boards and University to whom services are provided by the petitioners are educational institutions ? - HELD THAT - Notification No.06/2014 - Service Tax dated 11.07.2014 defines educational institution to mean an institution providing services specified in clause (l) of section 66D of the Finance Act, 1994. Therefore only those entities which provide such services would qualify under the term educational institution - It appears that according to the respondents the term educational institution envisages only those institutions which actually enroll students and impart education. In paragraph 7.6 of the show-cause notice, it has been stated that on examining the functions and duties of the above said Boards/University, it appears that these Boards/University are functioning as organisations which are entrusted with the work of creating more schools/colleges/institutes under their affiliation, to prepare the syllabus of education for such institutes, to conduct the academic tests and exams, to appoint examiners/supervisors for smooth conduct of examination, to declare the results of such examinations etc. On a broader aspect, these University/Boards work more like managerial organisations to plan the syllabus of education and conduct of examination for institutes affiliated under them. For this purpose, the Boards/University procure services of other service providers for such examination related and result processing services. Whether the narrow meaning sought to be assigned to the word education by the respondents is required to be adopted, namely only those institutions which directly impart education to the students; or a broader meaning which includes even those institutions which are connected with the education of those students? - HELD THAT - This court is of the opinion that the word education cannot be given a narrow meaning by restricting it to the actual imparting of education to the students but has to be given a wider meaning which would take within its sweep, all matters relating to imparting and controlling education. Examination is an essential component of education as it is one of the major means to assess and evaluate the candidate's skills and knowledge, be it a school test, university examination, professional entrance examination or any other examination. - Thus, education would mean the entire process of learning, including examination and grant certificate or degree or diploma, as the case may be and would not be limited to the actual imparting of education in schools, colleges or institutions only. Unless the School Boards hold examinations, the education of school students would not be complete, so is the case with college students, whose education would be complete only when the University conducts examinations and awards degrees or diplomas. Once the Boards/University to whom services have been provided by the petitioners, are held to be educational institutions, the very substratum of the impugned show-cause notices is lost inasmuch as the show-cause notices are premised on the allegation that the service recipients namely the Boards/University referred to hereinabove are not educational institutions and, therefore, the services rendered by them do not fall within the negative list of services as provided under section 66D(l) of the Finance Act, 1994 and that the Board/University are not educational institutions as defined under clause (oa) of Entry No.2 of the Mega Exemption Notification No.25/2012-ST dated 20.06.2012 - Once it is held that the service recipients are educational institutions, the impugned show-cause notices are rendered unsustainable. Extended period of limitation - HELD THAT - When the Department itself was of the view that the services provided by the petitioner in Special Civil Application No.7414 of 2019 to the Boards/Universities were covered by the Mega Exemption Notification and were therefore, exempt, the petitioners in both these petitions were equally entitled to hold such a view. Therefore, it cannot be said that the petitioners had, with an intention to evade payment of service tax, misstated that the organisations to which they had provided services are educational institutions to claim incorrect and ineligible exemption. The larger period of limitation, therefore, could not have been invoked in the facts and circumstances of the present cases. Petition allowed - decided in favor of petitioner.

Summary

Issues Involved:
1. Whether the Boards/University are "educational institutions."
2. Validity of invoking the extended period of limitation.
3. Authority to initiate fresh proceedings after the omission of Chapter V of the Finance Act, 1994.

Detailed Analysis:

1. Whether the Boards/University are "educational institutions":

The court examined if the Boards/University to whom services were provided by the petitioners fall under the definition of "educational institutions." The petitioners argued that their services were exempt from service tax as they were provided to educational institutions. The respondents contended that the Boards/University do not qualify as educational institutions since they do not directly impart education but function as managerial organizations.

The court referred to several decisions, including *Gujarat University v. Krishna Ranganath Mudholkar* and *P. A. Inamdar v. State of Maharashtra*, which held that the term "education" includes all matters related to imparting and controlling education. The court noted that examination is an essential component of education, and thus, Boards/Universities, which conduct examinations and award qualifications, fall within the ambit of "educational institutions."

The court concluded that the Boards/University are indeed educational institutions as they are integral to the education process, including conducting examinations and awarding qualifications. Therefore, the services provided by the petitioners to these institutions are exempt from service tax under the Mega Exemption Notification No. 25/2012-ST.

2. Validity of invoking the extended period of limitation:

The petitioners argued that the extended period of limitation could not be invoked as there was no suppression of facts or intent to evade tax. The respondents had themselves previously acknowledged that the services provided by the petitioners were exempt from service tax.

The court noted that the respondents had issued a circular dated 19.09.2013, declaring that such services provided to educational institutions are exempt. The court found that the petitioners were guided by the respondents' understanding and had no intention to evade tax. Therefore, the invocation of the extended period of limitation was unjustified.

3. Authority to initiate fresh proceedings after the omission of Chapter V of the Finance Act, 1994:

The petitioners contended that the respondents had no authority to initiate fresh proceedings after the omission of Chapter V of the Finance Act, 1994, by the Central Goods and Services Tax Act, 2017. The respondents argued that section 174(2)(e) of the CGST Act allows for the continuation of proceedings initiated under the repealed Act.

The court referred to section 174(2)(e) of the CGST Act, which provides for the continuation of legal proceedings as if the Finance Act, 1994, had not been repealed. The court concluded that the respondents have the authority to initiate fresh proceedings under the repealed Act.

Conclusion:

The court held that the Boards/University are educational institutions, and the services provided by the petitioners are exempt from service tax. The invocation of the extended period of limitation was unjustified, and the respondents have the authority to initiate fresh proceedings under the repealed Act. The impugned show-cause notices were quashed and set aside.