2024 (4) TMI 399 - AT - Service Tax

Taxability - research projects - educational programs - fees charged to students in the post graduate student status program (PGSSP) offered by the appellant - externally funded research projects - suppression of facts or not - Extended period of limitation - penalties. Taxability of the fees collected from students in the PGSSP - HELD THAT - As far as PGSSP is concerned, IIIT does not fall under the definition of educational institution as the said course is not meant for obtaining any qualification or degree recognised by law - this interpretation of the notification/negative list cannot be agreed upon. It is settled law that a notification must be read in its plain terms. IIIT-H undisputedly offers recognised degree programs also recognised by UGC as a deemed to be university, hence it is an educational institution its services to its students, including permitting PGSSP students to attend regular degree courses, are held exempted. Whether research funding was taxable? - HELD THAT - The focus on nexus between the funds and activity funded is not conclusive to establish that a service was provided. As regards the finding of shared IP, it is noted that the appellant s contention, supported by annexures in its appeals that, though IP was shared as per agreements, in fact it was placed in the public domain by publication by the appellant s scholars, remains unrefuted by Revenue - a single factor is not determinative of service . Considering the facts and circumstances in which the appellant carries out its research activity, and the objectives thereof, it is found that the appellant s objectives and focus are on its academic activity which is carried out through conventional classroom teaching as well as through participation of students in the research projects that form part of academic engagement in this institution. These facts have not been disputed by Revenue - service in terms of section 65B(44) of the Finance Act 1994 was not provided by the appellant to its funders for research projects - the demands of service tax made under the orders impugned in the two appeals set aside. Extended period of limitation - Suppression of facts or not - penalty u/s 78 of FA - HELD THAT - There was no suppression of facts - Hence neither extended period of limitation nor penalties under section 78 were justifiable. All penalties are set aside. The impugned order is set aside - appeal allowed.

Summary

Issues Involved:
1. Taxability of fees charged in the Post Graduate Student Status Program (PGSSP).
2. Taxability of externally funded research projects.
3. Imposition of penalties u/s 78 for alleged suppression of facts.

Summary:

Issue 1: Taxability of PGSSP Fees
The impugned order in Appeal No. ST/30082/2020 dropped the demand for service tax on fees collected from students in the PGSSP. It was held that the PGSSP only gives access to the Institute's regular courses, and the credits earned were counted towards a formal postgraduate degree. The regular courses/degrees offered by IIIT are notified degrees, exempted from service tax u/s 66D of the Finance Act 1994. The tribunal agreed with this reasoning, stating that IIIT, being an educational institution offering recognized degrees, is exempt from service tax for services to its students, including PGSSP.

Issue 2: Taxability of Externally Funded Research Projects
The appellant argued that the funds received for research projects were for academic purposes and not for providing services to the funders. The tribunal noted that the appellant, as a deemed university, conducts educational programs with a strong research focus involving students. The tribunal found that the focus on the "nexus" between funds and activity was not conclusive to establish a service. The appellant's objectives were academic, and the research projects formed part of the educational engagement. The tribunal held that the appellant did not provide a "service" u/s 65B(44) of the Finance Act 1994 to its funders and set aside the service tax demands.

Issue 3: Imposition of Penalties u/s 78
The tribunal observed that there was no "suppression" of facts by the appellant. The term "suppression" implies intentional non-disclosure with malafide intent, which was not evident in this case. The tribunal cited the Supreme Court judgment in Pushpam Pharmaceuticals Co. Vs CCE Bombay and the CESTAT order in National Remote Sensing Agency Vs CCE Hyderabad-IV, noting that the appellant, governed by bureaucrats, scientists, and academicians, had no personal interest in evading tax. Therefore, the extended period of limitation and penalties u/s 78 were unjustifiable and were set aside.

Conclusion:
The appeals were allowed with consequential benefits, and all penalties were set aside. The tribunal pronounced the order in open court on 08.04.2024.