2022 (6) TMI 584 - HC - Service Tax

Exemption from Service Tax - Allied educational activities or not - affiliating Universities under which several institutions get affiliated and the students admitted in the affiliated institutions are being tested by conducting examinations - HELD THAT - The issue raised in these writ petitions is no more res integra, at least for the present, in view of the judgment made in MADURAI KAMARAJ UNIVERSITY VERSUS JOINT COMMISSIONER, OFFICE OF THE COMMISSIONER OF GST AND CENTRAL EXCISE, MADURAI 2021 (9) TMI 516 - MADRAS HIGH COURT , where it was held that the university cannot be assessed for demanding any service tax for the services of education provided by them, which includes affiliation or other services provided for the students, faculty as well as the staff of the university. The services rendered by the petitioner Universities by way of affiliation and allied activities including the conduct of examinations, awarding of degrees, diplomas etc., and also the income they derived from rent paid by the third parties like Postal Department, Banks etc., and also to run Canteen for the purpose of Students and Staff, were considered to be allied services attached with the educational activities undertaken by the Universities and therefore they are also exempted. Since that view had been taken in the Madurai Kamaraj University case , there are no hesitation to hold that the issue raised in entirety in these two writ petitions is covered by the decision of this Court - petition allowed.

Summary

Issues:
1. Whether the petitioner Universities are exempt from service tax for certain activities and rental income.
2. Whether the decision in the Madurai Kamaraj University case applies to the present case.

Analysis:
1. The petitioners, State Universities, argued that the fees collected for affiliation and related activities, as well as rental income from immovable properties on campus, should be exempt from service tax as they benefit students and staff. They relied on a previous decision involving Madurai Kamaraj University to support their claim. The respondents, however, contended that the revenue from renting properties to third parties like banks and canteens should not be exempt from service tax. They argued that such income does not fall under educational services. The court considered both arguments and examined the nature of the activities and income in question.

2. The court referred to the Madurai Kamaraj University case where it extensively analyzed similar issues. It noted that the previous judgment had considered the exemption of rental income from immovable properties as part of educational services. The court reiterated that services provided by the Universities, including affiliation activities, conducting examinations, and rental income from third parties, were considered allied services connected to educational activities. Therefore, the court held that the activities and income in question were exempt from service tax based on the precedent set in the Madurai Kamaraj University case. Consequently, the court set aside the show cause notice and the Order-in-Original issued against the petitioners, ruling in favor of the petitioners and closing the case without costs.

By thoroughly analyzing the issues raised by both parties and applying the precedent set in the Madurai Kamaraj University case, the court concluded that the petitioner Universities were indeed exempt from service tax for the activities and income in question. The judgment provided a detailed explanation of why the exemption applied and how it aligned with the legal principles established in the previous case.