2024 (3) TMI 343 - AT - Service Tax

Levy of service tax - affiliation fees collected by the appellant is towards rendering of service - scope of section 66D of Chapter V of the Finance Act, 1994 - HELD THAT - The Karnataka High Court has gone into the leviability of service tax on the affiliation fee collected by the universities in the case of M/S. RAJIV GANDHI UNIVERSITY OF HEALTH SCIENCES, VERSUS PRINCIPAL ADDITIONAL DIRECTOR GENERAL DIRECTORATE GENERAL OF GST INTELLIGENCE BENGALURU 2022 (8) TMI 707 - KARNATAKA HIGH COURT and have concluded that important education by university buy itself are through affiliated colleges by collecting an affiliation fee has to be considered as the service by way of education as a part of curriculum for obtaining qualification recognized by any law for the time being enforced and that the said service rendered by universities fall under the exemption contained under Clause I (of section 66D of the Act). The High Court of Karnataka has considered the provision of service tax vis- -vis important education in the new Service Tax Regime that is w.e.f. 01.07.2012. The impugned show cause notice to be issued covers the period 2014-2015 to 2017-2018 which squarely falls under the negative list regime. Therefore, there are no hesitation whatsoever to conclude that the impugned order cannot be sustained and is liable to be set aside. The affiliation fee collected by the appellants from the affiliated colleges is to be considered for providing the service to institution in relation to education, which is exempt by virtue of sub-clause (ii) of Clause L of section 66D of the Finance Act, 1994. Moreover as per Entry No. 25/2012-ST dated 20.06.2012, as amended by Notification No. 6/2014-ST dated 11.07.2024 services provided by an educational institution to its students, faculty and staff as well as certain services received by educational institution are exempt - In the instant case, the appellant themselves are a university and the services, if any, provided by the appellants and received by the affiliated colleges which are none other than educational institutions. This should leave no scope for any doubt as to the exigibility of the services rendered by the appellant to the affiliated colleges in consideration to application fee collected. The impugned order is not sustainable and the same is set aside - appeal allowed.

Summary

Issues:
The issues involved in the judgment are the leviability of service tax on affiliation fees collected by a university and whether the services provided to affiliated colleges are taxable under the Finance Act.

Leviability of Service Tax on Affiliation Fees:
The appellant, a university, collected affiliation fees from various colleges/institutes. The revenue claimed that these fees were for services rendered and demanded service tax. The impugned order confirmed the demand. The appellant argued that the issue had been decided in their favor by the High Court of Karnataka in a similar case. The Tribunal noted the Karnataka High Court's decision in the case of Rajiv Gandhi University of Health Sciences, which held that affiliation fees collected by universities for providing education through affiliated colleges fall under the exemption for services by way of education. The Court emphasized that universities, by granting affiliation, are providing educational services as part of the curriculum for obtaining qualifications recognized by law. This activity was considered exempt from service tax under the Finance Act.

Taxability of Services Provided to Affiliated Colleges:
The Tribunal observed that the appellant, as a university, decides the curriculum, conducts examinations, and awards degrees to students, including those in affiliated colleges. The affiliation fees collected from these colleges were deemed to be for providing services in relation to education, which is exempt under the Finance Act. The Tribunal also referred to Entry No. 25/2012-ST, which exempts services provided by educational institutions to students, faculty, and staff. Since the appellant university and the affiliated colleges are educational institutions, the services provided by the appellant to these colleges were considered exempt from service tax. Therefore, the impugned order demanding service tax on services provided to affiliated colleges was set aside, and the appeal was allowed.

Conclusion:
The Tribunal concluded that the impugned order demanding service tax on affiliation fees collected by the university from affiliated colleges was not sustainable. The order was set aside, and the appeal was allowed with consequential relief, if any, as per law. The decision was based on the exemption for services by way of education under the Finance Act and the nature of services provided by the appellant university to the affiliated colleges.