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TMI Blog2014 (9) TMI 385X X X X Extracts X X X X X X X X Extracts X X X X ..... tion 65(27) alone are subjected to the tax liability. Therefore, since Parallel Colleges, which are involved herein are also conducting classes and preparing the students for appearing the very same University examinations like regular students, which fact is not disputed and has been practically agreed to in the counter affidavit filed by the respondents in the writ petitions also, we find no distinction between these two classes of students. Merely because some of the students who are less fortunate have found themselves in Parallel Colleges, that cannot lead to a situation where they have to bear the burden of Service Tax as rightly found by the learned Single Judge. The distinction provided in the section is not based on any other characteristics like the curriculum, period of study, infrastructure provided by the colleges, the way in which fees are collected in regular colleges and Parallel Colleges, etc. The legislative policy is clear from Section 65(27) itself. Therefore, we will have to find out, the real object of the provision and the impact of the same. Therefore, the plea raised by the learned counsel for the appellants that students undergoing regular course of stu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Kerala and it cannot be treated as declaring the Section unconstitutional, in so far as any other category of educational institution or training centre is concerned. Thus, the respondents in the writ petitions were prohibited from demanding registration or service tax for the services rendered by the writ petitioners, their members and other Parallel Colleges in the State of Kerala. 3. We heard the learned Standing Counsel Shri John Varghese and Shri Thomas Mathew Nellimoottil, learned Standing Counsel for the appellants in the appeals. Heard, Shri P.K. Vijayamohanan, Shri P.C. Joseph Pazheparambil, Shri S.A. Razack learned counsel appearing for the respondents. 4. Learned Standing Counsel Shri John Varghese raised the following contentions. It is submitted that as far as the levy of tax is concerned, it is up to the Central Government to introduce Service Tax in respect of any specified items of service and it is beyond the pale of judicial review. The learned Counsel submitted that it is well settled by the decisions of the Apex Court that in economic matters, there is sufficient play in the joints and therefore, the Parliament is free to impose tax in respect of an ent ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mercial nature and therefore, there is no legal embargo in collecting Service Tax. 7. These arguments have been met by the learned counsel for the respondents by pointing out that any legislative measure will have to come within the constitutional scheme and it should not be violative of Article 14 of the Constitution of India. It is submitted that this Court has ample power to consider whether the introduction of the measure is arbitrary and discriminatory. The learned counsel for the respondents also relied upon various decisions of the Hon ble Supreme Court to contend that the scope of judicial review is not limited and this Court will be free to examine whether the measure can be supported in the light of the provisions of the Constitution of India. 8. The learned counsel for the respondents explained that the colleges run by the respondents are presenting students for various examinations to acquire the Degrees and other qualifications granted by the various Universities. The colleges under the regular stream are also allowing the students to appear for the various University examinations which is the facility granted by the Parallel Colleges. They are not directly confe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ives the meaning of commercial training or coaching centre . The above provisions are extracted below : 65(26): commercial training or coaching means any training or coaching provided by a commercial training or coaching centre; (27) commercial training or coaching centre means any institute or establishment providing commercial training or coaching for imparting skill or knowledge or lessons on any subject or field other than the sports, with or without issuance of a certificate and includes coaching or tutorial classes but does not include preschool coaching and training centre or any institute or establishment which issues any certificate or diploma or degree or any educational qualification recognised by law for the time being in force; (105) taxable service means any service provided or to be provided :- (zzc) to any person, by a commercial training or coaching centre in relation to commercial training or coaching; [Explanation:- For the removal of doubts, it is hereby declared that the expression commercial training or coaching centre occurring in this sub-clause and in clauses (26), (27) and (90a) shall include any centre or institute, by whatever name ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 13. In the counter affidavit filed in W.P.(C). No. 3617/2005 by the respondents (appellants in W.A. 926/2006) it is stated in para 3 as follows : ..Though the services provided by regular colleges and parallel colleges are identical in nature, both the institutions are functioning on certain criteria/conditions. Private tutorial colleges are not governed by any law. Commercial Coaching is taxable due to the reason that it is on commercial basis. Since regular colleges (aided or unaided) are affiliated to University/Board, such institutions do not come into the ambit of Service Tax. 14. In the counter affidavit filed by the respondents in W.P.(C). No. 28334/2004 from which W.A. No. 680/2006 arises, it is stated in para 2 that the term parallel college is used to denote those institutions which give coaching to private students who appear for the various courses offered by Universities/Boards . It is further stated in para 5 that the parallel colleges are distinct from regular unaided institutions, which are recognised by the Government or are affiliated to the Universities as per relevant statutes. The regular unaided institutions also come under the purview of Sectio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in parallel colleges. It is also well-known fact that the interior and remote areas of the State, poor students even if eligible for admission in regular colleges cannot afford out-station-study and they will naturally go to parallel colleges. Accordingly, it was held that in most cases, students landing in Parallel Colleges are less fortunate ones who are compelled to join Parallel Colleges for economic reasons. They are also eligible for bus fare concession as per the order of the State Government and finance benefits are provided to SC and ST community students studying in parallel colleges also and thus, the State Government also treats the students in affiliated colleges and parallel colleges as part of the same class. 17. It was also held that in any case there cannot be any distinction between students undergoing private study in the parallel colleges and those undergoing course study in the regular colleges, so long as the curriculum, the examinations written and the degree obtained by them are one and the same. 18. Finally, it was held that levy of service tax for services rendered by parallel colleges which indirectly falls on the students, but by simultaneously pro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rence to composition, use or value. In the other decisions cited by learned counsel Shri John Varghese, of the U.S. Supreme Court, the very same principles have been reiterated. The next decision relied upon is that of the Apex Court in Shri Ram Krishna Dalmia s case (AIR 1958 SC 538), wherein it has been held that a law may be constitutional even though it relates to a single individual, if, on account of some special circumstances or reasons applicable to him and not applicable to others, that single individual may be treated as a class by himself. It was held therein further that there is always a presumption in favour of the constitutionality of an enactment and the burden is upon him who attacks it to show that there has been a clear transgression of the Constitutional principles. 21. The law is well settled by a series of judgments of the Apex Court that even in the matter of taxing statutes, it will have to satisfy the test under Article 14 of the Constitution of India. Even though learned Standing Counsel for the appellants went on to the extent of submitting that any legislative measure, i.e. in economic matters or tax matters is beyond the pale of challenge, we ca ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd Budhan Choudhry v. State of Bihar [AIR 1955 SC 191 : (1951) 1 SCR 1045 : 1955 Cri LJ 374]. However, the legislature enjoys a greater latitude for classification in the field of taxation (see : Steelworth Ltd. v. State of Assam [1962 Supp (2) SCR 589 : (1962) 13 STC 233], Gopal Narain v. State of U P. [AIR 1964 SC 370] and Ganga Sugar Corpn. Ltd. v. State of U.P. [(1980) 1 SCC 223 : 1980 SCC (Tax) 90 : AIR 1980 SC 286]). No legislation can be declared to be illegal, much less unconstitutional on the ground of being unreasonable or harsh on the anvil of Article 14 of the Constitution, except, of course, when it fails to clear the test of arbitrariness and discrimination which would render it violative of Article 14 of the Constitution. (See : Steelworth Ltd. (1962 Supp (2) SCR 589 and McDowell and Co. (1996) 3 SCC 709)) 23. In the Constitution Bench decision of the Apex Court in Raja Jagannath Baksh Singh s case (AIR 1962 SC 1563), while considering whether the court can strike down a legislative measure as violative of Article 14 of the Constitution of India, it has been held thus in para 16: 16. A taxing statute can be held to contravene Art. 14 if it purports to impose ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the existing structures on the lands proposed to be acquired. There, the policy of the Government to exclude lands having structures thereon from acquisition, was under challenge under Article 14 of the Constitution. It was held that the provisions are not reasonable and are arbitrary and discriminatory. This is relied upon to contend that in the present case also no material has been placed to show the basis of classification. 27. The State of Kerala v. Haji K. Haji K. Kutty Naha and Others (AIR 1969 SC 378) is the decision of the Apex Court where the constitutional validity of Kerala Building Tax Act, Section 4 and Schedule was considered. It was held that the provision will go against the Constitution and is ultra vires. In para 3 it was held that if the Act infringes the provisions of Article 14 of the Constitution, it must be struck down as unconstitutional. Reference was made to the earlier decision of the Apex Court in K.T. Moopil Nair v. State of Kerala [(1961) 3 SCR 77]. 28. Kerala Hotel and Restaurant Association and Others [(1990) 2 SCC 502] is another decision of the Apex Court relied upon by Shri P.K. Vijayamohanan, learned counsel for the respondents. T ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e within the meaning; (b) it includes coaching or tutorial classes; (c) It does not include: (i) pre-school coaching and training centre; and (ii) any institute or establishment which issues any certificate or diploma or degree or any educational qualification recognised by law for the time being in force. 32. We are told that parallel colleges are sought to be included under the first limb of the above section on the plea that they are having tutorial classes. But it is clear that in the light of the stand taken in the counter affidavits filed by the appellants that they have understood parallel colleges as having the similar system like regular colleges wherein students are appearing for the same University examinations, and get the same certificates and they are also imparting similar education to the needy students. To attract the exclusion clause under Section 65(27) it should be one which issues any certificate or diploma or degree or any educational qualification recognised by law for the time being in force. Therefore, a distinction is drawn on the basis of the factors concerning issuance of certificate or diploma and the recognition of the same by any law for the time b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l come within the expression commercial training or coaching centre . The same is also important while considering the sustainability of the arguments raised by the learned counsel for the appellants. We are, therefore, of the view that such a distinction as sought to be drawn by the learned Standing Counsel for the appellants, cannot be imported into the provision. 35. Therefore, what is important to consider is that if the institution is one wherein students are being prepared for acquiring qualification, certificate or diploma or degree which is recognised by law in force, then the same will come within the second limb of the exclusion clause under Section 65(27). The important distinction is thus drawn based on the fact of recognition by law for the time being in force for the certificate, diploma or degree. It is well-known that as far as parallel colleges and self financing colleges in the State are concerned, they are preparing the students for acquiring University degrees, diploma certificate, etc. which is an admitted fact by the respondents also in their counter affidavit, the portions of which we have already extracted. 36. Apart from the same, in the first limb o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... te students are having no distinction between them. The main reason for many of the students not joining regular courses is economic and limited number of seats available in the affiliated colleges. These aspects are well-known. It is in that context, we will have to judge whether the conclusion that the students landing in parallel colleges are less fortunate ones, who are poorer to one joining regular courses. We find no reason to take a different view on those aspects. As far as the State are concerned, such colleges are established because of various factors like, catering to the needs of students, who cannot be accommodated in the regular colleges. Large number of students are coming out every year after passing Plus Two examinations and it is well-known that there are no sufficient facilities and number of seats for all of them to get admission in the regular colleges, are not there. 39. The crucial aspect is whether, there is an intelligible differentia in the classification sought to be introduced. These students form a homogeneous class. The coaching centres which come within the first limb of the Section 65(27) alone are subjected to the tax liability. Therefore, since ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ter, we find no reason to interfere with the decision of the learned Single Judge. We further clarify that those institutions or colleges, namely, parallel colleges, who are parties before this Court, who are preparing students to obtain certificates or diploma or degree or any other educational qualifications, recognised by law will not be liable to pay Service Tax under Sections 65(26) and 65(27) read with Section 65(105)(zzc) of the Act. The Department will be free to find out the credentials of other institutions or coaching centres as to whether they will come within the first limb of Section 65(27). Such individual cases will have to be dealt with accordingly and in the proper legal manner, as the learned Single Judge has made clear that the judgment is not to be treated as declaring the Section unconstitutional insofar as any other category of educational institution or training centre is concerned. We are not making a Universal declaration in respect of all institutions in whatever manner they are being conducted. The declaration made by this Court in the Judgment will be clarified to that extent and we further make it clear that the declaration will apply to the parties to ..... X X X X Extracts X X X X X X X X Extracts X X X X
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