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TMI Blog2025 (3) TMI 270X X X X Extracts X X X X X X X X Extracts X X X X ..... ts RCs, and LCs towards each other are governed by an MoU; the students admitted pay the fees to the university by way of Demand Drafts which are collected by the LCs and submitted to respective RCs, who in turn sent the same after due checks to the university; a nonrefundable authorization fee, for courses mentioned in the letter of authorization, is paid by the LCs; an additional authorization fee is also payable by the LCs for courses not mentioned in the initial letter of authorization; out of the total fee collected from the students and transmitted to PTU by the RCs as above, the share of PTU, RC & LC, is approximately 28-37;18-22 and 45-50% respectively. 2. Revenue entertained a view that PTU is providing Franchise Service to the RCs/LCs, in view of the above arrangement; investigations were conducted, statements were recorded and documents were collected; on completion of the investigation, a Show Cause Notice dated 12.03.2014 seeking to recover service tax of Rs.20,22,10,037/- along with interest and penalty was issued to the appellants; the proposals of the Show Cause Notice were confirmed by the Commissioner of Central Excise, Chandigarh vi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng by PTU and RCs/LCs are not for any commercial purpose but for imparting education to the students who are either not eligible to study in the regular college or are working and are not able to devote full time to study in regular college, as the time duration in LCs is shorter than the affiliated colleges. He submits that there is no relationship of provider of service and the recipient of service between PTU and RCs /LCs; no consideration has been received by PTU from RCs / LCs for alleged provision of franchise service; the alleged service is not a declared service within the meaning of section 66 E of the Finance Act and therefore, no tax is liable to be paid by PTU. He submits that as per section 65 (105) (zze) of the Finance Act, 1994, taxable service means any service provided or to be provided to a franchisee, by the franchisor, in relation to franchise; there is no service which has been provided by PTU to RCs / LCs; RCs and LCs are simply aiding PTU in spreading of technical education to far flung and remote areas as its extended arm under the public-private partnership scheme of outsourcing of teaching facilities. 5. Learned Counsel submits further that alleged ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 51) * Tarulata Syam Vs Cit Air 1977 SC 1802 (Page 1811) * Oswal Agro Mills Ltd VS CCE 1993 (66) E.L.T. 37 (S.C.) 7. Learned Counsel submits in addition that private coaching institutes are those institutes which provide only coaching and having nothing to do with the conduct of examination, distribution of degrees / diplomas / certificates and MCs etc; the appellant be equated with the private coaching institutes which are out of the purview of the negative list of services; whereas in the facts of the present case, education imparted by LCs / RCs are nothing but conduct of degree courses etc. which leads to grant of qualifications recognized by law of the land; effect must be given to the clear meaning of words, without any amendment etc; clear meaning of the words to be given in a statute unless it leads to anomaly. He relies on * Hemraj Gordhandas Vs H.H. Dave ACCE 1978 (2) ELT J 350 (SC) * CCE Vs Parle Exports (P) Ltd 1988 (38) ELT 741 (SC) * Compack Pvt Ltd Vs CCE, Vadodara 2005 (189) ELT 3 (SC.) 8. Learned Counsel submits that the appellant is providing 'Education Service' as Courses offered lead towards grant of a recogni ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is a statutory duty and cannot be called a commercial service. 10. Learned Counsel submits that the appellant PTU hasn't granted any representational right to any RC / LC; PTU / IGKPTU has kept with itself the essential and statutory functions of a university; the RCs / LCs simply assist PTU / IGKPTU in the discharge of its core functions of imparting education and carry out the activities of teaching technical education to the students as per the guidelines laid down by PTU / IGKPTU and act as its extended arms of under the public-private partnership scheme of outsourcing of teaching facilities to achieve the goal of spreading technical education to the last remote corners of India; the essential and statutory functions of university rests with itself; RCs / LCs haven't been granted with the representational rights at all; in no way, the money retained by Appellant out of fee received (except to the extent of share of LCs / RCs as per agreement being returned to LCs / RCs) from the students as academic fee could be treated as consideration received towards Franchise service as the said amount hasn't been paid by LCs / RCs but by the students; LCs / RCs have sim ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed to be Franchise Services; learned Commissioner categorically held that they do not fall under Negative List. He submits that the contention of the appellants that they are not engaged in any commercial activity is incorrect; learned Commissioner held that the LCs/ RCs have been established for generating income in addition to income flowing through affiliated colleges; he relies on Hon'ble Madras High Court's decision in the case of Manonmaniam Sundaranar University - 2022 (58) GSTL 27 (Mad.) and Pradyumna Steel Ltd. - 1996 (82) ELT 441 (SC). 13. Learned Authorized Representative for the Department submits on the issue of constitutional protection under Article 243W of the Constitution of India read with Sl.No.13 of the 12th Schedule that the Adjudicating Authority has clearly dealt the issue in the impugned order. He relies on Hon'ble Supreme Court's decision in the case of Water-Supply & Sewerage V.R. Rajappa & Others - 1978 SCR (3) 207 (SC). As regards the appellant's argument that they are rendering Educational Service which is exempt, learned AR relies on the Tribunal's decision vide Final Order No. A/53817/2015/CU (DB) dated 23.12.2015 and submits that Hon'ble Tribu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... exemption under Entry No. 39 of opening Para of Notification No. 25/2012-ST, dated 20.06.2012 is applicable to service provided; in view of clarification by CBIC, post 2012 Budget, under the Educational Guide', services are classifiable as an Education Service; there being an Education Service involved, the same service cannot be classified into another service; Educational Service is a more appropriate entry for classification than Franchise Service; the appellant not being engaged in a commercial activity is out of the net of service tax; the appellant has given any representational right to RCs/LCs, to exploit the same commercially, so as to be called a franchiser; if at all there is any service rendered, it is by the RCs/LCs to the appellant in the discharge of constitutional responsibility and the appellant is not rendering any service to RCs/LCs; demand of the service tax was made on the amount more than what has accrued to the appellant; cum duty benefit is applicable and that no penalty can be levied as the issue is interpretational in nature. 16. We find that the questions that need to be answered so as to arrive at a conclusion are: (i). whether the s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ection 4.2 of the MoU, which are as under:- (i) The RC will coordinate with the PTU on the one hand and the LC on the other hand in all matters as required by the PTU from time to time. (ii) The RC will provide logistic support to the PTU and LCs as per norms of the PTU to carry out the objects of and obligations under this MoU (iii) Provide information about each LC to the PTU and assist in its proper monitoring. (iv) In case any LC is closed by PTU then it would be the liability of the RC to assist the PTU to ensure that students do not suffer and their studies are conducted alternatively, in PTU's another authorized LC with the zone allotted to RC. Before officially closing the center, all student record files and "No Dues" must be submitted by RC to the University. (v) RC will be responsible for conducting the marketing/advertising campaigns & strategies in print and electronic media for admissions and brand promotion of the courses of PTU in coordination with PTU (vi) To assist the PTU in the skill enhancement and quality control of the entire system. (vii) To maintain document and data control as well as authentic student data in prescribed formats and to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... persions on or discredit the PTU, and the decision of PTU ordering the withdrawal of the advertisement or removal of the hoarding shall be final and binding on the RC/LCs. (xxiii) The RC may take part in actively, with the PTU in image building exercises and must organize at least one public functions, seminar, counseling session in their region each semester (xxiv) The RC agrees to provide expertise for infrastructure, equipments, teaching and training necessary for the course as and when called to do so by the PTU in respect of any LC within the Zone allotted to the RC (xxv) The RC shall ensure that the learning imparted to the student covers comprehensively the entire syllabus, as prescribed by the University, within the specified time frame and strictly as per norms laid down or to be laid by the PTU (xxvi) The RC will have to perform any other functions or assist the PTU in the proper functioning of the LCs as and when called to do so by PTU (xxvii) The RC agrees to pay the necessary fee i.e. as decided by the PTU for each region/zone allotted to the RC (xxviii) The RC will ensure that all the various LCs under the zone comply strictly with their obligations to the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ckground, it is required to examine whether the appellant-university is providing education service or rendering franchise service to the LCs. 19. We find that the appellants are established under an Act of State Legislature; the appellants submit that they are not engaged in any commercial activity and they are working in the field of education, discharging the functions of the Government/ Municipalities as per Article 243W of the Constitution of India read with Sl. No. 13 of the XII Schedule of the Constitution. It will be beneficial to have a look at the Statutory Provisions under Service Tax Act, 1994 in order to see whether the activity undertaken by the appellants falls under the purview of service tax w.e.f. 01.07.2012. Section 66D provides Negative List of services and Section 66D(l) mentions the services by way of (ii) education as part of a curriculum for obtaining a qualification recognized by any law for the time being in force. We find that Negative List includes services in education as part of a curriculum for obtaining a qualification recognized by any law. The appellant being established by the authority of an Act of State Legislature are themselves deciding ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dia, Extraordinary, Part II, Section 3, Sub-section (i) vide number G.S.R. 467 (E), dated the 20th June, 2012, namely :- (1) In the said notification, in the opening paragraph,- (iii) for entry 9, the following entry shall be substituted, namely :- "9. Services provided, - (a) by an educational institution to its students, faculty and staff; (b) to an educational institution, by way of,- (i) transportation of students, faculty and staff; (ii) catering, including any mid-day meals scheme sponsored by the Government; (iii) security or cleaning or house-keeping services performed in such educational institution; (iv) services relating to admission to, or conduct of examination by, such institution;"; (2) In the said notification, in paragraph 2 relating to definitions, - (a) clause (f) shall be omitted; (b) after clause (o), the following clause shall be inserted, namely: - '(oa) "educational institution" means an institution providing services specified in clause (l) of section 66D of the Finance Act, 1994 (32 of 1994).";" 20. In view of the Statutory Provisions of Section 66D a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... irtue of the said power, Government has issued a Notification No. 25/2012S.T., dated 20th June, 2012, exempting certain services. Sl. No. 9 thereof reads as follows: "Services provided to an educational institution in respect of education exempted from service tax, by way of,- (a) auxiliary educational services; or (b) renting of immovable property;". As defined in the said notification, "auxiliary educational services" means any services relating to imparting any skill, knowledge, education or development of course content or any other knowledge-enhancement activity, whether for the students or the faculty, or any other services which educational institutions ordinarily carry out themselves but may obtain as outsourced services from any other person, including services relating to admission to such institution, conduct of examination, catering for the students under any mid-day meals scheme sponsored by Government, or transportation of students, faculty or staff of such institution. 3. By virtue of the entry in the negative list and by virtue of the portion of the exemption notification, it will be clear that all services relating to education are exempt from service tax ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... description of "commercial training or coaching centre" defined under Section 65(27) of the Act, which is subject to tax under Section 66 read with Section 65(105)(zzc) of the Act. In order to appreciate the arguments of the petitioners, the relevant definition clauses have to be gone into and for easy reference sub-clauses 26 and 27 of Section 65 are extracted hereunder : 65. Definitions : .............................. (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 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 pre-school coaching and training centre or any institute or establishment which issues any certificate or diploma or degree or any educational qualification recognized by law for the time being in force. Even though petitioners have referred to the dictionary meaning of "commercial training" and contended that imparting of coa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e definition clauses includes not only institutes or establishments issuing certificates or diplomas or degrees, but will cover any institution issuing any other "educational qualification" recognized by law for the time being in force. Petitioners are right in their contention that affiliated aided or self-financed colleges are not awarding any degree or diploma but the Universities to which those colleges are affiliated only are issuing degrees or diplomas. However, under the University Education Regulations, certain degree or diploma examinations can be written only after the students undergo a "course study", which requires minimum attendance in lecture classes and practical training in an affiliated college or institution. The distinction between the petitioners and the affiliated colleges is that only affiliated colleges and institutions can conduct course-study wherever required to qualify the students to write the University examination. Students studying in the parallel colleges are private students who are taking private coaching in subjects where course-study is not required under the Examination Regulations of the University to write the examinations. Such courses are i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... able under Section 66 (105)(zzc), is discriminatory and violative of Art. 14 of the Constitution of India. It is a settled position by series of decisions of the Supreme Court that taxing provisions should stand the test of constitutional validity with reference to Art. 14 of the Constitution of India also; see Federation of Hotel And Restaurant v. Union of India, (1989) 3 SCC 634 and East India Tobacco Co. Ltd. v. State of A.P., AIR 1962 SC 1733. In order to appreciate the challenge against levy of service tax as discriminatory and violative of Art. 14 of the Constitution of India, the effect of levy has to be gone into. Counsel for the petitioners rightly contended that there is no provision in the Act prohibiting collection of service tax and serviceprovider is therefore entitled to collect service tax which in this case is from the students. Even if prohibition is introduced against collection of service, fee has to be increased without which the heavy burden of 10% tax cannot be paid is the case of the petitioners. In either case, the burden of service tax on education falls on the student community. It is in this context that the validity of the provision has to be cons ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on 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 degrees obtained by them are one and the same. So far as the teaching staff rendering coaching rendered is concerned, it is common knowledge that appointments in private colleges whether aided or self-financed are made at the choice of the managements and not by relative merits of the applicants. In fact counsel for the petitioners rightly pointed out that those who start parallel colleges are mostly those who by virtue of their weak financial position are not able to secure jobs in regular colleges and they employ equally unfortunate ones as members of teaching staff. In other words, there may not be any qualitative difference in the coaching rendered in parallel colleges and in regular colleges. Even though counsel for the respondents submitted that by virtue of notification fixing the threshold limit of Rs. 4 lakhs-turnover for attracting service tax liability only big institutions are liable. I do not think any distinction can be drawn among parallel colleges based on turnover, because, the b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... x for the services rendered by petitioners, their members and other parallel colleges in Kerala. 23. We find that Authority for Advance Ruling, New Delhi in the case of Choice Estates and Constructions Ltd. - 2016 (45) STR 480 (AAR) held that Service Tax is not leviable on the fees collected from the students to the extent it is covered under the Negative List in terms of Section 66D(l) of the Finance Act, 1994. The Authority finds as follows: 14. Applicant submits that both the applicant and Choice Foundation are jointly providing education service which is exempted from payment of Service Tax by virtue of being mentioned in the Negative List; that revenue's share received by both parties being Revenue's share for provision of an exempted service cannot be taxed separately. It is to be observed that applicant shall construct building(s) and undertake infrastructural development of education institution. Choice Foundation is responsible for overall management and operation of the Educational Institution from academic perspective. 15. Section 66B ibid inter alia envisages that Service Tax shall be levied on the value of all services, other than those services specified in the N ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... been quoted hereinabove. 13. While giving such explanation for the term "service", the legislature also thought it fit to introduce two sections, namely, Sections 66B and 66D. 66B is a charging section which makes it clear that, there shall be levied a tax at the rate of 12% on all services other than those specified in the negative list. Therefore, what are all the services provided under the negative list are taken away from the purview of Service Tax net. The exempted services as provided under Section 66D Clause (l), alone has been quoted hereinabove. 14. Under Clause (l) there are three categories of services by educational institutions. One is pre-school to higher secondary education service, second is education as a part of curriculum for obtaining a qualification recognised by law for the time being in force and the third one is education as a part of an approved vocational course. This Court feels that, sub-clause (2) of Clause (l) of Section 66D is relevant for the present issue, the reason being that, whatever be the education as a part of curriculum for obtaining a qualification recognised by law for the time being in force means whatever be the Degree, Diploma, PG ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... purview. 18. Not stopping with that, it goes further saying that, an educational institution can render services by way of transportation of students, transportation of faculty and transportation of staff. Like that it further goes, like, catering including any mid-day meal scheme sponsored by the Government. It further expands to security or cleaning or housekeeping services performed in such educational institutions. It also expands to services relating to admission or conduct of examination by such institutions. The word 'such institution' according to the revenue is nothing but the institution which impart education and conduct examination i.e., affiliated college and not the university. But, in the considered view of this Court, that kind of interpretation is not possible, in view of the expanded meaning that has been given and the explanation given, which shows the intention of the Central Government who issued the mega exemption notification, under which, we can understand that, what are all the allied services that shall form part of the educational services, which may be services provided to the staff, services provided to the faculty, expanded services like transportat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ble in the words "conduct of examination". The reason being, the very prime function of the petitioner university under the statute, under which it has been created, under Section 4(4) of the University Act, which has been quoted herein above, is to hold examinations and to confer degrees, titles, diplomas and other academic distinctions. Therefore, holding or conducting an examination is primarily a job of the university and the colleges affiliated to the university are only facilitators. Therefore, examinations are not conducted directly by the colleges, it is being conducted by the university, but the facilitator is the college. Therefore, the word "conduct of examination by such institution" means, conduct of examination by the university and the college and not by the college alone. The examination is the examination of the university, for which, facilitation is given by the college, wherein the examinations are conducted and ultimately, valuation is to be done by the university and marks are awarded and degree is conferred by the university. Therefore, it is the university, where, the facilitator is the college, where, the examination is being taken place and therefore, the w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for the services being provided by the petitioner university cannot be approved. 24. Insofar as the second part of the claim made by the respondent university against levying the service tax on the services such as renting of immovable property for the purpose of bank, post office, canteen etc., as we stated above, these are all allied services of education which are also included in the purview of educational services, in view of clause (9), which has given an expanded meaning of educational services which includes the services to be provided not only to the students, but also faculty and staff. In this category, the faculty and staff of the university are getting whatsoever services by way of transportation, boarding and lodging etc., are also to be included in the meaning educational services being provided by the educational institutions i.e., the petitioner herein which can also be exempted from the purview of service tax. Therefore, that aspect of assessment and demand made for levying service tax on the services provided by the petitioner institution under the heading renting of immovable property also, in the considered view of this Court, cannot be sustained. Therefore, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd the term "franchisee" shall be construed accordingly; (105) "taxable service" means any service provided or to be provided, (zze) to a franchisee, by the franchisor in relation to franchise;" 26. We find that the definition of "Franchise" as above involves trademark, service mark, trade name or logo (or any such symbol); learned Counsel for the appellants submits that the expression "any such symbol" should be read with the preceding words and should not be extended beyond. We are in agreement with the same following the principal of ejusdem generis, we find that the name of the university being used by LCs/ RCs cannot be taken to be a trademark, service mark, trade name or logo (or any such symbol). A reading of the MOU does not give an understanding that it is Franchise Agreement. We find force in the argument of the learned Counsel for the appellants that even if it is a Franchise Service, it would be exempt in terms of the Notification discussed above as they are rendered in relation to education. 27. We find that Revenue heavily relies on the judgment of the Tri ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... facilitated their study in the Coventry University and charged fee from them which were subsequently transferred to Coventry University. This course is parallely recognized by the Punjab Technical University as stated above. Accordingly, we are of the view that the main appellant is providing the educational services approved by the various Universities recognized under law for the AITC approved course. The fact that some of the students are being in the Coventry University cannot be classified as the franchise services as proposed by the Revenue, the franchise service is defined under Finance Act as under (sic). We also find that the service by the way of education as a part of recognized university recognized by law is taxable neither taxability during the positive list nor under the negative list which has been rightly pointed out by the Ld. Advocate. It is also emanates from the decision of the Hon'ble High Court in Malappuram Distt. Parallel College Associates (supra). 28. We find that learned Adjudicating Authority, after extracting the clauses of the MOU, comes to the conclusion that LCs/ RCs perform all such activities being performed by the PTU such as making advertiseme ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ustified at all. The agreement will have to be read as a whole and precisely, that is done by the Tribunal in the impugned order. Its discussion in para 4, therefore, meets our approval. Once the matter is approached in a holistic manner and looked as such, then, we do not find any perversity or error of law apparent on the face of the record in the impugned order. Consequently, the appeal fails and it is dismissed. There would be no order as to costs. 29. We find that the entire proceedings are based on a grave misconception on the part of Revenue. There is no clarity in the approach of the department vis a vis the serviced provider, service rendered and the consideration in the impugned case. In case the appellant-university is alleged to have rendered any service, say Franchise Service to the LCs/ RCs, they should have received some consideration towards the same. In fact, the university is not getting any consideration from the LCs/ RCs. It is the appellant-university who are paying the LCs/ RCs by way of a percentage of the revenue. Only because the LCs are collecting the fees, in the form of Demand Drafts drawn in favour of the "Registrar" of the appellant-university, from t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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