Affiliation and Other Allied Services Provided By University Within the Ambit Of Educational Services, Exempted from the Purview of Service Tax: Madras HC
The Madras High Court, in Madurai Kamaraj University v. Joint Commissioner-W.P. No.20502 of 2019-set aside the impugned order and held that the services provided by a university which includes affiliation or other services provided to students, faculty as well as staff of the university fall within the ambit of educational services and are thus are exempt from the purview of service tax.
A single-judge Bench of Justice R Suresh Kumar ruled:
“Therefore, throughout the regime between 2012 and 2017, the educational institution had been provided with the exemption as has been stated in various provisions of the Act as well as the mega notification, followed by the amended notification and during all these periods, these institutions including the universities can very well enjoy the exemption. Accordingly, the stand taken by the revenue for levying service tax for the services being provided by the petitioner university cannot be approved.”
The petitioner-a state university was established as an affiliating university by an Act of state legislature called Madurai Kamaraj University Act, 1965 under which several colleges in the territorial jurisdiction got affiliated and, in those colleges, as well as the colleges run by the University itself, the prime function of the university is to hold examinations and to confer degrees, titles, diplomas etc.
The dispute that arose was whether such services of providing affiliation by the petitioner University can be treated as a taxable service within the meaning of service tax as provided under the 1994 Finance Act. The respondents claimed that the revenue made by the petitioner for providing affiliation and other allied or related services should be treated as taxable service.
However, the University by invoking the negative list clause provided under Section 66-D of the Finance Act and also the subsequent mega exemption notification and also the consequential notification No.9/16, as during the relevant period i.e., from 01.04.2013 to 30.06.2017, contended that they are exempted from the purview of service tax. All these legislations and the notification issued by the Central Government specified that the services rendered by educational institutions from pre-primary to college level and even postgraduate and professional level are completely exempted from the purview of service tax.
The respondent rebutting the argument stated that the petitioner institution is not an educational institution directly imparting education to the students. In fact, it is only an affiliating body. The process of granting affiliation to educational institutions and the allied activities are separate services provided by the university and cannot be treated as a part of educational services. Thus, the University should not be exempted from the purview of service tax.
Perusing the above arguments, the judge remarked:
“…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 transportation, boarding and lodging and other allied activities enabling the students as well as the staff and faculty to come to the institution and getting imparted the education.”
In conclusion, the court ruled that the petitioner University-an educational Institution is rightfully exempted from the levy of service tax as per the Central Government legislation and the various notifications. The court also held that even allied services provided by the University fall within the ambit of educational services which are exempt from service tax.
Nidhi Nair | Research Intern | EduLegaL