Custom, Excise & Service Tax Tribunal
Mody Education Foundation vs Jodpur on 15 May, 2023
Author: Dilip Gupta
Bench: Dilip Gupta
CUSTOMS, EXCISE & SERVICE TAX APPELLATE TRIBUNAL
NEW DELHI
PRINCIPAL BENCH
SERVICE TAX APPEAL NO. 50636 OF 2017
(Arising out of Order-in-Original No. JOD-EXCUS-000-COM-0057-16-17 dated
17.01.2017 passed by Commissioner of Central Excise, Jodhpur)
Mody Education Foundation ...Appellant
Laxmangarh-332311,
Sikar, Rajasthan
versus
Commissioner of Central Excise, ...Respondent
Jodhpur
APPEARANCE:
Shri B.L. Narasimhan and Ms. Poorvi Asati, Advocates for the Appellant
Shri Harsh Vardhan, Authorized Representative for the Department
CORAM:
HON'BLE MR. JUSTICE DILIP GUPTA, PRESIDENT
HON'BLE MS. HEMAMBIKA R. PRIYA, MEMBER (TECHNICAL)
Date of Hearing: 03.05.2023
Date of Decision: 15.05.2023
FINAL ORDER NO._50657/2023
Justice Dilip Gupta:
M/s. Mody Education Foundation1 (earlier Known as M/s. Mody
Institute of Education & Research) has filed this appeal to assail the
order dated 17.01.2017 passed by the Commissioner of Central
Excise, Jodhpur2.
2. The appellant is a society registered under the Societies
Registration Act, 1860. It runs a boarding school called „Mody School‟,
located at Laxmangarh in Sikar, Rajasthan, for girls from third to
twelfth standard. The school is affiliated to the Central Board of
1. the appellant
2. the Commissioner
2
ST/50636/2017
Secondary Education3. It has an accreditation from the National
Accreditation Board for Education and Training. The school is also
affiliated to the International Baccalaureate of Geneva, Switzerland
for IB Diploma Programme for Classes XI and XII.
3. The appellant, with respect to the boarding school, receives
hostel fees from the students, in addition to the tuition fee and other
charges. A small portion of the students are day scholars who do not
opt for the hostel facility and thus, no hostel fees is collected from
such day scholars.
4. The appellant has also rented out a building to M/s. Mody
University of Science and Technology4 and has received rent for the
period 2014-15. The appellant has also provided transportation
services to its students and staff. The appellant has also received
goods transport agency services5.
5. An investigation was initiated against the appellant whereafter
it was observed that the appellant had failed to pay service tax in
respect of various services provided/received by it.
6. A show cause notice dated 20.09.2016 was, therefore, issued to
the appellant proposing a demand of service tax of Rs.
02,02,01,879/- with interest and penalties. The allegations made
against the appellant in the show cause notice are as follows:
(i) The hostel services provided by the appellant to the
students, being an auxiliary education services, was not
exempted under Serial No. 9 of the Notification dated
20.06.2012 during the period 01.04.2013 to
10.07.2014 and thus, taxable;
3. CBSE
4. Mody University
5. GTA Services
3
ST/50636/2017
(ii) The hostel services are not naturally bundled with
education services;
(iii) The hostel services are not in the nature of renting of
residential dwelling for use as residence covered under
section 66D(m) of the Finance Act, 19946;
(iv) The appellant is liable to pay service tax on the rent
received from Mody University from July 2014 to March
2015;
(v) The transportation services provided by the appellant to
the students, faculty and staff, being an auxiliary
education services is leviable to service tax during the
period 01.04.2013 to 10.07.2014;
(vi) The appellant is liable to pay service tax on the GTA
services received by it during the period April 2014 to
March 2015; and
(vii) The appellant had intentionally and wilfully suppressed
the fact of provision and receipt of taxable services by
it from the Department and so the extended period was
invokable.
7. The appellant filed a detailed reply to the above show cause
notice on 10.11.2016.
8. The Commissioner by order dated 17.01.2017 confirmed the
demand of Rs. 01,98,20,476/- along with interest and penalties.
9. The details of demand proposed, dropped and confirmed, have
been tabulated below:
6. the Finance Act
4
ST/50636/2017
Sl. Nature of Taxable value Service Tax Service Service Tax Service
No. Service (in Rs.) Demand Tax Paid Demand Tax
Proposed (in Rs.) Confirmed Demand
(in Rs.) (in Rs.) Dropped
(in Rs.)
1. Hostel fees 15,34,92,200 1,89,71,637 - 1,88,48,037 1,23,600
received from
students
2. Rent received 57,60,000 7,11,936 8,25,648 9,49,248 0
from Mody
University
3. Transportation 40,05,783 4,95,115 - 0 4,95,115
services to
student, staff
and faculty
4. GTA services 7,50,528 23,191 23,191 23,191 0
received by the
appellant
Total 16,40,08,511 2,02,01,879 8,48,839 1,98,20,476 6,18,715
10. Shri B.L. Narasimhan, learned counsel for the appellant,
assisted by Ms. Poorvi Asati, made the following submissions:
(i) Service tax is not leviable on the hostel fees received
by the appellant from the students;
(ii) Hostel services are naturally bundled with education
services, which is covered under section 66D(l) of the
Finance Act. As the two services i.e. hostel services and
education services are naturally bundled in the ordinary
course of business, in accordance with the provisions of
section 66F(3)(a) of the Finance Act, the essential
character of this bundle is education services, which is
covered under section 66D(1) of the Finance Act;
(iii) Explanation to section 66F of the Finance Act which
defines bundled services, provides that for a service to
be a bundled service, an element of provision of one
service needs to be combined with an element of
provision of another service and there should be a
nexus between the two services;
5
ST/50636/2017
(iv) In the present case, the hostel services and education
services provided by a boarding school are naturally
bundled in the ordinary course of business, and it is the
education service that gives the essential character to
such a bundle. This apart, as hostel services cannot be
provided on a stand alone basis without the provision of
education services by a boarding school, there is a clear
nexus between the two services;
(v) Even otherwise, the hostel services rendered by the
appellant are covered under section 66D(m) of the
Finance Act and hostel services rendered by the
appellant are exempted under serial no. 18 of
notification dated 20.06.2012;
(vi) In any case, the exemption given at serial no. 9 of the
notification dated 20.06.2012 was available even during
the period 01.04.2013 to 10.07.2014;
(vii) Demand of service tax on the rent received from Mody
University is required to be recomputed after extending
the threshold exemption; and
(viii) The extended period of limitation is not invokable.
11. Shri Harshvardhan, learned authorized representative
appearing for the Department has, however, supported the impugned
order and made the following submissions:
(i) The hostel services is a distinct service provided by the
appellant and is not bundled together with education
service;
(ii) The appellant is not covered under section 66D(m)of
the Finance Act;
6
ST/50636/2017
(iii) The hostel services rendered by the appellant are not
exempted under serial no. 18 of the notification dated
20.06.2012;
(iv) The exemption at serial no. 9 of the notification dated
20.06.2012 was not available to the appellant during
the period 01.04.2013 to 10.07.2014; and
(v) The extended period of limitation was correctly invoked
in the facts and circumstances of the case.
12. The submissions advanced by the learned counsel for the
appellant and the learned authorized representative for the
department have been considered.
13. The impugned order has confirmed the demand of service tax
of Rs. 01,88,48,037/- on the hostel fees received by the appellant
from the students during the period 01.04.2013 to 10.07.2014 on the
ground that the same was not exempted under Serial No. 9 of the
Notification dated 20.06.2012 during the said period.
14. It would, therefore, be necessary to examine the amendments
made to Serial No. 9 of the Notification dated 20.06.2012. Serial No.
9 of the said Notification during different periods, is reproduced below
in tabular form:
Sl. Period Serial No. 9 of the Notification dated 20.06.2012
No.
1. From 01.07.2012 to 9. Services provided to or by an educational institution
31.03.2013 in respect of education exempted from service tax, by
way of, -
(a) auxiliary educational services; or
(b) renting of immovable property;
2. Definitions. - For the purpose of this notification,
unless the context otherwise requires, -
(f) "auxiliary educational services" means any services
relating to imparting any skill, knowledge, education
or development of course content or any other
7
ST/50636/2017
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;
2. Between 01.04.2013 9. Services provided to an educational institution in
to 10.07.2014 respect of education exempted from service tax, by
way of, -
(a) auxiliary educational services; or
(b) renting of immovable property;
2. Definitions. - For the purpose of this notification,
unless the context otherwise requires, -
(f) "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. From 11.07.2014 to 9. Services provides, -
31.03.2017
(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;
4. From 01.04.2017 to 9. Services provided, -
30.06.2017
(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
8
ST/50636/2017
performed in such educational institution;
(iv) services relating to admission to, or conduct
of examination by, such institution;
"Provided that nothing contained in clause (b) of this
entry shall apply to an educational institution other
than an institution providing services by way of pre-
school education and education up to higher
secondary school or equivalent;
15. The Commissioner, in the impugned order, has noted that a
demand of service tax amounting to Rs. 1,89,71,637/- had been
made from the appellant from 01.04.2013 to 10.07.2014 on the
hostel services provided by the appellant to the students and after
noticing that w.e.f. 01.04.2013 serial no. 9 of the notification dated
20.06.2012 had been amended by substituting „services provided to
or by an education institution‟ with „services provided to an education
institution‟ went on to observe that because of the amendment the
auxiliary education services by the appellant would be subjected to
levy of service tax for the period from 01.04.2013 to 10.07.2014. The
relevant portions of the order passed by the Commissioner are
reproduced below:
"4.4 Hostel Services provided to students
4.4.1 A demand of Service Tax amounting to Rs.
1,89,71,637/- has been made for the period stretching from
01.04.2013 to 10.07.2014 on the Hostel Services provided
by the noticee to the students of Mody School. The demand
has been issued on the ground that during the said period,
Service Tax was leviable by virtue of an amendment made in
Notification No. 25/2012- ST dated 20.06.2012. This
amendment was made vide Notification No. 3/2013 -
ST dated 01.03.2013 (effective from 01.04.2013) in
which the Auxiliary Education Services provided by an
educational institution became taxable. The noticee
during the said period had collected Rs. 15,34,92,200/- [Rs.
10,17,60,700/- in FY 2013-14 + Rs. 5,17,31,500/- in
9
ST/50636/2017
01.04.2014 to 10.07.2014] as hostel fees (boarding &
lodging charges).
4.4.2 The noticee has mainly contended that the Show Cause
Notice has not discussed the Para 4.12.4 of the CBEC's
Education Guide properly as in the said Para, hostel fees has
been clarified as being part of Negative List - clause (m) as
service of providing residential dwelling covered as a
separate entry in this clause. Hence, no Service Tax is
payable on hostel fees charged by them form the students of
Mody School.
4.4.3 I observe that by virtue of Notification No.
3/2013 - ST dated 01.03.2013, an amendment was
made in entry no. 9 of the Notification No. 25/2012-
ST dated 20.06.2012 w.e.f. 01.04.2013 and for the
words "provided to or by", the words "provided to"
were substituted. After the said amendment, the entry
no. 9 of the Notification No. 25/2012- ST dated 20.06.2012
read as under:
9. 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;
4.4.4 Hence, it is clear that from 01.04.2013, the
auxiliary educational services provided by an
educational institution ceased to be exempted and
came within the purview of Service Tax. However, the
entry no. 9 of the Notification No. 25/2012-ST dated
20.06.2012 was substituted vide Notification No. 6/2014 -ST
dated 11-07-2014 and exemption was granted to the
services provided by an educational institution to its
students, faculty and staff. As such, the auxiliary educational
services were subject to levy of Service Tax for the
intervening period of 01.04.2013 to 10.07.2014 which is the
period of dispute in this case also"
16. The Commissioner further observed that the hostel services
rendered by the appellant are not bundled services so as to attract
10
ST/50636/2017
the provisions of section 65F of the Finance Act and the relevant
portion is reproduced below:
"4.4.8 I observe that Para 4.12.4 of CBEC Education
Guide discusses a situation where taxability is to be
determined in terms of the principles laid down in
Section 66F of the Finance Act, 1994. This type of
situation arise in case of "bundled services" where an
element of provision of one service is combined with an
element or elements of provision of any other service or
services. The situation in the instant case is altogether
different. The Hostel Services being provided by the noticee
is towards boarding & lodging charges collected from the
students. I find that in the fee receipts, these charges
have been shown separately by the noticee. These
charges have been given a separate treatment in
books of account as "boarding & lodging charges".
This service has been rendered purely as hostel service
against boarding / lodging and is independently
identifiable at the end of service provider as well as
service recipient. Hence, I am of the view that in this
case, the hostel services rendered by the noticee are
not a subject of bundled services so as to attract the
provisions of Section 66F of the Finance Act, 1994. I
therefore, find that Para 4.12.4 of CBEC Education Guide has
explained a situation which is totally different from the facts
and circumstance of the present case and the boarding /
lodging or hostel service provided by the noticee cannot be
bundled with education service provided by them."
17. The first issue that arises for consideration in this appeal is
whether the two services, namely hostel services and education
services, are naturally bundled in the ordinary course of business and
for this it would be necessary to reproduce the relevant provisions of
section 66F of the Finance Act and they are as follows:
"66F. Principles of interpretation of specified
descriptions of services or bundled services.
66F. (1) Unless otherwise specified, reference to a service
(herein referred to as main service) shall not included
11
ST/50636/2017
reference to a service which is used for providing main
service.
xxxxxxxxx
(2) Where a service is capable of differential treatment for
any purpose based on its description, the most specific
description shall be preferred over a more general
description.
(3) Subject to the provisions of sub-section (2), the
taxability of a bundled service shall be determined in the
following manner, namely:-
(a) if various elements of such service are
naturally bundled in the ordinary course of
business, it shall be treated as provision of the
single service which gives such bundle its
essential character;
(b) if various elements of such service are not
naturally bundled in the ordinary course of
business, it shall be treated as provision of the
single service which results in highest liability of
service tax.
Explanation.- For the purposes of sub-section (3), the
expression "bundled service" means a bundle of provision of
various services wherein an element of provision of one
service is combined with an element or elements of provision
of any other service or services."
18. A perusal of the aforesaid provisions of section 66F of the
Finance Act would indicate that if there are various elements of
service which are naturally bundled in the ordinary course of
business, the taxability of such bundled services shall be based on
the service which gives the essential character to such bundle.
Explanation to section 66F of the Finance Act defines what a „bundled
service‟ would be. It provides that for a service to be a „bundled
service‟, an element of provision of one service needs to be combined
with an element of provision of any other service or services. In other
words, there should be a nexus between the two services.
12
ST/50636/2017
19. The appellant has a boarding school and it receives hostel fees
from students in addition to the tuition fee and other charges.
However, students who are day scholars and who do not opt to pay
the hostel facility are not required to pay the hostel fees. The hostel
facility cannot be provided without the provision of education services
by a boarding school as it is not the case of the department and it
cannot be that students who are not receiving education services can
also avail hostel services. On the other hand, the students who are
receiving education services, may or may not opt for hostel services.
There is, therefore, a nexus between the two services. It cannot,
therefore, be doubted that the hostel services and education services
provided by a boarding school are naturally bundled in the ordinary
course of business, and the education service is the service which
gives the essential character to such bundle.
20. In this connection reference can also be made to paragraph
4.12.4 of the CBIC Education Guide dated 20.06.2012 and the
relevant paragraph is reproduced below:
"4.12.4 Are services provided by boarding schools
covered in this entry?
Boarding schools provide service of education
coupled with other services like providing dwelling
units for residence and food. This may be a case of
bundled services if the charges for education and
lodging and boarding are inseparable. Their taxability
will be determined in terms of the principles laid down in
section 66F of the Act. Such services in the case of
boarding schools are bundled in the ordinary course
of business. Therefore the bundle of services will be
treated as consisting entirely of such service which
determines the dominant nature of such a bundle.
In this case since dominant nature is determined by
the service of education other dominant service of
providing residential dwelling is also covered in a
13
ST/50636/2017
separate entry of the negative list, the entire bundle
would be treated as a negative list service."
(emphasis supplied)
21. Section 66D of the Finance Act provides for the negative list of
services and it includes service by way of pre-school education and
education up to higher secondary school or equivalent. Thus,
education service would be covered within the purview of negative list
contained in section 66D of the Finance Act. It would, therefore, not
be taxable.
22. Even in the Goods and Service Tax regime, the views expressed
earlier by the CBIC continue to operate as in the pre-Goods and
Service Tax regime. This would be clear from the CBEC Press Release
dated 13.07.2017 and the relevant portion is reproduced below:
"2. It may be mentioned that services provided by
an educational institution to students, faculty and
staff are fully exempt. Educational institution has been
defined as an institution imparting
(i) pre-school education and education up to higher
secondary school or equivalent;
(ii) education as a part of a curriculum for obtaining
a qualification recognised by any law for the time
being in force;
(iii) education as a part of an approved vocational
education course.
3. Thus, services of lodging/boarding in hostels provided
by such educational institutions which are providing pre-
school education and education up to higher secondary
school or equivalent or education leading to a qualification
recognised by law, are fully exempt from GST. Annual
subscription/fees charged as lodging/boarding charges by
such educational institutions from its students for hostel
accommodation shall not attract GST."
14
ST/50636/2017
23. What, therefore, follows from the aforesaid discussion is that
the hostel service and education services are naturally bundled in the
ordinary course of business and it is the education service that gives
the essential character to such bundle. Education services by way of
pre-school education and education up to higher secondary school or
equivalent are enumerated in the negative list of services
enumerated in section 66D of the Finance Act. Thus, it cannot be
subjected to levy of service tax.
24. In this view of the matter, it may not be necessary to examine
the remaining contentions advanced by the learned counsel for the
appellant regarding the exemption granted under serial no. 18 of the
notification dated 20.06.2012.
25. Thus, for all the reasons stated above, the impugned order
dated 17.01.2017 passed by the Commissioner cannot be sustained
and is set aside. The appeal is, accordingly, allowed.
(Order pronounced on 15.05.2023)
(JUSTICE DILIP GUPTA)
PRESIDENT
(HEMAMBIKA R. PRIYA)
MEMBER (TECHNICAL)
JB, Shreya
15
ST/50636/2017
CUSTOMS, EXCISE & SERVICE TAX APPELLATE TRIBUNAL
NEW DELHI
PRINCIPAL BENCH
SERVICE TAX APPEAL NO. 50636 OF 2017
(Arising out of Order-in-Original No. JOD-EXCUS-000-COM-0057-16-17 dated
17.01.2017 passed by Commissioner of Central Excise, Jodhpur)
Mody Education Foundation ...Appellant
Laxmangarh-332311,
Sikar, Rajasthan
versus
Commissioner of Central Excise, ...Respondent
Jodhpur
APPEARANCE:
Shri B.L. Narasimhan and Ms. Poorvi Asati, Advocates for the Appellant
Shri Harsh Vardhan, Authorized Representative for the Department
CORAM:
HON'BLE MR. JUSTICE DILIP GUPTA, PRESIDENT
HON'BLE MR. P. ANJANI KUMAR, MEMBER (TECHNICAL)
Date of Hearing: 03.05.2023
ORDER
Order Pronounced on 15.05.2023.
(JUSTICE DILIP GUPTA) PRESIDENT (P. ANJANI KUMAR) MEMBER (TECHNICAL) JB