Custom, Excise & Service Tax Tribunal
Maharana Mewar Public School vs Commissioner, Cgst-Udaipur on 23 May, 2025
CUSTOMS, EXCISE & SERVICE TAX APPELLATE TRIBUNAL
NEW DELHI
PRINCIPAL BENCH - COURT NO.4
Service Tax Appeal No. 51012 Of 2020
[Arising out of Order-in-Appeal No. 240(CRM)ST/JDR/2020 dated 08.07.2020
passed by the Commissioner (Appeals) of CGST & Central Excise, Jodhpur]
Maharana Mewar Public School : Appellant
HO-Kalash Marg, In city palace
Udaipur-313001
Vs
Commissioner of Central Goods : Respondent
Service Tax-Udaipur 142-B, Hiran Magri, Sector 11, Udaipur APPEARANCE:
Shri Kunal Agarwal, Advocate for the Applicant Shri Shashank Yadav, Authorised Representative for the Respondent CORAM :
HON'BLE DR. RACHNA GUPTA, MEMBER (JUDICIAL) HON'BLE MS. HEMAMBIKA R. PRIYA, MEMBER (TECHNICAL) FINAL ORDER No. 50785/2025 Date of Hearing:23.05.2025 Date of Decision:23.05.2025 DR. RACHNA GUPTA The appellant, M/s Maharana Mewar Public School is engaged in providing the services in relation to Auxiliary Education Services.
Acting upon the information the records of the appellant were examined and it was found that during the period from 01.04.2013 to 10.07.2014, the appellants have been collecting an amount in the name of hostel fees. The activity of providing accommodation is taxable activity but the appellants were found to have not deposited the tax. Accordingly, vide show cause notice No. 103/2018 dated 16.10.2018, service tax amounting to Rs. 14,86,475/- was proposed 2 Service Tax Appeal No. 51012 of 2020 to be recovered along with the proportionate interest and appropriate penalties. While adjudication, the original authority has dropped the entire demand holding as follows:-
"11.6. In view of the above, I find that the services provided by the educational institute to its students, faculty or staff as hostel fall under the negative list of services defined under section 66D
(m) of the Finance Act, 1994 and no service is leviable under section 66 (B) of the Finance/Act, 1994. Hence, the demand of service tax amounting to Rs.14,86,475/- on boarding (Hostel) fee is not sustainable and an amount received on account of boarding(Hostel) fee is not liable for payment of service tax. I further find that since the demand of service tax itself is not sustainable, no question of interest and penal provisions arises."
The department filed an appeal before the Commissioner (Appeals). The said appeal was allowed vide Order-in-Appeal No. 240(CRM)ST/JDR/2020 dated 08.07.2020. Being aggrieved by the said order, the appellant is before this Tribunal.
2. We have heard Shri Kunal Agarwal, learned counsel for the appellant and Shri Shashank Yadav, Authorized Representative for the Department.
3. Learned counsel for the appellant has mentioned that the appellant is a school and is affiliated with the Central Board of Secondary Education, Delhi ('CBSE') for imparting education. In the course of providing education, the appellant is required to provide other facilities to students, such as hostel, transportation etc. The charges for such facilities are specified and are recovered by it from the students in addition to the tuition fee & other charges. Further, a small portion of the students are day scholars, who do not opt for the hostel facility and thus, no hostel fees are collected from such day scholars. As all such services are naturally bundled and represented by education services, the Appellant was not paying any Service Tax 3 Service Tax Appeal No. 51012 of 2020 thereon. Otherwise also such education services were covered under negative list of services under Section 66D(1) of the Act during the relevant period.
3. It is submitted that the issue involved in the present appeal stands already decided in favour of the appellant and the decision in the case of Modi Education Foundation vs. Commissioner of Central Excise, Jodhur reported as 2023 (5) TMI 609 - CESTAT NEW DELHI and Rajiv Gandhi University of Health Sciences, Karnataka vs. Principal ADG, Bengaluru Zonal Unit, reported as 2022 (8) TMI 707-Karnataka High Court. The appeal is accordingly prayed to be allowed by setting aside the Order-in- Appeal/impugned order.
3. While rebutting the submissions, learned DR at the outset, has reiterated the findings arrived at by the Commissioner (Appeals). It is submitted that the Commissioner (Appeals) has followed the decision of Hon'ble Supreme Court in the case of Commissioner of Customs Import, Mumbai vs. M/s Dilip Kumar & Company reported in 2018 (7) TMI 1826 (S.C.-Larger bench) which is regarding the strict interpretation of the exemption notification issued under tax statutes. It has clarified by the Hon'ble Apex Court that whenever there is ambiguity in the exemption notification which is subject to the strict interpretation, the benefit of ambiguity cannot be extended in favour of the assessee. It must be interpreted in favour of the Revenue as has been done by the Commissioner (Appeals). Impressing upon, no infirmity in the order under challenge, the appeal is prayed to be dismissed.
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Service Tax Appeal No. 51012 of 2020
4. Having heard the parties and perusing the entire record as well as the decisions as relied upon by the learned counsel for the appellant. Also, keeping in view that it has been fairly conceded on part of the department that the decisions relied upon by the appellant fairly covers the issue as involved in the present appeal, we observe and held as follows:-
The issue in the present appeal is the demand of service tax on hostel charges/fee collected from the students on account of uses of hostels provided by the appellant to such students while imparting the education to them. This Tribunal while adjudication, the Modi Education Foundation Case (supra) has dealt with the facts with respect to the boarding school receiving hostel fees from the students in addition to the tuition fees and the other charges. The perusal reveals that the issues are identical in the said decision. While adjudication, this Tribunal has considered the another issue as to whether the two services, namely, hostel services and the education services are naturally bundled in the ordinary court of the business and while doing so, it has been held as follows:-
"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.
19. The appellant has a boarding school and it receives hostel fees from students in addition to the tuition fee and 5 Service Tax Appeal No. 51012 of 2020 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 20-6- 2012 and the relevant paragraph is reproduced below :
"Are services provided by boarding 4.12.4 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 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 Services Tax regime, the views expressed earlier by the CBIC continue to operate as in the pre-Goods and Services Tax regime. This would be clear 6 Service Tax Appeal No. 51012 of 2020 from the CBEC Press Release dated 13-7-2017 and the relevant portion is reproduced below :
"It 2. 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.
Thus, services of lodging/boarding in 3. 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."
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 20-6-2012." As brought to notice, we observe that the Hon'ble Apex Court also in the case titled as Assam State Tax Book Production and Publication Corporation vs. CIT reported in 2009 (17) SCC 391 has held that providing hostel facility to people is also an activity 7 Service Tax Appeal No. 51012 of 2020 incidental to imparting the education. In view of the decision of the Hon'ble Supreme Court & Hon'ble High Court of Karnataka as well as of this Tribunal, dealing with identical issue as involved in the present appeal and finding no other fact which may distinguish the present appeal from those decisions, we hold that the issue stands already decided and we do not differ from the findings arrived at. Since, the findings of the order under challenge are contrary to those findings, we hereby set-aside the order under challenge and consequent thereto , the appeal is allowed.
(Dictated & pronounced in the open Court) (DR. RACHNA GUPTA) MEMBER (JUDICIAL) (HEMAMBIKA R. PRIYA) MEMBER (TECHNICAL) G.Y.