Custom, Excise & Service Tax Tribunal
Punjab Technichal University vs Ludhiana on 4 March, 2025
CUSTOMS, EXCISE AND SERVICE TAX APPELLATE TRIBUNAL
CHANDIGARH
REGIONAL BENCH - COURT NO. I
Service Tax Early Hearing Application No.60096 of 2021
Service Tax Appeal No.51954 of 2015
[Arising out of Order-in-Original No.JAL-EXCUS-000-COM-003-14-15 dated
19.02.2015 passed by the Commissioner of Central Excise, Ludhiana, Punjab]
M/s Punjab Technical University ......Appellant
Jalandhar-Kapurthala Highway, Near Science
City, Ludhiana, Punjab-144021
VERSUS
Commissioner of Central Excise, ......Respondent
Ludhiana
GST Bhawan, F-Blok, Rishi Nagar, Ludhiana,
Punjab-141001
WITH
Service Tax Appeal No.60765 of 2019
[Arising out of Order-in-Original No.JAL-EXCUS-000-COM-008-009-18-19 dated
31.03.2019 passed by the Commissioner of CGST, Ludhiana, Punjab]
M/s Punjab Technical University ......Appellant
Jalandhar-Kapurthala Highway, Near Science
City, Ludhiana, Punjab-144021
VERSUS
Commissioner of Central Excise, ......Respondent
Ludhiana
GST Bhawan, F-Blok, Rishi Nagar, Ludhiana,
Punjab-141001
APPEARANCE:
Shri Prabhat Kumar, Advocate for the Appellant
Shri Siddharth Jaiswal and Shri Aneesh Dewan, Authorized Representatives
for the Respondent
2 ST/51954/2015
ST/60765/2019
CORAM: HON'BLE MR. S. S. GARG, MEMBER (JUDICIAL)
HON'BLE MR. P. ANJANI KUMAR, MEMBER (TECHNICAL)
FINAL ORDER NO.60350-60351/2025
DATE OF HEARING: 10.01.2025
DATE OF DECISION: 04.03.2025
PER: P. ANJANI KUMAR
The appellants, M/s Punjab Technical University, Jalandhar, is
a university established under the Punjab Technical University Act,
1996; as per decision taken in the 7th meeting of the Board of
Governors in 2001, PTU has designed its Distance Education
Programme (DEP) and implemented it, through designated Learning
Centers (LCs); some private bodies/ institutions are appointed by the
appellant as Regional Centers (RC) to look after the functioning of
the LCs in its allocated territory and to act as a coordinating link
between LCs & the appellant; obligations of the appellants 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 non-
refundable 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
3 ST/51954/2015
ST/60765/2019
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 vide order dated
19.02.2015. Against the same, the appellants have preferred Appeal
No.ST/51954/2015. Further, two Show Cause Notices, dated
17.04.2015 and 15.04.2016, demanding service tax of Rs
17,09,32,224 & Rs. 6,38,53,198 along with interest and penalty,
covering the period Apr‟13 to Mar‟14 and Apr‟14 to Mar‟15
respectively, were issued to the appellants. Both the show cause
notices were adjudicated by the Commissioner, CGST, Jalandhar vide
order dated 31.03.2019 confirming the demand of service tax
amounting to Rs. 13,58,04,692 along with interest; imposing penalty
of Rs. 3,73,56,548 for the demand for the period 04/2014 to 03/2015
under section 78; imposing penalty at rate of Rs. 100/- per day or
1% of the service Tax and imposing a penalty of Rs. 5000/- under
section 77 of the Finance Act, 1994.This order is challenged by appeal
No. ST/60765/2019-DB.
4 ST/51954/2015
ST/60765/2019
3. Shri Prabhat Kumar, Learned Counsel for the appellants submits
that the impugned orders are liable to be set aside on the following
grounds
impugned Order relies upon Clauses (47), (48) & (105) (zze) of
section 65, which ceased with effect from 01.07.2012 by virtue
of clause (A) of section 143 of the Finance Act, 2012 read with
Notification No. 20/2012-ST, dated 05.06.2012.
the appellant not being engaged in a commercial activity is out
of the net of service tax.
constitutional protection under Article 243W of the Constitution
of India read with S. No. 13 of the Twelfth Schedule which
contemplates that the Municipalities are entrusted with the
functions of promotion of cultural, educational and aesthetic
aspects is applicable.
the appellant set up as an educational institution as a University
under the State Act is exempt from service tax.
educational service leading to award of a degree would be
exempt as a service.
benefit of 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
5 ST/51954/2015
ST/60765/2019
Service is a more appropriate entry for classification than
Franchise Service.
4. Learned Counsel submits further that the activities being
undertaking 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 service is exempted
under Entry No. 39 of opening Para of Notification No. 25/2012-ST,
dated 20.06.2012, as amended; it provides that services by a
6 ST/51954/2015
ST/60765/2019
governmental authority by way of any activity in relation to any
function entrusted to a municipality under article 243 W of the
Constitution; service rendered by PTU / IKGPTU falls under the
purview of Article 243W of the Constitution of India read with S. No.
13 of the Twelfth Schedule which contemplates that the Municipalities
are entrusted with the functions of promotion of cultural, educational
and aesthetic aspects; the appellant being established by an Act of
the State Legislature, with 90% or more participation by way of
control by Government of Punjab, to carry out any function entrusted
to a municipality under article 243W of the Constitution, is covered by
the Notification.
6. Learned Counsel submits that the disputed service is in the
Negative List of services contained in section 66D (l) (ii) which
contemplates that the negative list shall comprise of services by way
of education as a part of curriculum for obtaining a qualification
recognized by any law for the time being enforce; before amendment
(for the period 01.04.2013 to 10.07.2014), Notification No. 25/2012-
S.T. dated 20.06.2012, exempts educational services in question
under the category of auxiliary services contained in entry 9 (a) of
the opening paragraph read with definition of auxiliary educational
services contained in Para 2(f) of the notification ibid; after the
amendment for the period 11.07.2014 to 31.03.2015, the services in
question are exempted by virtue of amended entry 9(b) (iv) read
with newly inserted clause (oa) in Para 2 of notification dated
20.06.2012; CBEC Circular clarifies that pre-school education and
7 ST/51954/2015
ST/60765/2019
education up to higher secondary school or equivalent education as a
part of a prescribed curriculum for obtaining a qualification
recognized by law for the time being in force and education as a part
of an approved vocational education course, fall under negative list.
He submits that it is the settled principle of interpretation of tax
statutes that an entry appearing in a statute cannot be substituted,
amended, deleted or added with additional words or meanings.
Reliance is placed on the following case laws.
Stock Vs Frank Jones (Tipton) Ltd (1978) 1 All England
Reporter 948 (Hl) (Page 951)
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 ST/51954/2015
ST/60765/2019
8. Learned Counsel submits that the appellant is providing „Education
Service‟ as Courses offered lead towards grant of a recognized
Degree by PTU, a State University set up by due process of law; the
education imparted by PTU is a part of a curriculum for obtaining a
qualification recognized by law; the degrees and diplomas awarded
by PTU are governed by the Punjab Technical University Act, 1996;
thus, PTU is imparting education as a part of a curriculum for
obtaining a qualification recognized by law for the time being in force;
the only head under which the service would fall is "Education
Service", which service is not taxable under the Finance Act. As per
Education Guide issued by CBIC, it is only "Commercial and coaching
service" (which is only a small sub-set of Education Service), which
the Legislature in their own wisdom have thought it proper to bring it
under the service tax net; it was never the intent of Legislature to
bring the said activity within the purview of service tax.
9. Learned Counsel takes us through the definition of „Franchise‟ and
submits that the appellant has not rendered Franchise Service under
section 65 (105) (zze) of the Finance Act as they cannot be treated
as Franchisor and their LCs / RCs as Franchisee; the definition of
Franchisee given in Section 65 (47) of the Finance Act necessarily
involves an element of trade mark, service mark, trade name or logo
(or any such symbol) as the case may be; the interpretation of the
word „any such symbol‟ must be seen in the light of the preceding
words namely trade mark, service mark, trade name or logo and it
9 ST/51954/2015
ST/60765/2019
would not cover within its ambit the entire universe; merely by use of
name of „Punjab Technical University‟ (PTU) or „IK Gujral Punjab
Technical University‟ (IGKPTU) cannot be considered as an entity
having a trade mark, service mark, trade name or logo or any such
symbol, of the same genre; the department has totally failed to
produce any evidence of commercial exploitation of such „trade mark‟
etc; MoU between Appellant and RCs and LCs talks of no such
association with any trade mark, logo etc; PTU isn‟t providing any
service to LCs / RCs, even if it is presumed that the service is
franchise in nature, then also no tax is payable by PTU because it is
on the negative list as explained supra; the service is by way of
education a part of curriculum for obtaining a qualification recognized
by the law of the land; no element of commerce is involved;
imparting of education by a university, 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
10 ST/51954/2015
ST/60765/2019
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 simply collected the cheques /
demand drafts and forwarded them to PTU / IGKPTU; even if there is
an element of service involved, then it is the LCs / RCs who are
providing certain support services to PTU / IGKPTU, which could have
been classified as Business Auxiliary Service (BAS) and demand if any
was required to be issued to LCs / RCs for providing service to PTU /
IGKPTU. He relies on Aptech Computers Pvt Ltd v/s CCE & ST,
Lucknow - 2019 (2!) GSTL 513 (Tri. All.)
11. Learned Counsel submits, without prejudice to the above, that
the valuation is on the higher side; service tax has been demanded
on the entire fees that has been collected by the LCs and transferred
to PTU; it is on record that the share of PTU varies from 28% to 37%
of the total fees; similarly the share of RCs vary from 18% to 22%
and the share of LCs vary from 45% to 50% of the total fees; service
tax cannot be demanded from PTU on amount which is in excess of
28% to 37% of the total fees. He submits that in case the appellant
has to pay service tax benefit of cum service tax is admissible; no
penalty is imposable when the issue involved is technical in nature.
He relies on the following cases.
11 ST/51954/2015
ST/60765/2019
Swift Institute of Engineering & Technology Vs CCE&
ST, Chandigarh-II2020 (34) G.S.T.L. 502 (Tri. - Chan.)
Malappuram District Parallel College Association Vs UOI
2006 (2) STR 321 (Ker)
CCGST & CE Mumbai Vs BPCL 2019(24) GSTL 347
(Bom)
M. Rajan Vs CST, Chennai2019 (20) GSTL 84 (Tri. -
Chennai)
In Re: Emerge Vocational Skills Pvt Ltd 2018 (17) GSTL
494 (AAR - GST)
In Re: Logic Management Training Institutes Pvt Ltd
2022 (61) GSTL 470 (App AAR - GST - Ker.)
Punjab Technical University Vs CCE & ST Ludhiana 2016
(42) STR 474 (Tri. - Del.)
Punjab Technical University V. Commissioner 2016 (43)
STR J179 (SC)
Madurai Kamaraj University Vs Jt. CGST & CE, Madurai
2021 (54) GSTL 385 (Mad.)
In Re: Choice Estates and Constructions Ltd. 2016 (45)
STR 480 (AAR)
12. Learned Authorized Representative for the revenue reiterates the
findings of the impugned orders and submits that learned
Commissioner has categorically referred to the classification of
services only while discussing the previous Show Cause Notices
issued to the appellants; in respect of the impugned order dated
31.03.2019, he only held that the nature of the services remained 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
12 ST/51954/2015
ST/60765/2019
(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 12 th 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 Tribunal after duly considering
various issues raised by the appellants held that the service rendered
by the appellants to the LCs was Franchise Services; the said order
has been appealed against; however, no stay has been granted.
14. Learned Authorized Representative further submits that as it
was held that the appellants are providing Franchise Services to
private commercial bodies, the appellants are not eligible for
exemption contained under Notification No.25/2012-ST dated
20.06.2012. Learned AR further submits that it is apparent that the
appellant has provided franchise services to LCs and the same are
liable to service tax; the services of the appellants remain franchise
services prior to or post 01.07.2012; the franchise services provided
by the appellants are not the same as educational services and are
13 ST/51954/2015
ST/60765/2019
neither in the negative list nor exempted under any notification; the
ratio of cases relied by the appellants to the facts and circumstances
of the case. Rather the decision of the Hon‟ble Tribunal dated
23.12.2015 in their own case is squarely applicable; the appellants
are therefore liable to pay service tax on the taxable services
provided by it and as such, the appeals filed by the appellants merits
dismissal.
15. Heard both sides and given careful consideration to the rival
submissions and perused the case records. Brief issue that requires to
be decided in the impugned case is as to whether the appellant
university has rendered any taxable service so as to make them liable
to pay service tax as confirmed by the impugned orders. Gist of the
arguments by the Learned counsel for the appellants is that the
impugned Order relies upon Clauses (47), (48) & (105) (zze) of
section 65, which ceased with effect from 01.07.2012 by virtue of
clause (A) of section 143 of the Finance Act, 2012 read with
Notification No. 20/2012-ST, dated 05.06.2012; the appellant is
engaged in discharging constitutional obligation under Article 243W of
the Constitution of India read with S. No. 13 of the Twelfth Schedule
which contemplates that the Municipalities are entrusted with the
functions of promotion of cultural, educational and aesthetic aspects
is applicable; the appellant set up as an educational institution as a
University under the State Act is exempt from service tax;
educational service leading to award of a degree would be exempt as
14 ST/51954/2015
ST/60765/2019
a service; benefit of 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 service alleged to have been rendered by the
appellants to RCs/LCs can be termed as „Education Service‟ as
claimed by the appellants.
(ii). whether the service alleged to have been rendered by the
appellants to RCs/LCs can be termed as „Franchise Service‟ as alleged
by the Revenue
15 ST/51954/2015
ST/60765/2019
(iii). whether the appellants are rendering any taxable service to the
RCs/LCs;
17. Punjab Technical University is a body created under Punjab
Technical University Act, 1996; they have 494 affiliated colleges; in
terms of the decision taken in the seventh meeting of the Boards of
Governor in the year 2001, the appellants have started implementing
Distance Education Programme (DEP); for this purpose, they have
established Learning Centers (LCs) and Regional Centers (RCs) to
coordinate/ control the learning centers and have entered into a
Memorandum of Understanding with them. In order to understand
the working arrangement of the appellant and the LCs and RCs, we
find it beneficial to go through the various clauses of the Agreement.
They are as follows:
"4.1 Obligations of the PTU
(i) PTU will appoint RC and allot zone of operation
under this MOU, and shall monitor the working of
the RC, and may at its sole discretion, for the
development of the system, restructure zone(s)
allotted to the RC or advertise for a new RC where
performance of the RCs is poor or not up to the
satisfaction of the University.
(ii) PTU will establish and monitor all the LC's in the
zone through the RC
(iii) The LC's will be under the Direct and strict
control of the PTU
(iv) The PTU will approve the syllabus, courseware
and examination process
(v) The students will be on the Roles of PTU
(vi) The prospectus and application form will be
approved by PTU
16 ST/51954/2015
ST/60765/2019
(vii) The PTU will approve and update regularly at
regular intervals, the course material through its
statutory board of studies from time to time.
(viii) The PTU will conduct the examinations,
undertake evaluation process, declare results,
award degrees/diplomas and issue the DMC's
(ix) The Questions paper would be prepared and
supplied by the PTU with secrecy
(x) The PTU will lay down all the requisite norms
which shall be implemented by the LC's to ensure
the imparting of quality education by the LC's to
the student of PTU enrolled for the authorized
course."
A. Obligations of RCs under Section 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 make available such data and MIS to PTU
within the stipulated deadlines.
17 ST/51954/2015
ST/60765/2019
(viii) RC will establish a placement assistance cell
and liaise with industry through its experts & place
students appropriately and maintain data of such
placements.
(ix) To assist PTU in defending or fighting legal
cases within the zone allotted to RC.
(x) To ensure timely delivery of course material,
identity cards, etc. to LC
(xi) Coordinate efforts for preparing digital
contents, CD‟s, learning material, MIS, and LMS,
etc. for quality teaching-learning process within
the allotted zone and for the overall development
of the distance education.
(xii) To participate in national and international
events pertaining to distance education within and
outside the country, in consultation with PTU
(xiii) The RC will assist the PTU for conduct of the
examination as per Rules and regulations of the
PTU and ensure fair practice
(xiv) The RC will issue state level advertisement for
admission notices for the aforesaid courses in the
leading newspaper in coordination with the LC, in
consultation with the PTU
(xv) The RC will arrange to provide training for the
latest technologies and teaching pedagogy to the
staff of the LCs in coordination with PTU
(xvi) The RC will make timely collections from the
LCs of the fees paid by the student at the LCs for
the allotted courses.
(xvii) The RC will keep regular and periodic checks
on the LC‟s so as to ensure timely completion of
the allotted courses by the LCs
(xviii) The RC will conduct all kind of audits (i.e.
technical audit, management information system
audit, Library Audit, Financial Audit, etc.) of the
LCs in respect of the PTUs courses run at the LCs
(xix) The RC will frame the marketing strategy and
will ensure its implementation by the LCs in
consultation with PTU
(xx) The working of the RC and LCs shall also be
monitored mechanism/reviewed by PTU‟s Regional
Monitoring Committee (RMC)
18 ST/51954/2015
ST/60765/2019
(xxi) In addition, to review by the RMs, continuous
monitoring mechanism will be in place for
assessment by the PTU of the performance of the
RC and LCs
(xxii) The format of the style of any advertising and
hoarding to be placed/put up by the RC and LCs
under the RC shall be done with the prior written
approval of the PTU. Any advertisement and
hoarding to be placed/put up by the RC/LCs should
not bring down or cast aspersions 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 full satisfaction of the PTU
(xxix) The RC will follow, in letter and spirit, all rules
and regulations, notifications, guidelines (whether
issued to the RC or to the LCs) and office orders of
the PTU issued from time to time.
19 ST/51954/2015
ST/60765/2019
B. Obligations of LCs under Section 4.3 of the MoU,
are as under:-
(i) Each LC shall abide by all the terms and
conditions laid down in the letters of its
Authorization read with the guidelines issued by
the PTU.
(ii) To establish and maintain infrastructure as per
the norms of the PTU
(iii) To maintain a strict academic calendar for timely
completion of the course and to arrange for
practices within the center.
(iv) To maintain student record files and
comprehensive MIS for each PTU student enrolled
at the LC.
(v) To follow, in letter and spirit, all rules and
regulations, notifications guidelines and office
orders of the PTU issued from time to time.
(vi) To enhance student skills and facilitate their
placements
(vii) To effectively coordinate with the RC and to
working close cooperation with that RC
(viii) To participate in meetings and training programs
organized by the RC/PTU
(ix) To adhere to the norms & standards of the PTU
at all times, as modified from time to time. If the
LC is not able to admit students for two
consecutive semesters or does not comply with the
orders norms and guidelines of PTU, its
authorization shall stand canceled and withdrawn
18. In terms of the Agreement, the fee is collected by the LCs from
the students in the form of Demand Drafts drawn in favour of "The
Registrar" of the appellant; the total revenue collected is distributed
as per the agreed share of the appellant RCs and LCs, which is in the
range of 28/32.2/37%, 18/20/22% and 45/47.5/50% respectively;
however, Authorization Fee and Additional Authorization Fee collected
20 ST/51954/2015
ST/60765/2019
is entirely retained by the appellant. On going through the clauses of
the Agreement, we find that the appellant retains the core functions;
eligibility for admission of the students, syllabus and qualification of
the teachers, setting of question papers and examination time-table
and award of degree/ diploma is decided by the appellant; LCs/ RCs
are responsible for appointment of teachers, classroom coaching &
practical training as per the syllabus, conduct of examinations; LCs/
RCs may advertise/ canvas about the courses in the university. In
this background, 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
21 ST/51954/2015
ST/60765/2019
law. The appellant being established by the authority of an Act of
State Legislature are themselves deciding the curriculum and are
awarding the degrees. Therefore, we find that the appellants are
better placed than any other institutions engaged in services relating
to education. We further find that Notifications issued from time to
time have also exempted the education services from the purview of
service tax.
(i) Notification No.25/2012-ST dated 20.06.2012
"In exercise of the powers conferred by sub-section (1)
of section 93 of the Finance Act, 1994 (32 of 1994)
(hereinafter referred to as the said Act) and in
supersession of notification number 12/2012-Service
Tax, dated the 17th March, 2012, published in the
Gazette of India, Extraordinary, Part II, Section 3, Sub-
section (i) vide number G.S.R. 210(E), dated the
17th March, 2012, the Central Government, being
satisfied that it is necessary in the public interest so to
do, hereby exempts the following taxable services from
the whole of the service tax leviable thereon under
section 66B of the said Act, namely :-
9. Services provided to or by an educational institution
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 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
22 ST/51954/2015
ST/60765/2019
students under any mid-day meals scheme sponsored
by Government, or transportation of students, faculty or
staff of such institution;"
(ii) Notification No. 6/2014 - ST dated 11.07.2014
"In exercise of the powers conferred by sub-
section (1) of section 93 of the Finance Act, 1994
(32 of 1994), the Central Government, being
satisfied that it is necessary in the public interest
so to do, hereby makes the following further
amendments in the notification of the Government
of India in the Ministry of Finance (Department of
Revenue) No. 25/2012-Service Tax, dated the 20th
June, 2012, published in the Gazette of India,
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 and the
Notification discussed as above, we understand that services as
regards education fall in the Negative List. We also find that these
23 ST/51954/2015
ST/60765/2019
Notifications provide exemption for Auxiliary Education Services also.
Exemption is also extended to services to education by way of
Renting of Immovable Property also. In such circumstances, we do
not understand as to why such exemption is not available to the
appellant-university, which is established by an Act of State
Legislature to propagate education. We find that CBEC vide Circular
No.172/7/2013-ST dated 19.09.2013 clarifies the kind of exemptions
available to the services rendered in relation to education. The
Circular is extracted as below:
Circular No. 172/7/2013-S.T., dated 19-9-
2013
F.No. B1/14/2013-TRU
Government of India
Ministry of Finance (Department of Revenue)
Central Board of Excise & Customs, New Delhi
Subject: Education services - clarification -
Regarding.
The following representations have been received
seeking clarifications regarding the levy of service
tax on certain services relating to the education
sector:
1. Private Schools Correspondents
Confederation, Madurai.
2. Tamil Nadu Nursery, Primary, matriculation
and Higher Secondary Schools Association, Chennai.
3. Punjab Association, Chennai.
4. Association of Self-financing Universities of
Rajasthan
5. Unaided Schools‟ Forum, Mumbai.
6. VedavalliVidyalaya, Wallajapet.
7. Independent Schools Associations,
Chandigarh.
8. Mother Teresa Public School, New Delhi.
9. BVM Global, Chennai.
10. Sastra University, Tanjavur.
11. HLC International, Chennai.
12. Sodexo Food Solutions, Mumbai.
13. Federation of Associations of Maharastra,
Mumbai.
24 ST/51954/2015
ST/60765/2019
2. The matter is covered by two provisions of the
Finance Act, 1994. Section 66D of the Finance Act
contains a negative list of services and clause (I)
thereof reads as under :
"services by way of-
(i) pre-school education and education upto higher
secondary school or equivalent;
(ii) education as a part of a curriculum for
obtaining a qualification recognized by any law for
the time being in force;
(iii) education as a part of an approved vocational
education course;".
Further Section 93(1) of the Finance Act, 1994,
enables the Government to exempt generally or
subject to such conditions taxable service of
specified description. By virtue of the said power,
Government has issued a Notification No. 25/2012-
S.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. There are many
services provided to an educational institution.
These have been described as "auxiliary educational
services" and they have been defined in the
exemption notification. Such services provided to an
educational institution are exempt from Service Tax.
For example, if a school hires a bus from a transport
25 ST/51954/2015
ST/60765/2019
operator in order to ferry students to and from
school, the transport services provided by the
transport operator to the school are exempt by
virtue of the exemption notification.
4. In addition to the services mentioned in the
definition of "auxiliary educational services", other
examples would be hostels, housekeeping, security
services, canteen, etc.
5. Thus the apprehensions conveyed in the
representations submitted by certain educational
institutions and organizations have no basis
whatsoever. These institutions and organizations are
requested not to give credence to rumors or
mischievous suggestions. If there is any doubt they
are requested to approach the Chief Commissioner
concerned.
6. All concerned are requested to acknowledge the
receipt of this circular.
21. Further, we find that Circular dated June 20, 2012 issued by
CBEC clarifies the above position. Therefore, we find that when
various services like renting of immovable property, 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,
rendered in relation to education are exempt, there is no reason or
rhyme as to why the benefit of the exemption should not be extended
to the university which is designing its own course and awarding
degree/ diploma.
22. We find that Hon‟ble Kerala High Court in the case of
Malappuram District Colleges Association - 2006 (2) STR 321 (Ker.)
held that:
3. The Central Excise authorities have issued the
impugned notices to petitioners demanding
registration and payment of service tax on their
26 ST/51954/2015
ST/60765/2019
finding that the service rendered by parallel
colleges attracts service tax under the charging
section read with definition clause and since
petitioners are denying the same, this Court has to
examine this as a preliminary issue and the
challenge against constitutional validity particularly
on the ground of discrimination under Art. 14 need
be gone into only if the parallel colleges answer
the 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 coaching by them to students to write various University degree examinations such as B.A., B.Com., M.A., M.Com., etc., do not come within the meaning of "commercial training", I do not think the said argument can be accepted, because, on going through sub-clause (27) of Section 65 it is clear that coaching in any form for imparting knowledge or skill or lessons on any subject or field, except the subjects specifically excluded by the said definition clause are covered by it. In fact the institutions excluded are those imparting coaching or training in sports, pre-school coaching and 27 ST/51954/2015 ST/60765/2019 training centres and institutes or establishments which issue any certificate or diploma or degree or any educational qualification recognized by law for the time being in force. In other words, except those covered by the above said exclusion clause, all other educational institutions or training centres imparting any education or training, in any form are covered by the definition clause. The claim of the petitioners is that they are imparting coaching and training to students to appear for University degree examinations in B.A., B.Com., M.A., M.Com., etc., as private students and the said students write the same examinations and get the same degrees as students of regular colleges affiliated to regular Universities. According to the petitioners, the regular colleges, whether aided or self-financed affiliated to Universities, are also rendering the same service to students and though they are not awarding any degrees or diplomas, they are not subjected to levy of service tax by the Department and so much so, if such colleges are not liable for payment of service tax, then there is no reason why the petitioners who are rendering same services should be treated differently and subjected to tax. Alternatively they contended that the regular colleges, whether aided or self- financed, affiliated to Universities, which are not awarding any degree or diploma also are liable to service tax as they also do not come under the exclusion clause. In other words, according to the petitioners, the respondents are not justified in exempting regular colleges, whether aided or self- financed affiliated to Universities from service tax as no exemption is provided to them in the definition clause. I am unable to accept this argument of the petitioners because the category of institutions excluded from the 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 28 ST/51954/2015 ST/60765/2019 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 in subjects in humanities, language, commerce, etc., where students attending parallel colleges are free to write examination as private students without the need to complete any course-study. In other words, students trained by the petitioners in the parallel colleges are otherwise eligible to write examinations just by registration with the University without any need to undergo any course study anywhere. Of course, regular affiliated colleges are also imparting education in same subjects where course study is not required to write the University examinations. However, those colleges are conducting courses in Science subjects also where course study with required attendance and practical training are compulsory under the Examination Regulations of the University to which those colleges are affiliated. Therefore the completion of course study with practical training in the subject in an affiliated college is a requirement for the student to write University examination, irrespective of whether examination is written immediately on completion of course study in the same college or not. Even though the colleges are not issuing any diploma or degree certificates, they are issuing course completion certificate to the students to make them eligible to write the examinations in terms of the University Regulations which is certainly an "educational qualification" prescribed by the University. So much so, affiliated colleges whether aided or self- financed are different and come within the description of the exempted category under the definition clause, while petitioners who are engaged in private coaching are not covered by the exemption clause. In the circumstances, the 29 ST/51954/2015 ST/60765/2019 petitioners‟ contention that students trained by them are getting diploma or degree certificate after writing University or Board examinations in the same way as students studying similar subjects in regular aided or self-financed colleges does not make them eligible for exemption under the exemption clause. Therefore the service rendered by the petitioners in coaching and training private students for examinations will attract service tax while regular aided or self- financed colleges affiliated to Universities are outside the tax net.
4. The next question to be considered is whether the definition clause contained in Section 65(27) of the Act which makes the service rendered by the petitioners taxable 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 service- provider 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 considered with reference to Art. 14 of the Constitution of India. As already stated students studying in the parallel colleges are students who are entitled to write the University examinations as private students. The curriculum prescribed for the examination and the degree certificate awarded to private students and students studying in regular colleges, whether aided or self-financed affiliated to University, are 30 ST/51954/2015 ST/60765/2019 the same. Therefore there is no distinction between the two classes of students namely, the students studying in the colleges affiliated to Universities and private students who take coaching in parallel colleges to write the same examinations. While the students studying in affiliated colleges cannot be subjected to service tax along with tuition fees and other fees levied by the management of those colleges students, who are studying in parallel colleges will have to bear the service tax as an additional burden along with tuition fees and other charges collected by the management of parallel colleges. The main reason why many students cannot join regular colleges affiliated to Universities is economical. Further on account of limited number of seats available in the affiliated colleges, the less brilliant will have to look for coaching elsewhere and they end up in parallel colleges. It is also a well-known fact that in interior and remote areas of the State, poor students even if eligible for admission in regular colleges cannot afford out-station-study and they naturally go to parallel colleges. In fact counsel for the petitioners pointed out that many brilliant students who could not afford to go to regular colleges after study in parallel colleges have secured high ranks in the examinations conducted by the Universities. Therefore in most cases, students landing in parallel colleges are the less fortunate ones who are compelled to join parallel colleges for economic reasons. It is worthwhile to note that the State Government after appreciating these realities have granted the same concession in bus fare granted to regular college students, to students in parallel colleges also. Financial benefits are provided to students from SC and ST community studying in parallel colleges also. Therefore, the State Government also treats the students in affiliated colleges and parallel colleges as part of the same class. In any case there can be no 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 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 31 ST/51954/2015 ST/60765/2019 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 burden of service tax on the parallel colleges will have to be borne by the students, and the validity of charging section has to be tested against Art. 14 of the Constitution with reference to its effect on the beneficiaries, that is the students. In view of the findings above, I find no distinction between students undergoing private study in parallel colleges and those undergoing study in affiliated colleges whether aided or self-financed in the same subjects for writing the same examinations. Therefore levy of service tax for services rendered by parallel colleges which indirectly falls on the students, but by simultaneously providing exemption to regular affiliated colleges allowing the students therein study free of tax is patently discriminatory and violative of Art. 14 of the Constitution of India. Though the service tax is in the Union list, since education happens to be in the concurrent list and considering the encouraging policy of the State Government to improve the educational opportunities of the students in the State, wherefrom large number of educated people migrate outside the State and outside the country seeking employment, the view of the State Govt. was called for by this Court. After referring the matter to the Cabinet, the Under Secretary to Government has filed an affidavit in Court wherein he has stated that though the State is helpless in regard to levy of service tax, the Government decided to bring it to the notice of the Central Government the difficulties experienced by parallel 32 ST/51954/2015 ST/60765/2019 colleges in the matter of service tax. In the circumstances, it has to be assumed that the State Government is also in favour of exemption to the parallel colleges in the same way granted to regular colleges under the exemption in the definition clause. In view of the above findings, I hold that the impugned provisions of the Act authorising levy of service tax on parallel colleges are arbitrary and violative of Art. 14 of the Constitution of India. However, I make it clear that the judgment is rendered on the peculiar facts applicable to parallel colleges in Kerala and this is not to be treated as declaring the Section unconstitutional in so far as any other category of educational institution or training centre is concerned. The impugned proceedings in all the WP Cases are quashed and respondents are prohibited from demanding registration or service tax 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.
33 ST/51954/2015 ST/60765/2019
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 Negative List of services under Section 66D of the Finance Act, 1994. Section 66D(l) of the Finance Act, 1994 reads as under :
(l) Services by way of -
(i) pre-school education and education up to higher secondary school or equivalent;
(ii) education as a part of curriculum for obtaining a qualification recognized by any law for the time being in force;
(iii) education as a part of an approved vocational educational course.
16. It is clear from Section 66D(l) of the Finance Act, 1994 that service provided by way of pre-school education and education up to higher secondary school or equivalent is not liable to Service Tax being in the Negative List. In the subject case, applicant and Choice Foundation propose to enter into a Partnering Agreement. Applicant and Choice Foundation would be formed for a specific purpose of providing education to students up to higher secondary school, wherein role of both the parties have been specified in said Agreement. Further proposed Agreement clearly mentions that the applicant and Choice Foundation would partner together to combine their mutual expertise for setting up and operation of an educational institution at Thiruvalla. Therefore, service provided by the "partnering person" would come under the Negative List and would not be liable to Service Tax.
24. We find that Hon‟ble Madras High Court in the case of Madurai Kamraj University - 2021 (54) GSTL 385 (Mad.) held that:
11. After having gone into these arguments and the connected records, this Court feels that, the only question posed before this Court for decision is that, whether the services rendered by the petitioner university by granting affiliation and its allied activities and also by providing shelter in their campus to the service providers like Bank, Post Office, or catering etc., directly beneficial to 34 ST/51954/2015 ST/60765/2019 the students, staff and faculty of the university, are exempted services within the meaning of Section 66D of the Finance Act and also under the Mega Exemption Notification of the year 2012 as amended from time to time.
12. The history of introduction of service tax has been traced by the Learned Counsel for the petitioner, which has been discussed in the earlier paragraphs. Up to 2012, the term "service" seems to have not been explained. First time, the term "service" has been explained under Clause (44) of Section 65B, which has already 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 diploma, Professional Degree or Post Graduate Degree are concerned, in order to obtain such qualification, if education being imparted as a part of curriculum, that education shall be part of service for the purpose Clause (l) for getting exemption.
15. When an educational institution is imparting education as part of curriculum for obtaining a qualification as stated supra, no doubt, such services are being exempted and in this 35 ST/51954/2015 ST/60765/2019 context, there can be no quarrel from the revenue side also.
16. However, whether such kind of service of imparting education as part of curriculum for obtaining a qualification whether is rendered by the petitioner university is a question where, it is the stand of the revenue that, the university is not directly imparting any education except providing affiliation to the institution, but would not deal with imparting education to the students. Therefore, the activities of affiliation and allied activities like inspection etc., cannot be treated as imparting education by the educational institution concerned.
17. However, insofar as the said stand taken by the revenue is concerned, we must take into aid the expanded provision which has subsequently been inserted under mega notification referred to above, whereby, clause (9) has been inserted with effect from 11-7-2014, where, the services provided by the educational institution to its students, faculty and staff are mentioned. The word "students", that we can understand, with, the services provided, is nothing but imparting education, whereas, the services to be provided by the educational institution to its faculty and staff is concerned, certainly, it may not be a direct activity of imparting education. No staff or faculty is going to get any imparting of education either from the institution or from the university. Hence, it is not limited to the services of imparting education to students alone for the purpose of exemption, but, it expands beyond which, where, whatever the services to be provided by the educational institution to its faculty and staff shall also form part of the activity of education being provided by way of services by the educational institution. If we take up this language used, exactly, the services provided by the educational institutions including the university not only for students but also for faculty and staff would be covered under the exempted 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 36 ST/51954/2015 ST/60765/2019 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.
19. In this context, sub-clause (iv) of clause (9) referred to above is so important, which says that, services related to admission or conduct of examination by such institution are exempted services. Here, the services rendered to admission is two fold, one is the admission being made for the students in a particular institution. However, such admission can be made legally by the said institution, only on the basis of the affiliation granted by the University, fixing the intake strength of each and every course for the particular academic year. Illustratively, if there is a class where the university has given permission/affiliation for 100 students, not even 101 students can be admitted by the college. Therefore, that admission of the students strictly relates to the affiliation granted by the university. Therefore, the affiliation activity is an integral part of imparting education for any student for getting qualified to get a qualification like degree or diploma. Accordingly, the services provided by the educational institution like the petitioner institution i.e., the university to give affiliation can be an integral part of the educational services, being provided jointly, both by the University and the college. The college cannot independently function without the affiliation of the university. Therefore, 37 ST/51954/2015 ST/60765/2019 for the purpose of providing the services of education, both the university as well as the college concerned, who get affiliated to the university, cannot be separated.
20. This is the purposive interpretation which is only possible, because, the services relating to admission and also the conduct of examination by such institution has been exempted. When we talk about the conducting of examination, it is the vehement contention of the revenue as submitted by the Learned Standing Counsel by relying upon the advance ruling referred to above, stating that, exempted service on the conduct of examination is that, it relates to admission to institution and anything related to examination, based on which, degree, title or diploma is conferred to the students.
21. With respect, this Court is of the concerned view that, that kind of narrow or pedantic interpretation cannot be possible 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 word "conduct of examination", cannot have such a narrow and pedantic interpretation as has been given by the Advance Ruling Authority in their order dated 19- 38 ST/51954/2015 ST/60765/2019 11-2020, which has been in fact, heavily relied upon by the respondent revenue. Therefore, this Court is not subscribing the said view given by the Advance Ruling Authority in their order dated 19- 11-2020.
22. In this context, it is further to be noted that, the very Advance Ruling Authority in the said order in paragraph No. 7.6 has also made it clear that, we do not part any opinion on the claim of the applicant that they extend such services to the institutions by extending the affiliation. Therefore, the said issue as claimed by the said university in the said ruling of the Advance Ruling Authority has not been answered and it has been kept open by stating the aforesaid that they do not want to express any opinion on such claim. Therefore, the claim made by the university on that aspect even though was indicated, the issue was kept open. In that context also, this Court feels that, no such pedantic or narrow view can be taken as that would destroy the very concept of providing exemptions to the services rendered by the educational institutions. The word "educational institution", cannot denote only the college affiliated to the university, but, it includes the university. As stated above, without the university, college cannot impart education on its own.
23. Moreover, the regime of service tax, i.e., prior to the GST came into the field, had continuously made available the exemption provisions, initially by Section 66D, from 2012, subsequently the mega notification, wherein, in the year 2014 clause (9) was inserted and subsequently by Notification No. 9/2016, Clause (l) of Section 66D, which was omitted from the year 2016, had been reintroduced by introduction of clause (oa), where, under the heading "educational institution", the exact Clause (l) of Section 66D has been inserted. 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 39 ST/51954/2015 ST/60765/2019 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, on both aspects, the assessment and demand made by the respondent, in the considered view of this Court, is untenable and therefore, it is liable to be interfered with.
25. The alternative appeal remedy plea raised by the respondent also has been considered and in this context, the judgment of the Gujarat High Court has been placed for my consideration, where the Court has simply relegated the party therein to go before the appellate authority under Section 86 of the Finance Act. In my considered view, here, the issue is, whether the exemption claimed by the petitioner is tenable or not is the main question, where, already there has been a judgment by the Learned Judge by order dated 22- 2-2021, as referred to above, where certain area has not been considered, as the mega notification was not brought before the Writ Court and therefore, it normally cannot be resolved by the appellate authority under Section 86 of the Finance Act. Therefore, that kind of relegation of parties to the appellate authority, in this context, in the present case, does not arise.
40 ST/51954/2015 ST/60765/2019
25. We find that in the impugned case, Revenue relies on the definition of "Franchise Service" as it existed before 01.07.2012, for a show cause notice issued for the period after 01.07.2012 when the concept of Negative List has been put in place and intends to levy service tax on the appellants under Franchise Service. Though, we are in agreement with the submission of the learned Counsel for the appellant that the definition of a service before 01.07.2012 cannot be transported to a period after 01.07.2012, we find it expedient to have a look at the erstwhile provisions so that it can be analyzed whether the appellant-university has rendered any taxable service post 01.07.2012. Erstwhile Section 65(47) of Finance Act, 1994 defines the "Franchise Service" as:
"65. (47) "franchise" means an agreement by which the franchisee is granted representational right to sell or manufacture goods or to provide service or undertake any process identified with franchisor whether or not a trade mark, service mark, trade name or logo or any such symbol, as the case may be, is involved;
(48) "franchisor" means any person who enters into franchise with a franchisee and includes any associate of franchisor or a person designated by the franchisor to enter into franchise on his behalf and 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 41 ST/51954/2015 ST/60765/2019 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 Tribunal in appellant‟s own case - 2016 (42) STR 474 (Tri. Del.) wherein it was held that the appellant-university provided Franchise Service. We find that the judgment was rendered in respect of the demand for the period before 01.07.2012 whereas the impugned case is for the period after 01.07.2012 that is after the introduction of Negative List of Services. We find that Section 66D(l) of the Finance Act, 1994 exempts services in relation to education as a part of a curriculum for obtaining a qualification recognized by any law for the time being in force. Moreover, we find that the judgments cited above were not available to the Bench while deciding the issue for the earlier period. Moreover, the Education Guide and the Circular dated 19th September, 2013 provide more clarity vis-à-vis the exemption available to services rendered in relation to education. Therefore, we find that much reliance cannot be placed on the decision of the Delhi 42 ST/51954/2015 ST/60765/2019 Bench in the appellant‟s own case. We find that this Bench while deciding the case of Swift Institute of Engineering and Technology -
2020 (34) GSTL 502 (Tri. Chan.) held that the appellant-university is not rendering any Franchise Service. We find that the position of Swift Institute of Engineering and Technology and the LCs/ RCs in the impugned case is comparable. In fact, the position of the LCs/ RCs is on a better footing inasmuch as they are conducting courses approved by the appellant-university, who also award degree/ diploma. The Bench finds in the case of Swift Institute of Engineering and Technology (supra) that:
14. The issue to be decided by us is regarding the classification of the courses being provided by the appellant falls under commercial coaching services and franchise services or not. It is a fact that the main appellant are recognized as Research and Education Society and conducts various courses affiliated by the various universities and also as per AITC approved courses and awards degree to the students. Regarding courses, which are being provided in collaboration with Coventry Universities, the same are also recognized by the UK Government as well as the parallelly by the Punjab Technical Universities. As Students are being enrolled by the main appellant initially to their institute and subsequently the students, who desired to pursue their study in the Coventry University, the appellant 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
43 ST/51954/2015 ST/60765/2019 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 advertisements about their existence, about courses being offered by them, about collection of charges from students, about placement of the students etc. and so much so by displaying the name of the PTU prominently at the premises; thus, the nature of Agreement prima facie suggests that LCs/ RCs represent the noticee in such activities as agreed upon in the MOU, which means that the noticee has granted representational rights to the LCs/ RCs and thus, become Franchises of the appellant-university. We are of the considered opinion that it is not open to the Adjudicating Authority to pick and choose from the clauses of the Agreement. We find that learned Commissioner has grossly overlooked the fact that the appellant-
university is in total control of the fees, the curriculum and award of degree/ diploma. The LCs/ RCs cannot operate independently just by using the name of the university in the respective area assigned to them. We find that Hon‟ble Bombay High Court in the case of Bharat Petroleum Corporation Ltd. - 2019 (24) GSTL 347 (Bom.) that the 44 ST/51954/2015 ST/60765/2019 clauses of the Agreement should not be read in isolation. Hon‟ble High Court held that:
6. We have perused the order impugned in this appeal. The order under appeal is rendered by the CESTAT and it was aware of the definition of the term "franchise service" as appearing in Section 65(47) of the Finance Act, 1994. First, the definition of the term "franchise" as found in this clause means an agreement by which the franchisee is granted representational right to sell or manufacture goods or to provide service or undertake any process identified with franchisor, whether or not a trade mark, service mark, trade name or logo or any such symbol, as the case may be, is involved. Insofar as the understanding of the Revenue about the "franchise service" is concerned, it is apparent that this is to be found in sub-clause (zze) of clause (105) of Section 65 of the Finance Act, 1994. There, the definition of "taxable service" means any service provided or to be provided and, in the instant case, to a franchise by the franchisor in relation to franchise.
7. We do not see how by reading clause (10) of the agreement in isolation can the Revenue reach this conclusion. The Tribunal found that clause (10) of the agreement between the assessee and the dealer was picked up and read in isolation to arrive at the above conclusion. That is not justified 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 45 ST/51954/2015 ST/60765/2019 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 the students, it cannot be said that the LCs are paying consideration to the appellant-university. LCs are acting merely as post-offices for the fees paid, by the students to the university, in the form of Demand Drafts. It is the university which is paying some portion of the revenue generated to the LCs/ RCs towards the services, if any, rendered by LCs/ RCs to the appellant-university. By no stretch of imagination, it can be said that the appellant-university is into a commercial activity and are rendering services to the LCs/ RCs for a consideration. It is very clear from the facts of the case and the MOU that the appellant-university is using the services of LCs/ RCs in discharging their statutory function of spreading education.
Service tax, if any, is leviable on the LCs/ RCs. However, this is not the case of the Department.
30. In view of the above discussion, we are of the considered opinion that there is no service rendered by the appellant-university.
Therefore, it cannot be categorized as any taxable service. The services rendered by them cannot be termed as Franchise Service by 46 ST/51954/2015 ST/60765/2019 no stretch of imagination. Revenue has not made out any case as regards either the taxability of the activity undertaken by the appellant-university or the category of service alleged to have been rendered by them. Even if it is alleged that the appellant or the LCs/RCs are rendering a service, the service falls under the purview of Article 243W of the Constitution of India read with S. No. 13 of the Twelfth Schedule which contemplates that the Municipalities are entrusted with the functions of promotion of cultural, educational and aesthetic aspects appellants are rendering services related to education which is exempt in terms of Section 66D (l) of the Finance Act, 1994 w.e.f. 01.07.2012. The alleged service is also exempted under Entry No. 39 of Notification No. 25/2012-ST, dated 20.06.2012, as amended and Notification No. 6/2014 - ST dated 11.07.2014 during the relevant period.
31. In view of the above, both the appeals are allowed with consequential relief, if any, as per law.
32. The early hearing application has become infructuous and disposed of accordingly.
(Order pronounced in the open court on 04/03/2025) (S. S. GARG) MEMBER (JUDICIAL) (P. ANJANI KUMAR) MEMBER (TECHNICAL) PK