Custom, Excise & Service Tax Tribunal
Schoolnet India Limited vs Noida on 20 May, 2026
CUSTOMS, EXCISE & SERVICE TAX APPELLATE TRIBUNAL
ALLAHABAD
REGIONAL BENCH - COURT NO.I
Service Tax Appeal No.70470 of 2020
(Arising out of Order-In-Original No.15-PR.COMM-ST-NOIDA-2020-21, dated -
31/07/2020 passed by Commissioner, Central Goods & Service Tax, Noida)
M/s Schoolnet India Limited .....Appellant
(Formerly Known as IL&FS Educational & Technology Service Ltd.
NTBCL Building, Toll Plaza, DND Flyway, Noida, Uttar Pradesh-201301)
VERSUS
Commissioner, Central Goods & Service Tax, Noida
....Respondent
(C-56/42, Renu Tower, Sector-62, Noida, Uttar Pradesh-201306)
AND
Service Tax Appeal No.70045 of 2021
(Arising out of Order-In-Original No.15-PR.COMM-ST-NOIDA-2020-21, dated -
31/07/2020 passed by Commissioner, Central Goods & Service Tax, Noida)
Commissioner, Central Goods & Service Tax, Noida
....Appellant
(C-56/42, Renu Tower, Sector-62, Noida, Uttar Pradesh-201306)
VERSUS
M/s Schoolnet India Limited .....Respondent
(Formerly Known as IL&FS Educational & Technology Service Ltd.
NTBCL Building, Toll Plaza, DND Flyway, Noida, Uttar Pradesh-201301)
APPEARANCE:
Shri B. L. Narasimhan, Advocate for the Assessee
Shri Santosh Kumar, Authorized Representative for the Revenue
CORAM: HON'BLE MR. P. K. CHOUDHARY, MEMBER (JUDICIAL)
HON'BLE MR. P. ANJANI KUMAR, MEMBER (TECHNICAL)
FINAL ORDER NO.-70172-70173 /2026
DATE OF HEARING : 11.03.2026
DATE OF DECISION : 20.05.2026
2 Service Tax 70470 of 2020 &
Service Tax Appeal No.70045 of 2021
P. ANJANI KUMAR:
M/s School Net India Limited (SNIL, formerly known as
'IL&FS Educational & Technology Service) arraign the impugned
Order-in-Original dated 31.7.2020, vide Service Tax Appeal No.
70470 of 2020, for the reason that a demand of Rs. 39, 56, 57,281
was confirmed and Revenue is in appeal against the same order,
vide Appeal No. 70045 of 2021, for the reason that a demand of
Rs. 34, 11, 31,936 was dropped.
2. Brief facts of the case are that M/s SNIL are engaged in
education, skill development, healthcare and cluster development
for long term and sustainable impact and are registered with the
Service tax department as a service provider under the category
of taxable services namely, Management or Business Consultant
Services, Commercial Training or Coaching Services, etc. Ministry
of Human Resource Development (HRD) launched the ICT@
School's Scheme in 2004 (revised in 2010) to provide
opportunities to secondary stage students to mainly build their
capacity on Information and Communication Technology (ICT)
skills and make them learn through computer aided learning
process. The Scheme is run by State Governments with funding
support from the Ministry of HRD. The students and teachers are
the beneficiaries of the activities undertaken under the ICT@
School' scheme. As per the guidelines issued w.e.f. 15.02.2011
• the scheme is envisaged for providing computer aided
education in Secondary and Higher Secondary Government
and Government aided schools;
• States are engaged and encouraged to implement the
program through a BOOT (Build-Own-Operate-Transfer)
model under which the supplier would make available the
ICT infrastructure for the duration of the contract period
(normally five years) on the basis of a service level
agreement and assurance of a periodic payment subject to
satisfactory maintenance;
• the State/UT Governments are free to partner with private
organizations or integrate it with other similar schemes for
3 Service Tax 70470 of 2020 &
Service Tax Appeal No.70045 of 2021
implementation of the 'ICT in schools' scheme including
providing for maintenance.
• the purpose of the scheme is to make all students of
Government and Government aided secondary and higher
secondary schools' IT literate.
• the scheme would involve formulation and transaction of
curriculum and syllabus on computer literacy for each of the
classes from IX to XII.
2.1. The Appellant was selected through bidding process and
have entered into agreements with authorities of various States's
Education Department or their authorized agencies of the States
namely Maharashtra, Odisha, Bihar, West Bengal, Rajasthan, and
Himachal Pradesh, for implementation of the ICT@ Schools
Scheme. Agreements were entered into with the primary aim of
providing computer aided learning and computer education
training among the students and teachers of the government and
government aided higher secondary schools.
2.2. On conduct of an audit of records of the Appellant, it
appeared to the Revenue that Appellant's had undertaken the
activities of Installation & Commissioning of IT infrastructure and
providing education related services to the Education
Boards/authorised companies of various States; these activities
were exempted under Serial No. 9 of the Mega Exemption
Notification No. 25/2012-ST dated 20.06.2012 as 'Auxiliary
Educational Services' only till 10.07.2014; vide the Notification
No. 06/2014-ST dated 11.07 2014, the exemption on services
provided to the schools by way of auxiliary education services was
omitted; a new concept of the exemption on services provided by
or to the educational institution was introduced and therefore, for
the period 11.07.2014 to 30.06.2017, these activities were not
covered either under Section 66D(l) of the Act or clause (c) of Sl.
No.12 or clause (b) of Sl.No.12A of the Mega Exemption
Notification. As the appellants did not pay service tax during the
period, a Show Cause Notice, dated 7.1.2019, demanding service
tax of Rs 73,67, 89,217, along with interest and penalty, for the
4 Service Tax 70470 of 2020 &
Service Tax Appeal No.70045 of 2021
period October 2014 to June 2017, was issued. The demand was
partly confirmed and partly dropped. Hence, these cross appeals.
3. B.L. Narasimhan, Learned Counsel for M/s SNIL submits that
the demand has considered six agreements; the SCN alleged that
the services provided by the Appellant are different and distinct in
nature and it involves the services namely (1) supply, installation
and commissioning service of computer hardware, software and
connected accessories in schools; (2) Management and
maintenance of the same; and (3) Imparting computer aided
learning or computer education to the students and teachers to
make them skillful in use of Information Technology; these
activities undertaken by the Appellant in the ICT Scheme are not
naturally bundled and the taxability and valuation of each of the
services is required to be considered separately; SCN has
classified the services of supply, installation and commissioning
service of computer hardware, software and connected
accessories under the definition of 'Works Contract' and
considered the other services of management and maintenance
and Computer Aided Learning as pure service in nature for
purpose of the valuation under Section 67 of the Act and Rule
2A(ii) of the Service Tax (Determination of Value) Rules, 2006.
3.1. He submits that the Adjudicating Authority partially agreed
with the Appellant's submissions that the services provided under
the ICT Scheme are naturally bundled as per Section 66F of the
Act by relying upon the Education Guide and AAAR Rulings passed
in Appellant's own case.; activities undertaken by the Appellant
cannot be taxed separately; he dropped the Service tax demand
of Rs. 34,11,31,936 and allowed 60% abatement benefit to the
entire services under Rule 2A(ii)(A) of the Valuation Rules. The
Adjudicating Authority confirmed the Service tax demand
amounting to Rs. 39,56,57,281/- along with interest and imposed
equal penalty by invoking the extended period of limitation holding
that the Appellant is providing bundled computer aided education
services to Government/Government Authorities; the services do
not fulfil the conditions (i) and (ii) of Section 66D(l) of the Act and
5 Service Tax 70470 of 2020 &
Service Tax Appeal No.70045 of 2021
are also not covered by Sl. No. 9 of the Mega Exemption
Notification; the appellants are not eligible for exemption under
Sl. No. 12/12A of the Mega Exemption Notification
4. Learned Counsel submits that the services in question are
naturally bundled and covered within the ambit of 'negative list'
and under 'mega exemption notification' and thus, no service tax
is payable; the allegations in the SCN that the services are
different and distinct in nature and are not naturally bundled have
been rejected by the Adjudicating Authority, by placing reliance
on Para 9.2.4 of the Education Guide and Maharashtra AAAR
Ruling dated 04.02.2019 [2019 (22) G.S.T.L. 569 (App. A.A.R.-
GST)]. He takes us through the provisions of Section 66F, 66D(l),
guidelines of the ICT Scheme and different agreements and
submits that the activities undertaken by the Appellant are
naturally bundled in the ordinary course of business and thus, are
in accordance with the provisions of Section 66F(3)(a) of the Act,
the essential character of this bundle is 'Education services; these
education services are covered under Section 66D(l) of the Act i.e.
negative list till 13.5.2016 and thereafter, exempted under Sl. No.
9 of the Mega Exemption Notification for the periods from
14.05.2016 to 30.6.2017. Learned counsel submits that the AAAR
ruling, relied upon by the adjudicating authority is squarely
applicable to the present case as the Section 8 read with Section
2(30) of the Central Goods and Service Tax Act, 2017 regarding
'composite supply' are similar to the Section 66F (3) (a) of the
Finance Act, 1994 as held by the Hon'ble Gujarat High Court in
the case of Torrent Power Ltd 2020 (34) GSTL 385
(Guj.)(Paragraph 26). He also relies on the following cases:
• Mody Education Foundation 2023-VIL-421-CESTAT-
DEL-ST;
• Logix Infrastructure Pvt Ltd 2019 (25) GSTL 59 (Tri. -
All.);
• Rajiv Gandhi University of Health Sciences, Karnataka
2022 (64) GSTL 465 (Kar.).
6 Service Tax 70470 of 2020 &
Service Tax Appeal No.70045 of 2021
5. Learned Counsel submits that merely because the payment
schedules are indicated separately in the impugned agreements
which are composite in nature, a single contract cannot artificially
be vivisected for the provision of different services as held in Sri
Chaitanya Educational Committee 2019 (22) GSTL 67 (Tri. - Hyd.)
and Western GECO International Ltd 2025-VIL-1919-CESTAT-
DEL-ST.
6. Learned Counsel submits that the Education Services were
covered under the 'Negative List' and under 'Mega Exemption
Notification'; Impugned Order acknowledges the fact that the
'bundled computer aided education services' are being provided
by the Appellant to Government/ Government Authorities;
however, the Adjudicating Authority has confirmed the demand
by holding that the conditions (i) and (ii) of Section 66D(l) of the
Act are not fulfilled and as such the said services are not covered
under Sl. No. 9 of the Mega Exemption Notification; the Impugned
Order has not given any cogent reasons for the denial of the
benefit to the Appellant under the said provisions/exemption
notification. He takes us through the relevant Provisions of the
Finance Act, 1994 and the Mega Exemption Notification and
submits that Section 66D(l) of the Act covers within its ambit
services by way of; (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 recognized by any law
for the time being in force; (iii) Education as a part of an approved
vocational education course; the term 'education' is of wide import
and connotes the process of training and developing the
knowledge, skill, mind and character of students by formal
schooling as held in the case of State of Odisha vs. Mamta
Mohanty, (2011) 3 SCC 436 and Sole Trustee, Lok Shikshana
Trust vs. CIT, (1976) 1 SCC 254 and Sahitya Mudranalaya Private
Limited vs. Additional Director General 2021 (46) G.S.T.L. 245
(Guj.) affirmed by the Supreme Court in 2021 (48) G.S.T.L. J62
(S.C.); the negative list regime under clause (i) and (ii) of Section
66D(l) of the Act, services were excluded by description
7 Service Tax 70470 of 2020 &
Service Tax Appeal No.70045 of 2021
irrespective of the person who is providing such services. He relies
on Principal ADG & Ors. vs. Rajiv Gandhi University of Health
Sciences, Karnataka 2024-VIL-780-KAR-ST affirmed by the
Supreme Court in 2025-VIL-46-SC-ST; in the instant case, the
activities undertaken by the Appellant under the ICT Scheme are
naturally bundled and the principal supply is the delivery of
computer education; as per the Agreements and the ICT Scheme,
the computer education services were provided by the Appellant
to the students of the Government Secondary and Higher
Secondary Schools and thus, the activities of the Appellant fell
under Sl. No.(i) of Section 66D (l) of the Act and were covered
under the negative list till 13.5.2016.
6.1. Learned Counsel refers to sample copies of the Marksheets of
the Government Schools and submits that the course of
ICT/computer training was part of curriculum for students up to
the higher secondary schools who made it mandatory for their
students and marks obtained in the 'computer subject' were
considered and given due weightage in the final examination
result; amended guidelines of ICT scheme particularly involve the
curriculum and syllabus on computer literacy; as per Clause 7 of
the Agreement (Payment terms), the part payment to the
Appellant is based on the performance of students which are being
adjudged in the annual examination in 'computer subject'
conducted by Government of Maharashtra, Director of Education
(Secondary & Higher Secondary); hence, the condition under Sl.
No. (ii) of Section 66D(l) also stands fulfilled.
7. Learned Counsel submits further that that, w.e.f. 14.5.2016,
clause (a) of Serial No. 9 of the Mega Exemption Notification
includes services provided by an educational institution to its
students, faculty and staff; the term 'educational institute' has
been defined under clause 2(oa) of the Exemption Notification to
mean an institution providing services by way of; (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 recognized by any law for the time being in force; (iii)
8 Service Tax 70470 of 2020 &
Service Tax Appeal No.70045 of 2021
Education as a part of an approved vocational education course;
these requirements are similarly worded in Section 66D(l) of the
Act as prior to 14.5.2016; the Appellant has provided the
computer education to higher secondary school students and it
also forms part of their curriculum for getting the qualification as
recognised by law satisfying the condition no. (i) and (ii) of Section
66D(l) of the Act; thus, the Appellant qualifies as the 'Educational
Institute'; as per the ICT School scheme the students and teachers
are the beneficiaries of the activities undertaken under the said
scheme; Clause 8.3. of the Agreement states that Contractor (the
appellant) shall impart technical training to the Subject teachers
for a period of ten days per year for normal operation, installing
and use of Textbook based Educational software, computer
education software, additional Educational Software, School
Management Software, common software applications (word/
presentation, spreadsheet etc.). He submits that the Appellant
being an 'educational institute' provided the computer education
services to the students and teachers; hence, the activities of the
Appellant were covered under Serial No. 9 of the Mega Exemption
Notification w.e.f. 14.5.2016.
8. Learned Counsel Submits, without prejudice to the above, even
assuming without admitting that the Appellant was providing
services only in relation to the installation, commissioning and
maintenance services of computer hardware, software and
connected accessories in schools as per the agreements, such
activities carried out by the Appellant are exempted as per Serial
No. 12 of the Mega Exemption Notification for the period till
31.03.2015, Section 102 of the Act for 1.04.2015 to 29.02.2016
and under Serial No. 12A of the Mega Exemption Notification from
01.03.2016. He submits that a plain reading of clause (c) of Sl.
No. 12 and clause (b) of Section 102 of the Act & 12A of the Mega
Exemption Notification makes it clear that for a service to be
exempt from service tax, the three conditions that are required to
be fulfilled are (i). Service to be provided to Government/local
authority/governmental authority (ii). Service is by way of
9 Service Tax 70470 of 2020 &
Service Tax Appeal No.70045 of 2021
construction, erection, commissioning, installation, completion,
fitting out, repair, maintenance, renovation or alteration of (iii). a
structure predominantly for use as an educational establishment.
8.1. Learned Counsel submits that in the present case, the
benefit of this exemption was denied to the Appellant only on the
assumed ground of non-fulfilment of the third condition as above;
Adjudicating Authority wrongly concluded (Para 5.6.2 of the
Impugned Order) that the activities of installation, commissioning
and maintenance was not done by the Appellant on a structure
meant predominantly for use as an educational establishment; the
term 'structure' is not defined under the Exemption Notification or
the Act; thus, a reference may be made to understand the
dictionary meanings of the said term or as interpreted by various
courts;
(i). Cambridge Advanced Learners Dictionary (Fourth
Edition) defines structure to relate to or forming part of the
structure of a building or other item;
(ii). Black' Law Dictionary (Tenth Edition) defines it to mean
any construction, production, or piece of work artificially built
up or composed of parts purposefully joined together or the
organization of elements or parts or A method of constructing
parts.
(iii). The Chambers Dictionary defines it to mean the manner
or (obs) act of putting together; construction; the
arrangement of parts; the manner of organization; a thing
constructed; an organic form.
8.2. Learned Counsel submits that from the meaning provided by
above dictionaries, it can be inferred that 'structure' would mean
a piece of work artificially built up or composed of parts
purposefully joined together or anything relating to or forming
part of the structure of a building; the term 'structure' is not
limited to building, and it also includes parts thereof; the term
'structure' must be given a wide meaning to include installation or
maintenance of anything which forms part of the structure. He
submits that the above exemption entries are not limited to
10 Service Tax 70470 of 2020 &
Service Tax Appeal No.70045 of 2021
erection/construction of a structure, and it also includes fitting
out, repair, maintenance, renovation, or alteration of already
constructed structure predominantly for use as an educational
establishment.
8.3. He submits that in the instant case, as per the agreements,
one room having enough space is to be provided by Schools to
Appellant for the creation of an IT infrastructure for a computer
laboratory by way of installation and commissioning of computer
hardware equipment; for creation of computer lab, the Appellant
was also required to undertake the finishing works such as tiling,
hoarding, wall plastering, electrical work; thereafter, the said
computer lab is further maintained by the Petitioner; thus, the
activities undertaken by the Appellant were in respect of the fitting
out, maintenance, and alteration of the structure/building
(Schools). Thus, the findings of the Adjudicating Authority are not
sustainable and liable to be set aside. He relies on Goa Friends
Engineering & Electricals Pvt Ltd 2021 (55) G.S.T.L. 306 (Tri. -
Mumbai) and on the case of Telecommunications Consultants
India Ltd (2025) 27 Centax 18 (Del.). He submits that entire
infrastructure set up by the Appellant in the Govt. Schools is used
to provide computer education to the students as well as training
to the teachers; thus, the structure was predominantly used for
education purpose in the Govt. Schools which are undisputedly
'educational establishment; the Appellant is eligible for the
exemption under clause (c) of Sl. No. 12 and clause (b) of Section
102 of the Act & 12A of the Mega Exemption Notification.
9. Learned Counsel further submits that the subject activities
fall under clause (a) of Sl. No. 12 and 12A of the Mega Exemption
Notification and Section 102 of the Act, "falling under any other
original works" meant predominantly for use other than for
commerce, industry, or any other business or profession; Clause
2(y) of the Exemption Notification, the term "original works" has
the meaning assigned to it in Rule 2A of the Service Tax
(Determination of Value) Rules, 2006; the term 'original works'
has been defined under Rule 2A as follows.
11 Service Tax 70470 of 2020 &
Service Tax Appeal No.70045 of 2021
"(a) "original works" means-
4.1. all new constructions;
4.2. all types of additions and alterations to abandoned
or damaged structures on land that are required to
make them workable;
4.3. erection, commissioning or installation of plant,
machinery or equipment or structures, whether pre-
fabricated or otherwise;
9.1. He submits that the 'equipment' covers within its ambit the
computer hardware, software and connected accessories and
thus, the activities of erection, commissioning or installation of
such equipment done by the Appellant are covered within the
definition of the 'Original Works'; the subsequent 'maintenance' of
such Original Works is also covered by the above exemption entry;
further, such Original Works done by the Appellant was for the
purpose of imparting computer education among the students as
per the ICT Scheme and such IT infrastructure was not used by
school students/teachers for any commercial or industrial
purposes; thus, the Appellant is eligible for the exemption under
the clause (a) of Sl. No. 12 and 12A of the Mega Exemption
Notification and Section 102 of the Act.
10. Learned Counsel takes us through contracts entered by
them with different State Governments and submits that as per
Section 66B of the Act, the taxable event was construed at the
time when the services are provided or agreed to be provided; in
respect of a majority agreements, no demand is sustainable, as
the taxable event occurred prior to 11.07.2014, being exempted
by the virtue of Sl. No. 9 of the Mega Exemption Notification for
"auxiliary education service; the SCN as well as the Impugned
Order accepts that the impugned activities carried out by the
Appellant in the above agreements were not taxable; all the
impugned agreements, except Agreement dated 26.03.2015 with
Webel Informatics Limited, West Bengal and the Agreement dated
31.03.2015 with State Project Director RMSA, Govt. of Himachal
12 Service Tax 70470 of 2020 &
Service Tax Appeal No.70045 of 2021
Pradesh, were executed prior to 11.07.2014; these two contracts
are however, covered by Section 66D(l) of the Act (Negative List)
• Madhya Pradesh State Mining, Corporation Limited 2023-
VIL-424-CESTAT-DEL-ST;
• Association of Leasing & Finance Service Companies
2010 (20) STR 417 (SC);
• Denso Haryana Private Limited, 2016 (42) STR 754
(Tri-Del);
• Petronet LNG LTD 2016 (46) S.T.R. 513 (Tri. - Del.);
• Modi-Mundipharma Pvt Ltd 2009 (15) S.T.R. 713 (Tri-
Del);
• 20th Century Finance Corporation and Anr 2000 (6)
SCC 12
10.1 Learned Counsel submits on the issue of limitation and
penalties under Section 75 and 78 that
• the present demand culminated from an audit and all the
details and documents were verified by the audit team and
all the material information was in the knowledge of the
department; there can be no question of any suppression of
facts or intent to evade payment of tax; it was held in a
plethora of cases that when a demand is based on audit
objection, there cannot be any allegation of suppression.
• the reasoning of the Adjudicating Authority for confirming
the invocation of extended period of limitation that the
Appellant neither sought any clarification from the
Department, is fallacious as there is no provision in the Act
which contemplates any procedure for seeking clarification
from jurisdictional service tax authority.
• the Appellant was functioning under the self-assessment
regime; appellant was under a bona fide belief that the
aforesaid activities were exempted from Service tax;
• appellant has been regularly filing its ST-3 returns and
cooperated with the department in audit proceedings and
have furnished all the details asked for by the Department.;
13 Service Tax 70470 of 2020 &
Service Tax Appeal No.70045 of 2021
• no positive action for a wilful default has been shown by the
department;
• payment of Service tax by the Appellant in respect of some
agreements does not mean acceptance of tax liability as
principles of Estoppel will not apply in instant case; present
case pertains to the complex interpretation of the legal
provisions as evident from the above submissions.
• since the demand itself is not admissible for the reasons
above, no penalty is imposable under Section 78 of the Act,
and no interest is recoverable under Section 75 of the Act;
no penalty is imposable in the absence of any mala fide.
10.2 Learned Counsel relies on the following as far as limitation is
concerned.
• Shriram Chits Pvt Ltd (69) GSTL 397 (Tri. - Hyd.)
affirmed by Hon'ble Supreme Court in 2023 (69) GSTL
338 (S.C.);
• Birla Corporation Limited (2023) 11 Centax 132 (Tri. -
Del) affirmed by the Supreme Court in (2023) 11 Centax
133 (S.C.); and
• Pragathi Concrete Products (P) Ltd., 2015 (322) ELT 819
(SC).
• Mahanagar Telephone Nigam Ltd. (MTNL) vs. Union of
India and Ors., 2023-TIOL-407-HC-DEL-ST (SLP filed by
the department was dismissed 2024 (388) E.L.T. 141
(S.C.).
• GD Goenka Private Limited 2023-VIL-798-CESTAT DEL-
ST New Delhi.
• Reliance Industries Ltd., 2023 (385) E.L.T. 481 (S.C.);
• Uniworth Textiles Ltd 2013 (288) E.L.T. 161 (S.C.)
11. Learned Counsel submits that the Appeal filed by the
Department is not sustainable on account of the above
submissions as the impugned activities undertaken by the
Appellant under the agreements during the relevant period were
exempted from Service tax; the department by way of its appeal
has asked for the re-quantification by vivisecting the goods &
14 Service Tax 70470 of 2020 &
Service Tax Appeal No.70045 of 2021
services value under Rule 2A(i) of the Valuation Rules to the
extent demand has been dropped by the Adjudicating Authority;
it is pertinent to note that the SCN has calculated the impugned
demand under Rule 2A(ii) of Valuation Rules by giving abatement
benefit of 60% to installation & commissioning services and 30%
abatement benefit to the maintenance services and on full value
for computer education services under Section 67 of the Act; the
department has gone beyond the SCN by contending the re-
quantification under Rule 2A(i) when there is no such proposal
exists in the SCN; further, the contention of the department to
vivisect the goods and service portion under the composite
contract is not sustainable in light of the decisions in the case of
Sri Chaitanya Educational Committee 2019 (22) G.S.T.L. 67 (Tri.
- Hyd.) and Western GECO International Ltd 2025-VIL-1919-
CESTAT-DEL-ST.
12. Shri Santosh Kumar, learned Authorised Representative,
appearing for the Revenue, reiterates the impugned order as far
as Appeal, No. ST/70470/ 2020, filed by M/s SNIL is concerned
and the grounds of appeal as far as Revenue Appeal, No.
ST/70045/2021 is concerned. The grounds of appeal briefly are
that :-
• the adjudicating authority has erred in holding
the services provided by the party as
composite indivisible "Works Contract Service"
without proper appreciation of the facts of the
case as well as the relied- upon documents;
the adjudicating authority has wrongly
concluded that the party had supplied goods as
well as services under the contracts which
could not be vivisected and, therefore, he
allowed a blanket abatement of 60% from the
total contract value. The Adjudicating Authority
has allowed abatement of 60% in these cases
also by taking recourse to Rule 2A(ii), whereas
Service Tax is required to be paid as per Rule
15 Service Tax 70470 of 2020 &
Service Tax Appeal No.70045 of 2021
2A(i) of the Service Tax (Determination of
Value) Rules, 2006.
• as per Annexure C and G, M/s SNIL provided
pure service to Bihar and Gujarat and they had
paid applicable Service Tax on the said service.
• as per Annexure H and I, i.e. agreements with
Pondicherry and Jharkhand, M/s SNIL raised
bills for service on which they had paid
appropriate Service Tax on the full value after
deducting the value of goods and VAT paid.
• invoices raised by M/s SNIL, the party for ICT
projects relating to Maharashtra (Annexure A),
West Bengal (Annexure D), Rajasthan
(Annexure E) and Himachal Pradesh (Annexure
F) have raised separate bills for hardware
against which VAT payment has been made,
and distinct bills for services provided including
maintenance.
• in respect of agreements with West Bengal
(Annexure D), Himachal Pradesh (Annexure F)
adjudicating authority has wrongly allowed
deduction of an amount which was already
considered at the Show Cause Notice stage.
13. Heard both the sides and perused the records of the case.
The brief issues that require to be decided in the instant case are
as to whether M/s SNIL are liable to pay Service Tax on the
services rendered by them in connection with ICT programme in
schools in different states as per the agreements with different
states and as to whether the deduction allowed by the
Commissioner are correct as per the Service Tax Valuation Rules.
In fact, the second question would have no relevance if the first
question is answered in the negative.
14. Ministry of Human Resource Development (HRD) launched
the ICT@ School's Scheme in 2004 (revised in 2010) to provide
opportunities to secondary stage students to mainly build their
16 Service Tax 70470 of 2020 &
Service Tax Appeal No.70045 of 2021
capacity on Information and Communication Technology (ICT)
skills and make them learn through computer aided learning
process. The Scheme is run by state governments with funding
support from the Ministry of HRD. The students and teachers are
the beneficiaries of the activities undertaken under the ICT@
School' scheme. As per the guidelines issued w.e.f. 15.02.2011.
The scheme is envisaged for providing computer aided education
in Secondary and Higher Secondary Government and
Government aided schools; States are engaged and encouraged
to implement the program through a BOOT (Build-Own-Operate-
Transfer) model under which the supplier would make available
the ICT infrastructure for the duration of the contract period
(normally five years) on the basis of a service level agreement
and assurance of a periodic payment subject to satisfactory
maintenance; the State/UT Governments are free to partner with
private organizations or integrate it with other similar schemes
for implementation of the 'ICT in schools' scheme including
providing for maintenance; the purpose of the scheme is to make
all students of Government and Government aided secondary and
higher secondary schools' IT literate; the scheme would involve
formulation and transaction of curriculum and syllabus on
computer literacy for each of the classes from IX to XII.
15. M/s SNIL was selected through bidding process and have
entered into agreements with authorities of various States's
Education Department or their authorized agencies of the States
namely Maharashtra, Odisha, Bihar, West Bengal, Rajasthan, and
Himachal Pradesh, for implementation of the ICT@ School's
Scheme. Agreements were entered into with the primary aim of
providing computer aided learning and computer education
training among the students and teachers of the government and
government aided higher secondary schools.
16. We find that M/s SNIL submits that they are providing
bundled services and the essential character to the bouquet of
services and creation of infrastructure and manpower is only for
supply of education and that the education service is covered
17 Service Tax 70470 of 2020 &
Service Tax Appeal No.70045 of 2021
within the ambit of 'Negative list' up to 13.05.2016 and under
'mega Exemption Notification' from 14.05.2016, on which no
service tax is payable by them. We find that learned Commissioner
relies on NIIT Ltd. Vs Commercial Tax Officer [2015] 56
taxman.com (Andhra Pradesh); Education Guide issued by the
Central Board of Excise & Customs, New Delhi and Advance Ruling
passed in party's own case on the same issue but for the GST
regime, vide order No. MAH/AAAR/SS- RJ/18/2018-19 dated
04.02.2019 and concludes that the services provided by the
appellants are bundled services. Learned Commissioner's findings
to conclude that the services rendered by M/s SNIL are taxable
holding that
5.4.4. On simultaneous reading of both Negative list and
the mega exemption I find that the exemption is available
on education service provided up to higher secondary or
equivalent and the part of curriculum for obtaining the
qualification recognized by law, to those service providers
who provide services to its students, faculty and staff.
In the instant case, the party has provided the computer
aided education which is appropriately defined in the
definition of 'Auxiliary Education Service' under para 2(f) of
the Notification No. 25/2012-S.T. dated 20.06.2012 as
under -
(f) "auxiliary educational services" means any services
relating to imparting any skill, knowledge, education or
development of course content or any other knowledge
enhancement activity, whether for the students or the
faculty, or any other services which educational institutions
ordinarily carry out themselves but may obtain as
outsourced services from any other person, including
services relating to admission to such institution, conduct
of examination, catering for the students under any mid-
day meals scheme sponsored by Government, or
transportation of students, faculty or staff of such
institution;
18 Service Tax 70470 of 2020 &
Service Tax Appeal No.70045 of 2021
As reflected from the above definition, the education which
any educational institute i.e, the school obtains as
outsourced services from any other person is covered under
the auxiliary education service. In fact, the party has
provided auxiliary education service to the
Government/Government authorities. Further, the said
service has been omitted from the mega exemption
notification No. 25/2012-dated 20.06.2012 as amended.
Therefore, the services provided by the party cannot
be covered in the education services under the
negative list or under mega exemption w.e.f.
11.07.2014.
xxxxxxxxxxxxx
5.5.2..........
In view of above facts, I find that, the party is providing the
bundled computer aided education service to the
Government/Government authorities and they neither fulfil
the condition Nos. (i) & (ii) of Section 66D(I) of the Finance
Act, 1994 which existed up to 13.05.2016 and nor covered
in S. No. 9 of the mega Exemption Notification No.
25/2012- S.T. dated 20.06.2012 as amended by
Notification No. 06/2014-S.T. dated 11.07.2014 and
further amended by Notification No. 09/2016-S.T. dated
01.03.2016. Therefore, the same is taxable under Section
65B (44) of the Finance Act, 1994 and chargeable to service
tax under Section 66B of the Act, ibid.
xxxxxxxxxxxxx
6.1. ----------
SERIAL NO. 12 OF MEGA EXEMPTION NOTIFICATION
NO. 25/2012-ST DATED 20.06.2012
19 Service Tax 70470 of 2020 &
Service Tax Appeal No.70045 of 2021
5.6.2. From perusal of the above provisions, I find that, the
benefit under S. No. 12/12A of the mega exemption cannot
be given to the party as they have not done installation,
commissioning and maintenance specifically on a structure
meant predominantly for use as an educational
establishment. In fact, they installed and commissioned the
computer in the already constructed structure i.e. the
Computer Lab in Schools and subsequently maintained the
same for further computer aided service. Therefore, the
supply of hardware and software and its installation,
commissioning and maintenance cannot be covered in S.
No. 12/12A of the Notification No. 25/2012 dated
20.06.2012 as amended by the Notification No. 06/2015
S.T. dated 01.03.2015 and further amended by the
Notification No. 09/2016 dated 01.03.2016.
17. We find that the Information and Communication Technology
(ICT) at Schools Scheme was launched in December 2004 by the
Ministry of Human Resource Development, Government of India.
The Scheme aimed to build ICT capacity among secondary and
higher secondary students in government and government-aided
schools and to promote computer-aided learning. Under the
Scheme, State Governments engage private organizations on a
Build, Own, Operate and Transfer (BOOT) model to set up
computer labs, supply hardware and software, deploy computer
instructors, impart computer training to students and teachers,
and maintain ICT infrastructure. The entire expenditure was borne
by the Central and State Governments. In terms of this scheme
M/s SNIL have bagged contracts from various state governments
as discussed above.
18. On going through the agreements entered by M/s SNIL with
different state Governments, we find that M/s SNIL are required
to;
20 Service Tax 70470 of 2020 &
Service Tax Appeal No.70045 of 2021
• supply computer hardware and connected accessories and
also providing text based educational software, computer
educational software.
• manage and online management dash board for standard
5th to standard 12th.
• set up computer lab and provide software with necessary
infrastructure like electrification, LAN cabling, fire safety
etc; to maintain the ICT Lab in proper working condition
• procure, customize and deploy text book-based software,
for standard 5th to standard 10th, in local language in every
computer lab.
• deploy and maintain school management software.
• train teachers of the school for normal operation and make
available manuals for teachers and provide one full time
Instructor at each school.
• appoint a help desk which will serve as a single point of
contact for all ICT related instances and service requests.
18.1. We find that as per the payment terms laid down in the
agreements, 30% payment is being made on satisfactory
commissioning and installation of hardware and delivery and
installation of education related software at each school within 120
days from the date of agreement; 5% made every semester and
the balance 20% payment made based on the performance of
student in the annual examination of the computer to be
conducted by the State Governments. As per the agreement, after
completion of the contract policy of 5 years, the equipment
installed and commissioned would be the property of Director of
Education and M/s SNIL shall handover all the hardware and
software at the end of 5 years.
19. Now, we proceed to analyse the question as to whether the
private service providers like M/s SNIL, were eligible for
exemption during the impugned period from payment of Service
Tax under the scheme. Section 66B of the Finance Act, 1994, the
charging section, w.e.f 1 July 2012, levies service tax on all
services, other than those specified in the negative list, provided
21 Service Tax 70470 of 2020 &
Service Tax Appeal No.70045 of 2021
in the taxable territory by one person to another. The term
"service" was defined in Section 65B (44) of the Finance Act, 1994
to mean any activity carried out by a person for another for
consideration. Under the ICT scheme, the private entities like M/s
SNIL are service providers and the state and central governments
are the service recipients under the tender contract. The service
provider, as above, has to build the infrastructure, under BOOT
model, for imparting computer education to the students and staff
in the government schools and later, transfer the ownership of
this infrastructure to the schools, for a consideration under the
contract.
20. The Finance Act,1994, does not define the term "education."
Since the term is undefined, it must be construed in its ordinary,
natural and common sense understanding as held by Hon'ble Delhi
High Court in National Board of Examinations v. Union of India
[(2024) 20 Centax 550 (Del.)]. Hon'ble High Court held that the
expression 'education' has not been defined in the 2017
Notification and therefore, must be construed in its ordinary
sense. (Para 13.22). The Court then referred to the Supreme
Court's interpretation in Sole Trustee, Lok Shikshana Trust v. CIT
[(1976) 1 SCC 254]:
82. 'Education' was held to mean 'the systematic
instruction, schooling or training given to the young
in preparation for the work of life. It also connotes
the whole course of scholastic instruction which a
person has received. What education connotes is the
process of training and developing the knowledge,
skill, mind and character of students by formal
schooling.'"
20.1. Hon'ble Delhi High Court further held that:-
72. In Sahitya Mudranalaya (P.) Ltd. (supra), the
Gujarat High Court had, inter alia, considered the
question, whether a State Board could be considered
as an educational institution within the meaning of
22 Service Tax 70470 of 2020 &
Service Tax Appeal No.70045 of 2021
clause (l) of Section 66D of the Finance Act, 1994,
which included certain services by education in the
negative list. Clause (l) of Section 66D of the Finance
Act reads as under:
"66D. Negative list of services. -The negative
list shall comprise of the following services,
namely:
(a) to (k)...
(l) services by way of
(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."
73. In terms of Entry No. 9 of the Mega Exemption
Notification no. 25/2012-ST dated 20-6-2012,
services provided to or by an educational institution
in respect of education, inter alia, by way of auxiliary
education services were exempted from the levy of
service tax.
74. Auxiliary education services were defined as
under:
"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 students
or the faculty, or 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
23 Service Tax 70470 of 2020 &
Service Tax Appeal No.70045 of 2021
for students under any mid-day meal scheme
sponsored by Government, or transportation
of students, faculty or staff of such
institution;"
75. Subsequently, clause (oa), which defined
'educational institution' was introduced in the Mega
Exemption Notification No. 25/2012 with effect from
11-7-2014 by Notification No. 06.2014 - Service
Tax. In terms of the said Clause, educational
institution was defined to mean institution providing
the services as specified in clause (l) of Section 66D
of the Finance Act, 1994. Thereafter, with effect
from 14-5-2016, the definition of 'educational
institution' in the Mega Exemption Notification No.
25/2012 was amended to read as under:
"(oa) 'educational institution'
means an institution providing services by
way of:
(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 recognized by
any law for the time being in force;
(iii) education as a part of an approved
vocational education course."
76. The exemption granted to educational
institutions within the meaning of clause (oa) of
Section 2 of the Mega Exemption Notification No.
25/2012 is also continued in terms of 2017
Notification. In Sahitya Mudranalaya (P.) Ltd.
(supra), the Gujarat High Court considered the
aforesaid definitions and held that the term
'education' is required to be read in an expansive
manner. Accordingly, the Gujarat High Court held
24 Service Tax 70470 of 2020 &
Service Tax Appeal No.70045 of 2021
that services rendered by the appellant (Sahitya
Mudranalaya Private Limited) to a State
Board/Central Board were also exempted from
payment of Service Tax. It is important to note that
the Court also drew support from the 2018
Notification II, whereby clause (iv) in Paragraph 3 of
the Explanation of the 2017 Notification was
introduced.......
21. The Gujarat High Court in Sahitya Mudranalaya Pvt Ltd Vs
Additional Director General [2021 (46) G.S.T.L. 245 (Guj.)]
adopted the same expansive reading, citing the Supreme Court's
decisions held that:
13.7.1. In Gujarat University v. Krishna Ranganath
Mudholkar (AIR 1963 SC 703), the Supreme Court
held that the expression 'education' is of wide import
and includes all matters relating to imparting and
controlling education.
13.7.2. In P.A. Inamdar v. State of Maharashtra
[(2005) 6 SCC 537], the Supreme Court held:
". 82. In Advanced Law Lexicon (P.
Ramanatha Aiyar, 3rd Edn., 2005, Vol. 2)
"education" is defined in very Wide terms.
It is stated: "Education is the bringing up;
the process of developing and training the
powers and capabilities of human beings.
In its broadest sense the word
comprehends not merely the instruction
received at school, or college but the
whole course of training moral,
intellectual and physical; is not limited to
the ordinary instruction of the child in the
pursuits of literature. It also
comprehends a proper attention to the
moral and religious sentiments of the
25 Service Tax 70470 of 2020 &
Service Tax Appeal No.70045 of 2021
child. And it is sometimes used as
synonymous with 'learning'."
83. In Sole Trustee, Lok Shikshana Trust
v. CIT, the term "education" was held to
mean: "the systematic instruction,
schooling or training given to the young
in preparation for the work of life. It also
connotes the whole course of scholastic
instruction which a person has received.
What education connotes is the process
of training and developing the knowledge,
skill, mind and character of students by
formal schooling."
84. In "India Vision - 2020" published by
the Planning Commission of India, it is
stated (at p. 250): "Education is an
important input both for the growth of the
society as well as for the individual.
Properly planned educational input can
contribute to increase in the gross
national products, cultural richness, build
positive attitude towards technology and
increase efficiency and effectiveness of
the governance. Education opens new
horizons for an individual, provides new
aspirations and develops new values. It
strengthens competencies and develops
commitment. Education generates in an
individual a critical outlook on social and
political realities and sharpens the ability
to self-examination, self-monitoring and
self-criticism."
22. The services rendered by M/s SNIL under ICT, include
providing the infrastructure like computers, connectivity; training
of the teachers and the students; providing for literature and
posters; aiding the teachers of different subjects in designing their
26 Service Tax 70470 of 2020 &
Service Tax Appeal No.70045 of 2021
teaching material; helping in the conduct of examination etc. It is
undeniably inclusive of systematic instruction and training of
students through technology as part of the school curriculum,
constitutes "education". It is also pertinent to note that a part of
the payment is also linked to the success rate of the students. in
view of the above decisions, the services by the private entities
like M/s SNIL, under the ICT scheme can be referred to as
Education services. It may be noted that the setting up of
infrastructure to impart the education is part of the service as well
and cannot be divorced from it and together it has to be
considered as a bundled service with imparting education as a
predominant nature of the bundled service. This contention is
addressed by Section 66F of the Finance Act, 1994, which provides
the statutory rule for classification of bundled services. Therefore,
the predominant nature of the service is education and the setting
up of ICT infrastructure component is merely the medium of
delivery. Applying Section 66F(3)(a), the service is a naturally
bundled service, notwithstanding the fact that in some cases
renumeration is separate for each activity and in some cases at a
time in total and its essential character is that of an education
service.
23. We find that Coordinate Bench of the Tribunal in Sri
Chaitanya Educational Committee (supra) considered this
provision and held that a composite course cannot be artificially
split:
20. ...the training/coaching provided by the
appellants in the Intermediate Colleges are
composite and an integrated course, whereby the
students become eligible for intermediate
qualification and simultaneously become prepared
for taking the entrance examinations. Such a course
cannot be artificially split as intermediate and
entrance coaching and more particularly demanding
service tax on even the intermediate coaching citing
inability to split the course fee."
27 Service Tax 70470 of 2020 &
Service Tax Appeal No.70045 of 2021
23.1. Tribunal further held that
30. "Furthermore, the appellants also place
reliance on Section 66F of the Finance Act, 1994
which states that in a bundled service where various
elements are naturally bundled in the ordinary
course of business, the service should be identified
from the predominant nature of service which gives
the bundle its essential character."
31. In the instant case, the primary activity of the
appellant is to impart intermediate education. The
appellants are imparting training for various
national entrance tests which are integrated to
their intermediate courses as prescribed by the
Board. Therefore, the predominant nature of the
service will be imparting formal education which
stands excluded from service tax net."
24. We find that Central Board of Excise and Customs addressed
this precise question in Circular No. 172/7/2013-S.T., dated
19.09.2013. Board identifies the two relevant provisions:-
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 (l)
thereof reads as under:
'Services by way of --
(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 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
28 Service Tax 70470 of 2020 &
Service Tax Appeal No.70045 of 2021
specified description. By virtue of the said power,
Government has issued a notification No. 25/2012-
ST 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;'"
25. Board further clarifies that 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. We find that the Circular thus
confirms that all education services are covered by one of two
provisions: (a) the negative list under Section 66D(l); or (b) the
exemption under Entry 9 of Notification No. 25/2012-S.T.
Therefore, the services provided by the private entity was not
liable to pay service tax on the services provided during the
impugned period.
26. We find that with effect from 1 July 2012, the Finance Act,
2012, introduced a comprehensive negative list-based service tax
regime introducing Section 66D(l), which was effective till
13.05.2016. Section 66B became the charging section, levying tax
on all services other than those specified in the negative list.
Section 66D enumerated the negative list. Clause (l) thereof read
as follows:
"66D. Negative list of services. -- The negative list
shall comprise of the following services, namely:
--
(l) services by way of --
(i) pre-school education and education up to higher secondary school or equivalent;
29 Service Tax 70470 of 2020 & Service Tax Appeal No.70045 of 2021
(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.
27. Services falling within this negative list were not merely exempt from tax, they were outside the charge of service tax altogether. The services in question are provided by M/s SNIL at government schools at the secondary and higher secondary level. The ICT education is delivered as part of the curriculum prescribed by the State Board. Students are evaluated on this content, and this evaluation contributes to the grant of the Secondary School Certificate or Higher Secondary Certificate, both of which are qualifications recognised by law. On these facts, the services fall squarely within Section 66D(l)(i), being services "by way of"
education up to higher secondary school or equivalent. They also fall within Section 66D(l)(ii), being education as a part of a curriculum for obtaining a qualification recognised by law.
28. The CBEC Educational Guideline dated 20.06.2012 clarified the scope of clause (l)(ii) at paragraph 4.12.1:
"What is the meaning of 'education as a part of curriculum for obtaining a qualification recognized by law'? It means that only such educational services are in the negative list as are related to delivery of education as 'a part' of the curriculum that has been prescribed for obtaining a qualification prescribed by law. It is important to understand that to be in the negative list the service should be delivered as part of curriculum. Conduct of degree courses by colleges, universities or institutions which lead grant of qualifications recognized by law would be covered. Training given by private coaching institutes would not be covered as such training does not lead to grant of a recognized qualification."
30 Service Tax 70470 of 2020 & Service Tax Appeal No.70045 of 2021
29. The ICT services rendered by M/s SNIL satisfy each element of this test: (a) they are delivered as part of the curriculum; (b) the curriculum has been prescribed for obtaining a qualification; and (c) the qualification (the Board certificate) is recognised by law. They are therefore, covered by the negative list. Hon'ble Gujarat High Court in Sahitya Mudranalaya Pvt. Ltd. v. Additional Director General 2021 (46) G.S.T.L. 245 (Guj.) considered the scope of clause (l) of Section 66D, placed express reliance on CBEC Circular No. 172/7/2013-S.T. which confirmed that "all services relating to education are exempt from service. The Court adopted an expansive reading of the word "education" and held that 13.22. .... education would mean the entire process of learning, including examination and grant certificate or degree or diploma, as the case may be and would not be limited to the actual imparting of education in schools, colleges or institutions only... Examinations are an indispensable component of education, without which such education is incomplete."
13.23. ...when sub-clause (ii) says education as a part of the curriculum for obtaining a qualification recognized by any law for the time being in force, it is apparent that the Legislature meant the entire process of preparation of curriculum to the holding of examination leading to obtaining of a qualification recognized by any law for the time being in force... Clearly, therefore, it was not the intention of the Legislature to exclude preparation of curriculum and holding of examinations from the ambit of clause (l) of Section 66D of the Finance Act, 1994."
30. The Special Leave Petition filed by the Revenue against the above decision was dismissed by the Supreme Court. The decision has attained finality. This fact was noted by Hon'ble Delhi High Court in the case National Board of Examinations Vs Union of India (2024) 20 Centax 550 (Del.).
31 Service Tax 70470 of 2020 & Service Tax Appeal No.70045 of 2021
67. ...a Division Bench of the Gujarat High Court had accepted that the State Board would fall within the definition of an educational institution in terms of clause (oa) of the Mega Exemption Notification No. 25/2012 relating to Service Tax... The Special Leave Petition preferred by the Revenue Department against the said decision was dismissed and the said decision has attained finality.
When the entire process of learning including examination and curriculum is covered under Section 66D(l), then the bundled services, provided by M/s SNIL, under the ICT scheme, stand covered by the definition.
31. We find that Section 66D(l) was omitted by the Finance Act, 2016 (No. 28 of 2016) with effect from 14.05.2016. However, this was not intended to create a new tax liability on education services. The D.O. Letter F. No. 334/8/2016-TRU, dated 29.02.2016, issued by the Joint Secretary (Tax Research Unit), explained the transition at paragraph 4.1(A):
"Presently, clause (l) of section 66D of the Act [Negative List] covers specified educational services. These services are proposed to be omitted from the Negative List but the service tax exemption on them is being continued by incorporating them in the general exemption notification (Notification No. 25/2012-ST as amended by notification No. 09/2016-ST, dated 1st March, 2016 refers). Consequently, the definition of 'approved vocational education course' [clause (11) of section 65B] is also proposed to be omitted from the Finance Act and is being incorporated in the general exemption notification. This amendment in the notification shall come into effect from the date of enactment of Finance Bill, 2016.
32. The JSTRU Letter makes it clear that the transition was revenue-neutral. The exemption was not being withdrawn; it was 32 Service Tax 70470 of 2020 & Service Tax Appeal No.70045 of 2021 being moved from the statute to the notification. Notification No. 9/2016-S.T. dated 1.03.2016 amended the definition of "educational institution" in clause 2(oa) of Notification No. 25/2012-S.T. Since Section 66D(l) was being omitted, the substance of that provision was incorporated directly into the definition. The amended clause 2(oa) is identically worded to the erstwhile Section 66D(l). As per Clause 2 "(oa) 'educational institution' means an institution providing services by way of
(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 recognized by any law for the time being in force;
(iii) Education as a part of an approved vocational education course.
33. M/s SNIL provides services by way of education up to higher secondary school, as part of a curriculum for obtaining a qualification recognised by law. It therefore, satisfies the definition of "educational institution" under clause 2(oa) as amended. This was also the earlier position. The D.O. Letter F. No. 334/15/2014-
TRU, dated 10.07.2014, which explained the insertion of the definition of "educational institution" by Notification No. 6/2014- S.T., stated at paragraph 2.2.2(i):
"At present, all services provided by educational institutions [providing educational services specified in the negative list] to their students, faculty and staff are exempted [section 66D(l) of the Finance Act, 1994]; this will continue... Further, for the purposes of this exemption, 'educational institution' is being defined in the exemption notification 25/2012-S.T., as institutions providing educational services specified in the negative list.
It may be noted that the scope of exemption remains the same as earlier in the case of services provided by eligible educational institutions..."
33 Service Tax 70470 of 2020 & Service Tax Appeal No.70045 of 2021
34. Entry 9(a) exempts all services provided by an educational institution to its students, faculty and staff; M/s NSIL falling within the ambit of an educational institution within clause 2(oa), provides ICT education services to students and staff of government schools. Entry 9 of Notification No. 25/2012-S.T., as it stood after the 2016 amendment, reads as under:-
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;
35. In view of our discussion as above, for the period 1.07.2012 to 13.05.2016, the services rendered by M/s SNIL, under ICT scheme services fall within the negative list under Section 66D(l)(i) and (ii) of the Finance Act, 1994. They are services by way of education up to higher secondary school and as part of a curriculum leading to a qualification recognised by law. They are outside the charge of service tax under Section 66B. From 14.05.
2016, the deletion of Section 66D(l) did not create a new tax liability as confirmed by the JSTRU Letter (D.O. F. No. 334/8/2016-TRU), the exemption was continued by Notification 34 Service Tax 70470 of 2020 & Service Tax Appeal No.70045 of 2021 No. 9/2016-S.T. M/s SNIL qualifies to be an "educational institution" under amended clause 2(oa), and the services are exempt under Entry 9(a) as services provided by an educational institution to its students.
36. We find that learned Commissioner finds that the services rendered by M/s SNIL include supply of hardware and software along with its installation & commissioning; Repair & Maintenance of above hardware & software and Computer aided education service. He analyses the contracts and relying on the provisions of Section (66F), JSTRU Letter & Service Education Guide and NIIT Ltd Vs Commercial Tax Officer (2015) 56 taxman.com (Andhra Pradesh) and finds that the services are inseparable and naturally bundled. However, the adjudicating authority fails to appreciate that M/s SNIL are providing the bundled computer aided education service to the Government/Government authorities" and that such "education services" fulfill the condition Nos. (i) & (ii) of the Section 66D(I) of the Finance Act, 1994 (up to 13.05.2016) and thereafter, of S. No. 9 of the mega Exemption Notification No. 25/2012- S.T. dated 20.06.2012 (as amended) and therefore, M/s SNIL are not subject to tax and are eligible for exemption. We find that in view of the CBEC Educational Guide dated 20.06.2012, the services in questions provided by M/s SNIL satisfy each element of this test viz (a) they are delivered as part of the curriculum; (b) the curriculum has been prescribed for obtaining a qualification; and (c) the qualification (the Board certificate) is recognized by law. Thus, they are therefore covered by the negative list up to 13.05.2016 and thereafter by Sl. No 9 of the Mega Exemption. Moreover, the clarification issued by CBEC, as discussed above, states categorically that no new Service Tax liability arises in view of the changes made w.e.f.14.05.2016.
37. For all the reasons cited above and discussion, we find that the impugned order cannot be sustained as far as confirmation of Service Tax demand on M/s SNIL is concerned. As the services rendered by M/s SNIL are held not be subjected to Tax and are covered by exemption notification in the respective periods, 35 Service Tax 70470 of 2020 & Service Tax Appeal No.70045 of 2021 Revenue appeal on the question of bundling of services and admissibility of abatement is rendered not-maintainable.
38. Accordingly, Service Tax Appeal No. 70470 of 2020 filed by M/s SNIL is allowed and Service Tax Appeal No. 70045 of 2021 filed by Revenue is dismissed.
(Pronounced in open court on 20.05.2026) Sd/-
(P. K. CHOUDHARY) MEMBER (JUDICIAL) Sd/-
(P. ANJANI KUMAR) MEMBER (TECHNICAL) Nihal