Custom, Excise & Service Tax Tribunal
Council Of Architecture vs Commissioner Of Service Tax-Delhi Ii on 19 July, 2024
CUSTOMS, EXCISE & SERVICE TAX APPELLATE
TRIBUNAL
NEW DELHI
PRINCIPAL BENCH - COURT NO. - IV
Service Tax Appeal No. 53090 of 2016 [DB]
[Arising out of Order-in-Original No. DLI-SVTAX-002-COM-013-16-17 dated
12.09.2016 passed by the Commissioner of Service Tax, Delhi - II]
M/s. Council of Architecture ...Appellant
Core-6A, India Habitat Centre,
Lodhi Road, New Delhi - 110003
VERSUS
Commissioner of Service Tax, Delhi-II ...Respondent
5th Floor, 14-15, Farm House, Nehru Place, New Delhi - 110019 WITH Service Tax Appeal No. 51947 of 2022 [DB] [Arising out of Order-in-Original No. 85-86/COMMR/DELHI EAST/A.P./2021- 22dated 27.04.2022 passed by the Commissioner of Central Tax: GST Delhi East] M/s.Council of Architecture ...Appellant Core-6A, India Habitat Centre, Lodhi Road, New Delhi - 110003 VERSUS Commissioner of CGST, Delhi East ...Respondent C.R. Building, IP Estate, East Delhi, New Delhi - 110002 APPEARANCE:
Shri Sushil Kumar Sharma, Advocate for the Appellant Shri Rajeev Kapoor, Authorized Representative for the Respondent CORAM:
HON'BLE DR. RACHNA GUPTA, MEMBER (JUDICIAL) HON'BLE MRS. HEMAMBIKA R. PRIYA, MEMBER (TECHNICAL) DATE OF HEARING: 19.03.2024 DATE OF DECISION: 19.07.2024 FINAL ORDER No. 56053-56054/2024 DR. RACHNA GUPTA Present order disposes of two appeals pertaining to the same assessee and involving the same issue and having the same 2 ST/53090/2016, ST/51947/2022 adjudication order. Details of both the appeals are tabulated as below:
Appeal No. ST/53090/2016 Appeal No.
O.I.O dated 12.09.2016 ST/51947/2022 dated
27.04.2022
SCN 1 SCN 2 SCN 3 SCN 4 SCN 5
Period 01.07.2012 2013-14 2014-15 2015-16 01.04.2016
to to
31.03.2013 30.06.2017
Demand 29,01,463 58,41,183 86,18,304 69,16,284 1,84,68,492
Confirmed
Penalty 14,70,732 5,94,118 8,71,830 7,11,628 18,66,849
imposed
The appeals have been filed to assail the aforementioned Order-in-Original bearing no. DLI-SVTAX-002-COM-013-16-17 dated 12.09.2016 and Order-in-Original No. 85-86/COMMR/DELHI EAST/A.P./2021-22 dated 27.04.2022. The facts relevant for the adjudication are as follows:
1.1 The appellant is engaged in providing services to the colleges or institutions imparting architectural education for granting recognition. While conducting an investigation against the appellant it was found that appellant was receiving amounts under the heads of Registration fees, Annual Renewal Fees, Restoration Fee, Duplicate Certificate fees, Fine from Architects, Apportionment of One time Renewal Fees, Equivalence Fees, RTI Fees, Nata Fees, Sale of Architectural Books, Advances recovered from staff, Maturityvalue of fixed deposit receipts, TDS refunds, Part fees on account, Arbitration fees, Interest received etc. Department formed an opinion that none of these activities are covered under the mega exemption Notification No.25/2012-ST dated 20.06.2012 nor fall under negative list of Section 66D of Finance Act 1994. The activities rendered by appellant were alleged to be taxable activities to which the tax liability has not been discharged by the appellant. It was opined by 3 ST/53090/2016, ST/51947/2022 the department that the non-payment of service tax has resulted into violation of various Section of Chapter 5 of Finance Act and also of Rule 2A and Rule 3 of point of taxation Rules, 2011 read with Rule 2(1)(d) of Service Tax Rules, 1994. Accordingly, vide aforementioned five show cause notices, the respective demand for the respective period were proposed by the department. Three of the said show cause notices have been adjudicated by one Order-in-
Original, remaining two wereadjudicated vide another Order-in- Original as mentioned in the above table. Both the orders have confirmed the proposed demand and have imposed penalty to the extent as mentioned in the above table. Being aggrieved of those orders the appellant is before this Tribunal.
2. We have heard Shri Sushil Kumar Sharma, learned Advocate for the appellant and Shri Rajeev Kapoor, learned Authorized Representative for the department.
3. Learned counsel for the appellant has mentioned that appellant is constituted by Ministry of Education, Government of India under Architect Act, 1972. The function performed by the appellants are the statutory functions which are not in the nature of contractual service to any individual for any consideration. Hence, the question of the activity of appellant to be a taxable services does not at all arise. Order under challenge is liable to be set aside on this ground itself.
3.1 It is further mentioned that appellant is registered under Section 12AA of Income Tax Act, 1961 having registration dated 15.09.1994 4 ST/53090/2016, ST/51947/2022 as Association of person (AOP-Trust) and as such is a non-business entity. The appellant since has not provided any service to individual architect nor has received any consideration towards any individual service, hence, there is no quid pro quo in its functioning. It is neither a commercial concern nor carries out any economic activity except carrying out its statutory regulatory function as envisaged under Architects Act, 1972 enacted by the act of Parliament. 3.2 It is further impressed upon that to carry out its objectives as prescribed under the said statute read with Council of Architecture Rules, 1973, the appellant is funded by Government of India as well as bestowed with the authority to receive various fees, as mentioned in the show cause notice, in order to made its expenses. These amounts are collected as minimal administrative charges to meet certain expenditure incurred including Honorarium, travelling and stay arrangement of inspector/expert, procurement and maintenance of softwares, ERPs etc. The prescribed fees are collected as the regulatory body for self-financing its expenses without any motive of carrying out any kind of commercial/economic activity of profit. The activity is specifically exempted vide Mega Exemption Notification No. 25/2012. The denial of benefit under said notification to the appellant in the order under challenge is not sustainable. For these reasons, the order is prayed to be set aside and appeals are prayed to be allowed. Learned counsel has relied upon the following decisions:
(i)Assistant Commissioner of Income Tax (Exemptions) Vs. Ahmedabad Urban Development Authority in Civil Appeal No. 21762 of 2017 vide its order dated 19.10.2022
(ii) M/s. Bureau of Energy Efficiency Vs. CST reported as 2019 (22) GSTL 25 (Tri.-Delhi) 5 ST/53090/2016, ST/51947/2022
(iii) Madurai Kamaraj University Vs. Joint Commissioner of Goods and Service Tax & Central Excie, Madurai reported as 2021 54 GSTL 385 (Madra)
(iv) Dr. MGR Medical University Vs. Principal Additional Directior General of Goods and Service Tax reported as 2022 141 taxmann.com 537 (Madras)
(v) Commissioner of Central Excise & CGST, Kanpur Vs. M/s.
Indian Institute of Technology (Tri.-Allahabad)
4. While rebutting these submissions, learned Departmental Representative has reiterated the findings arrived at by the original adjudicating authority. Impressing upon no infirmity in the order mentioning that the amount collected by the appellant is towards their own commercial activity, both the appeals are prayed to be dismissed.
5. Having heard both the parties and the rival contentions, we observe and hold as follows:
5.1 The appellant has foremost relied upon the Mega Exemption Notification No. 25/2012. The relevant Entry No. 9 reads as follows:
(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;
"Provided that nothing contained in clause (b) of this entry shall apply to an educational institution other than an institution providing services by way of pre-school education and education up to higher secondary school or equivalent,'''' inserted vide notification 10/2017-service Tax.6
ST/53090/2016, ST/51947/2022 5.2 The notification under Entry No. 6 thereof also exempt the services provided by any person other than a business entity. We observe that there is no denial to the fact that appellant is creature of the statute, the Architects Act, 1972. There is also no denial to the fact that the functions carried by the appellants are nothing but the objectives enshrined under the said statute. The objectives for which appellants are constituted are observed as follows:
a) The Objective of enactment of the Architects Act, 1972 is to grant exclusive authority to Appellant to register Architects and entitle them to practice the profession of Architecture all over India.
b) To control and regulate the entry into the profession of Architecture by regulating entire admission process in Architectural institutions by prescribing minimum standards for architectural education for imparting the recognised qualifications under the Architects Act, 1972.
c) COA conducts NATA examination on All India Basis as an admission/aptitude test for admission to B. Arch Course to ensure uniformity of admission standards. The COA also ensures that all students admitted possess the minimum standards as prescribed by the Architects Act, 1972 and Rules and Regulations thereunder.
d) In order to ensure that the aforesaid standards are duly followed, the COA makes continuous evaluation of Colleges and Universities through its Assessors/Inspectors/ Experts and collects all information in a prescribed format from institutions admitting students.
e) Further, the Appellant grants permission for admission and to conduct the architecture course as per its Minimum Standards of Architectural Education Regulations to the concerned Institutions (IITS, NITS, SPAs, Private Universities, Deemed Universities, affiliated colleges/schools, and autonomous institutions etc.).
f) As stated in section 25 of the Architects Act, 1972 read with rule 29 of Council of Architecture Rules, 1973, every architect who holds the 7 ST/53090/2016, ST/51947/2022 degree of B.Arch. and wishes to practice as an Architect, shall register himself with COA by submitting an application form with documentary evidence accompanied by the prescribed fees as notified by the Central Government by way of an official gazette, which is not discretionary in nature.
g) As a Disciplinary Authority, the COA has prescribed Code of Conduct and ethics to regulate the professional conduct and ethics of Architects so as to serve public interest of general public and maintain discipline among themselves.
5.3 The perusal of these objectives makes it clear that the activity of the appellant is squarely covered under Entry No. 9 of the above notification. The Mega Exemption Notification No. 25/2012, Entry No. 6 thereof, also exempt the services provided by any person other than a business entity. The word 'business' has not been defined in chapter V of the Finance Act, 1994. However, it has been interpreted consistently by Supreme Court under Income Tax and Sales Tax laws:
(a) The Hon'ble Supreme Court in State of Andhra Pradesh Vs. H. Abdul Bakshi and Bros. Reported at (15) STC 644 (SC), inter alia, held as under:
"we are unable to agree with the view of the High Court. A person to be dealer must be engaged in the business of buying and selling or supplying the goods. The Expression "business" through extensively used in a word of indefinite import, in taxing statute it is used in the sense of an occupation, or professionwhich occupies the time, attention and labour of a person normally with the object of making profit. To regard an activity as business there must be a course of dealings, either actually continued of contemplated to be continued with a profit motive, and not for sport or pleasure.
(b) The Hon'ble Supreme Court in case of SenairamDoongarmal Vs. CIT-
1961 (42) ITR 392 (SC)], observed as under:-
"The word "business" is not defined exhaustively in the Income-tax Act, but it has been held both by this Court and the judicial Committee to denote, an activity with the object of earning profit. To say that a business is being carried on, means no more than that profit is to be earned by a process of production."8
ST/53090/2016, ST/51947/2022 5.4 In the present case, the appellant is a statutory body carrying out the functions as laid down by the statute. It is collecting all such amounts as mentioned in the show cause notice but as per the statutory mandate of Section 18, 19, 21, 27, 29, 32, 33, 38 and 49 of the Architects Act, 1972 read with Rule 30 and 34 of Council of Architecture Rules. All kinds of the fees are apparently charged for inspection and approval of new institution as well as existing institutions admitting and offering recognised qualifications in the Architecture in India and for meeting out the other statutory objectives including promotion, research and development in architectural education. The appellant is publishing the articles/research papers for architects in magazines and books which are printed at no profit no loss basis and are supplied to architectural institutes, registered architects, council member etc. and some of the books are being supplied free of cost. We do not find any denial to thesefacts observed from record of appeal. Hence we hold that the impugned prescribed fees are collected by the appellants as a regulatory body for self financing its expenses incurred without motive of carrying out any kind of the commercial and economic activity of profit.
5.5 We observe that appellant admittedly is registered under Section 12AA of the Income Tax Act. The section provides that non-profit organisations like charitable trusts, welfare societies, NGOs, religious institutions etc. are entitled to tax exemption. The certificate of appellants' registration as a charitable trust is also on record. We rely upon the decision of Hon'ble Supreme Court in the case of Ahmedabad Urban Development Authority (supra) wherein it has been held that the income and receipts of statutory regulatory 9 ST/53090/2016, ST/51947/2022 bodies which are for instance, tasked with exclusive duties of prescribing curriculum, disciplining professionals and prescribing standards of professional conduct, are prima facie not business nor commercial receipts, if the regulatory body is to be considered as one with "charitable purpose" eligible for exemption under the Income Tax Act. We observe that appellant admittedly is registered under Section 12AA of the Income Tax Act. The section provides that non- profit organisations like charitable trusts, welfare societies, NGOs, religious institutions etc. are entitled to tax exemption. The certificate of appellants' registration as a charitable trust is also on Further, there is department's own Circular No. 177/09/2022- TRU dated 03.08.2022 wherein it has been held that all services supplied by an 'educational institution' to its students are exempts from GST. Consideration charged by the educational institutes by way of entrance fee for conduct of entrance examination is also exempt. The exemption is wide enough to cover the amount or fee charged for admission or entrance, or amount charged for application fee for entrance, or the fee charged from prospective students for issuance of eligibility certificate to them in the process of their entrance/admission to the educational institution. Services supplied by an educational institution by way of issuance of migration certificate to the leaving or ex-students are also covered by the exemption. Accordingly, such activities of educational institution are also exempt. Accordingly, it is clarified that the amount for fee charged prospective students for entrance or admission, or for issuance of eligibility certificate to them in the process of their entrance/admission as well as the fee charged for issuance of migration certificates by educational institutions to the leaving or 10 ST/53090/2016, ST/51947/2022 ex-students is covered by exemption under Sl. No. 66 of Notification No. 12/2017-Central Tax (Rate) dated 28.06.2017. 5.6 A prior circular also bearing no. 89/7/2006-ST dated 18.12.2006 has clarified that statutory functions performed in terms of specific responsibility assigned to a sovereign/public authority or any authority under law in force does not constitute provision of taxable service to a person and therefore no service tax is leviable on the activities of such authority. CESTAT Mumbai while relying upon this circular in the case of MIDC Vs. CCE reported as 2014 TIOL 2022 (Tri.-Mum.) has held that the fee collected by the authority constituted under provisions of law for performing such activity which is in nature of compulsory/statutory levy as per the provisions of relevant statute and that it is deposited in the government treasury, such activity is undertaken as mandatory and statutory function and thus, do not come under the ambit of taxable service. Hence, no service tax is leviable on such activity. The Hon'ble Supreme Court in Ahmedabad Urban Development Authority (supra) has clarified that the income and receipts of statutory regulatory bodies which are for instance, tasked with exclusive duties of prescribing curriculum, disciplining professionals and prescribing standards of professional conduct, are prima facie not business or commercial receipts. However, this is subject to the caveat that if the assessing authorities discern that certain kinds of activities carried out by such regulatory body involved charging of fees that are significantly higher than the cost incurred (with a nominal mark-up) or providing other facilities or services such as admission forms, coaching classes, registration processing fees, etc., at markedly higher prices, those would constitute commercial or business receipts. In that event, the 11 ST/53090/2016, ST/51947/2022 overall quantitative limit prescribed in the proviso to Section 2(15) (as amended from time to time) has to be complied with, if the regulatory body is to be considered as one with 'charitable purpose' eligible for exemption under the IT Act. Like statutory authorities which regulate professions, statutory bodies which certify products (such as seeds) based on standards for qualification, etc. will also be treated similarly. The original adjudicating authority has confirmed the demand holding that the appellants are neither covered under Mega Exemption Notification nor under the negative list, are therefore not sustainable.
6. In the light of entire above discussion, the orders under challenge are hereby set aside. Consequent thereto, both the appeals are hereby allowed.
[Order pronounced in the open court on 19.07.2024] (DR. RACHNA GUPTA) MEMBER (JUDICIAL) (HEMAMBIKA R. PRIYA) MEMBER (TECHNICAL) HK