The Bangalore Bench of the Customs, Excise & Service Tax Appellate Tribunal (CESTAT) has held that recruitment fees collected by educational institutions during campus placements are liable to service tax, while participation fees charged for infrastructure and facilitation are not taxable.
The bench of Dr. D.M. Misra (Judicial Member) and R. Bhagya Devi (Technical Member) has observed that recruitment fees collected only upon successful placement of students are directly linked to recruitment activity and therefore taxable under the category of manpower recruitment services.
The decision came in the case involving M/s. Indian Institute of Management Bangalore (IIM-B), where the Tribunal partly allowed the appeals and modified earlier orders confirming service tax demands.
The dispute arose after the Service Tax Department alleged that IIM Bangalore was providing “manpower recruitment or supply agency services” by facilitating campus placements and collecting fees from corporate recruiters. Based on this, two show cause notices were issued demanding over ₹1 crore in service tax for the period between May 2006 and September 2010, along with interest and penalties.
IIM Bangalore contended that it is an institution of national importance engaged primarily in imparting education, and that campus placement activities conducted through its student placement committee were merely incidental to its core educational function. It argued that the fees collected—both participation fees and recruitment fees—should not attract service tax as they were not part of any commercial manpower recruitment service.
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The Tribunal examined the statutory definition of “manpower recruitment or supply agency” under the Finance Act, 1994, along with CBEC circulars clarifying taxability of campus recruitment services. It noted that CBEC had specifically clarified that institutions like IITs and IIMs fall within the scope of manpower recruitment services when they charge fees for facilitating recruitment.
However, the Tribunal drew a clear distinction with respect to participation fees, observing that these charges were collected from companies for accessing campus infrastructure and participating in the selection process, irrespective of whether any recruitment actually took place. It ruled that such fees do not have a direct nexus with recruitment services and hence cannot be subjected to service tax under the same category.
On the issue of limitation, the Tribunal held that extended period of limitation could not be invoked, as the Department was already aware of the institute’s activities from earlier proceedings and audits. Consequently, the demand was restricted to the normal limitation period.
Further, noting that the issue involved interpretation of law and evolving definitions, the Tribunal set aside penalties imposed on the institute. It also allowed the benefit of cum-tax valuation while computing the service tax liability.
The Tribunal partly upheld the tax demand by confirming service tax on recruitment fees for the normal period, while quashing the demand on participation fees and penalties, thereby providing significant clarity on the taxability of campus placement-related charges by educational institutions.
Case Details
Case Title: M/s. Indian Institute of Management Bangalore Versus The Commissioner of Service Tax
Citation: JURISHOUR-992-CES-2026(BANG)
Case No.: Service Tax Appeal No. 1538 of 2011
Date: 27.04.2026
Counsel For Appellant: N. Anand, Advocate
Counsel For Respondent: Vikalp Jain, Superintendent (AR)
