The Customs, Excise and Service Tax Appellate Tribunal (CESTAT), New Delhi, has held that an education service provider need not itself be a university to claim service tax exemption for courses forming part of a curriculum leading to a qualification recognised by law.
The bench of Hemambika R. Priya (Technical Member) ruled that the exemption under Section 66D(l)(ii) of the Finance Act, 1994 focuses on the nature of the education imparted and the qualification obtained, rather than requiring the service provider to possess the status of a university.
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At the same time, CESTAT held that an associate or franchise training centre cannot claim the exemption available to a training partner approved by the National Skill Development Corporation (NSDC) when it is not itself directly approved by the NSDC or the relevant Sector Skill Council.
The dispute arose after the Service Tax Department examined third-party information received from the Income Tax Department. According to the authorities, Edupro E-Solutions had earned differential income of Rs 1.21 crore during the financial year 2015-16.
After finding the documents submitted by the company unsatisfactory, the Department issued a show-cause notice dated April 15, 2021. It proposed a service tax demand of Rs 17.59 lakh by invoking the extended limitation period under the proviso to Section 73 of the Finance Act, 1994.
The notice also proposed recovery of interest and imposition of penalties under Sections 77(1)(c) and 78 of the Finance Act.
As the company neither replied to the notice nor appeared for the personal hearing, the adjudicating authority confirmed the entire tax demand with interest. It also imposed a penalty of Rs 10,000 under Section 77(1)(c) and a penalty equal to the tax demand under Section 78.
On appeal, the Commissioner (Appeals) granted relief on several components of the alleged differential income but sustained tax demands on two categories of educational and skill-development services. The surviving demand amounted to Rs 81,843.
Indirect Association With NSDC Training Partner
The first dispute concerned Rs 3.14 lakh received by Edupro E-Solutions from Globsyn Skill Development Private Limited for conducting skill-development courses under the Pradhan Mantri Kaushal Vikas Yojana.
Edupro contended that Globsyn was an approved training partner of the NSDC and had engaged the company to conduct courses under the PMKVY Guidelines, 2016-20. Those guidelines, it argued, permitted approved training partners to operate through the franchisee or associate-partner model.
The company relied on a certificate stating that it was an authorised partner or learning centre for running banking, financial services and insurance and other NSDC programmes through Globsyn during FY 2015-16.
It argued that there was a direct nexus between its training activities and the NSDC schemes. On that basis, it claimed exemption under paragraph 9A(iv) of Notification No. 25/2012-Service Tax.
The Department opposed the claim, maintaining that the notification granted exemption only to specified entities, including an NSDC-approved training partner. Edupro had provided services to Globsyn and was not itself directly approved by the NSDC, the Department submitted.
CESTAT agreed with the Department on this issue.
The Tribunal examined the certificates placed on record and found that Globsyn, rather than Edupro, was the approved training partner of the NSDC for FY 2015-16. Edupro was merely an authorised associate partner or learning centre appointed through Globsyn.
Paragraph 9A of Notification No. 25/2012-ST exempted services provided by the NSDC, an approved Sector Skill Council, an approved assessment agency or a training partner approved by the NSDC or the Sector Skill Council in relation to specified skill-development programmes.
Since Edupro was not directly approved as a training partner, the Tribunal held that it failed to satisfy the conditions of the exemption notification. Consequently, the service tax demand of Rs 47,100 relating to the amount received from Globsyn was held to be sustainable, subject to the normal limitation period.
The Tribunal relied on the Supreme Court’s ruling in Commissioner of Customs v. Dilip Kumar and Company, which held that exemption notifications must be interpreted strictly and that the burden lies upon the assessee to establish that it falls within the exemption.
Edupro’s reliance on the CESTAT decision in SRK Innovatives School of Information v. Principal Commissioner was also rejected. The Tribunal distinguished that case on the ground that it involved a tripartite agreement between the NSDC, the authorised partner and the service provider, whereas no comparable agreement existed in Edupro’s case.
The second dispute concerned Rs 2.31 lakh received from Sahitya Sadawart Samiti, the society that established Suresh Gyan Vihar University in Jaipur.
Edupro submitted that it conducted distance-learning and vocational programmes according to the university’s curriculum. Students completing those programmes obtained qualifications recognised by law.
It therefore claimed that the services fell within Section 66D(l)(ii) of the Finance Act, which placed within the negative list services by way of education as part of a curriculum for obtaining a qualification recognised by law.
The Commissioner (Appeals) had denied the exemption on the ground that Edupro was neither a university nor an educational institution of the kind contemplated by the statutory provision. According to the appellate authority, the exemption applied when the recognised university itself conducted the degree courses and not when courses were conducted by an outside entity.
CESTAT rejected this interpretation.
On a plain reading of Section 66D(l)(ii), the Tribunal observed that the exemption was available for education provided as part of a curriculum leading to a qualification recognised by law.
The statutory provision did not stipulate that the service provider must itself be a university. It was an admitted fact that Edupro provided educational services in connection with the courses of Suresh Gyan Vihar University.
The Tribunal held that the Commissioner (Appeals) had read an additional condition into the provision that was not present in its text. Edupro was consequently found eligible for the negative-list exemption, and the service tax demand of Rs 34,783 relating to the courses conducted for the university was set aside.
CESTAT also ruled against the Department’s invocation of the extended limitation period.
The Tribunal noted that the show-cause notice issued in April 2021 had initially demanded Rs 17.59 lakh for FY 2015-16. However, after examining the documents subsequently produced by the company, the Commissioner (Appeals) reduced the surviving demand to only Rs 81,843.
According to the Tribunal, the substantial reduction in the demand after considering the supporting records demonstrated that there was no wilful suppression of facts with an intention to evade service tax.
The order also noted the company’s submission that the show-cause notice did not identify any specific act of fraud, collusion, wilful misstatement or suppression carrying an intention to evade tax.
Relying on the Supreme Court decisions in Uniworth Textiles Limited v. Commissioner of Central Excise and Anand Nishikawa v. Commissioner of Central Excise, CESTAT held that the extended limitation period could not be sustained.
The demand relating to the Globsyn skill-development services was therefore therefore upheld only to the extent falling within the normal limitation period, if any. The entire demand for services provided in connection with the university courses and the demand raised for the extended period were set aside.
The Tribunal accordingly modified the Commissioner (Appeals)’ order and partly allowed Edupro E-Solutions’ appeal.
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