Private Universities Not Liable To Pay Tax On Supply Of Food Stuff To Students: Himachal Pradesh High Court

The Himachal Pradesh High Court has held that private universities are not liable to pay tax on supply of food stuff to students.

The bench of Justice Tarlok Singh Chauhan and Justice Sushil Kukreja has observed that Tribunal erred in holding that the petitioner is liable to payment of taxes on supply of food stuff and other items to the students within its premises even though it has been held that petitioner is predominately existing for education.

The bench added that the Tribunal erred in artificially bifurcating the turnover into exempted and non-exempted goods even though it has been categorically found that the petitioner is not a dealer in view of the law laid down by various courts.

The bench stated that there was no occasion for the learned Tribunal to have remanded the case back particularly, when the entire proceedings were void ab initio and all the orders ought to have been set aside. The tribunal was not at all justified in holding that the petitioner would be liable to pay the tax on supply of goods to the students in the course of academic activities even though the same is not in the course of business.

The petitioner(s) - University was established in the year 2002 as a State Government University by virtue of passing of the Jaypee University of Information Technology Act No. 14 of 2002 by the Government of Himachal Pradesh. The University was setup under Jaiprakash Sewa Sansthan (JSS) a registered Public Trust (not for profit basis) and thus falls under the category of "Private University" within Regulation 2.1 of the University Grants Commission (Establishment and Maintenance of Standards in Private Universities) Regulations, 2003 framed under Clauses (f) 81 (g) of Section 26(1) of the University Grants Commission Act, 1956.

Due to non-availability of a market for the regular consumers in the vicinity of the University, it was considered essential to establish a facility in the University to cater to the needs of the students community. Thus, the University has established a mess, named as "Annapoorna".

No access is allowed to the outsiders to these premises. Mess facilities are meant for the students of the University only and not to the outsiders for business purposes. The details of turnover of mess facility were clearly reflected in the books of account of the Petitioner(s)-University and clue accounting was made for each amount expended and amount collected from the students.

On 06.03.2013 a team of officers from respondents-department visited the University premises of the Petitioner. The Petitioner was required to produce the information regarding the Mess facility. The Petitioner accordingly submitted the entire records including purchases, daily receipt and expenses account etc. The respondents’ officer without affording any opportunity of being heard, instantly proceeded in a very hasty manner to impose VAT under Section 21(7) of Himachal Pradesh Value Added Tax Act 2005 to the tune of 38,17,348.

The petitioner contended that officers demanded instant payment of the said amount and threatened to seal the entire premises in case of non- payment by the Petitioner. The Respondent authority further demanded blank papers duly signed, stating the same as part of procedure. The entire exercise including search of each and every cabins, counters, chambers etc. carried out in such a manner, as if, the petitioner was carrying some serious illegal activities. The Petitioner, keeping in mind the reputation of the University, succumbed to the pressure of the department and acted as directed and on 06.03.2013 itself handed over the cheque for a sum of Rs.38,17,348/- and blank signed paper. The amount of Rs. 38,17,348/- includes the amount of Rs. 8,36,451/- for the year 2009-10.

The court held that Dr. Sunil Kumar, the then AETC acted not only in a unprofessional but in a total illegal manner by fixing the liability to pay the tax on the day of the visit as is evident from the Assessment Order.

The court ruled that there is no material to establish that the ancillary activities of providing canteen facilities to the children is being conducted by the petitioner(s) with an independent intention to conduct business with such activities. Therefore, in the present case, the ancillary activities of providing canteen facilities to the inmates of the University would not amount to business as defined by the Act. Once that be so, obviously, the petitioner was not liable to pay any tax on the said activities.

Case Details

Case Title: M/s Jaypee University of Information Technology Versus State of H. P. & Ors.

Case No.: Civil Revision No. 41 of 2015

Date: 22.05.2025

Counsel For Petitioner: Rakesh Kumar, Advocate

Counsel For Respondent: Anup Rattan, A.G.

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