The Karnataka High Court ruled Service Tax exemption on education related affiliation service fees collected by University.
The single judge bench of Justice M. I. Arun observed that the act of the University in granting affiliation to a private college has to be considered as a service in furtherance of providing education and the decision of the respondents to consider otherwise is erroneous.
The court noted that by way of the impugned show cause notice, the respondents have sought to impose service tax on the petitioner University for the affiliation fee collected by it during the academic year 2013-2014 to 2017-2018. As per the Act, the negative list of services which are not chargeable to service tax is contained in Section 66D and Clause(l) of Section 66D of the Act.
Petitioner is Bangalore University and is in receipt of certain amounts collected by way of affiliation fee from Institutions affiliated to it. Respondent has issued a show cause notice proposing to levy service tax on the affiliation fee collected by the petitioner. Aggrieved by the same, the writ petition is filed.
The petitioner contended that it is imparting education and the entire affiliation fee received by it is towards the same and as per the provisions of Section 66D of the Act and notification as amended from time to time, consideration received by providing service by way of education as a part of curriculum for obtaining a qualification recognised by any law for the time being in force is exempted from service tax and thereby, the affiliation fee received by the petitioner University is exempted from service tax and that respondent does not have the jurisdiction to issue show cause notice proposing to levy service tax on the affiliation fee received by the petitioner University.
Counsel for the respondents admitted that the consideration received from the Institutions for services by way of education as a part of curriculum for obtaining qualification recognized by any law for the time being in force is exempted from service tax.
He contended that the affiliation fee received by the petitioner University cannot be considered as part of the said services and that it is a consideration received towards the services provided to private Institutions by affiliating the same.
He further submitted that what is under challenge is only the show cause notice and the petitioner is required to answer the same instead of approaching the Court.
The court said that normally, a person is bound to reply to the show cause notice issued by the Authority and it is not appropriate for him to approach the Court without doing the same. However, in the instant case, the dispute does not pertain to quantification of service tax, but whether the respondents Authorities have jurisdiction to demand service tax for the activity of petitioner University in providing education.
The court further stated that it is the clear stand of the respondents authorities before the Court that the activity of the petitioner Institution in granting affiliation to Colleges and consideration received towards it is taxable under the Service Tax.
The court under the circumstances, did not find it appropriate to relegate the petitioner before the adjudicating Authority.
The court set aside the show cause notice.
Case title: M/S Bangalore University v/s Principal Additional Director General Directorate General of GST intelligence Bengaluru zonal unit
Citation: WRIT PETITION NO.112 OF 2019 (T-TAR)