Educational exemption for authorised learning centres applies where the university collects fees and awards the recognised qualification.

Where a university directly collects fees and awards qualifications recognised by law, the fee share passed to authorised learning centres falls within the educational exemption and does not attract Service Tax in the centres' hands. The centres had no independent control over fee collection, and the arrangement was treated as part of the exempt educational framework rather than a taxable service rendered by them. On that basis, the tax demand against the learning centres could not be sustained and was correctly dropped.

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Issues: Whether the fee share received by authorised learning centres of a university was liable to Service Tax, or was covered by the exemption for institutions issuing certificates, diplomas, degrees or other educational qualifications recognised by law.

Analysis: Notification No. 10/2003-S.T. dated 20.06.2003 exempts services relating to institutions or establishments issuing certificates, diplomas, degrees or educational qualifications recognised by law. The fee was collected directly by the university, which awarded the qualification and was recognised by statute and by the relevant regulatory bodies. The learning centres had no independent control over the fee collection, and the arrangement was treated as falling within the exempt educational framework rather than a taxable service by the centres.

Conclusion: The fee share of the learning centres was not liable to Service Tax in their hands and the demand against them was rightly dropped.

Final Conclusion: The departmental appeals failed because the impugned order correctly held that the tax demand could not be sustained against the learning centres.

Ratio Decidendi: Where the university directly collects the fees and awards the qualification recognised by law, the share passed on to authorised learning centres does not give rise to Service Tax liability in the hands of those centres under the educational exemption.

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