Statutory university fees are not taxable service consideration, while rental income from immovable property remains subject to service tax.

Affiliation fees, inspection fees and similar statutory collections by a University were treated as compulsory levies collected under the governing statute, so they did not amount to consideration for a taxable service and the service tax demand on that component was quashed. Renting of immovable property was treated as a commercial activity distinct from statutory functions, so service tax on rental income was upheld. Penalty was also set aside because the assessee was not a private entity and there was no allegation of forgery or misrepresentation.

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Issues: (i) whether affiliation fees, inspection fees and similar amounts collected by a University established under a statute are liable to service tax as consideration for a taxable service; (ii) whether service tax is leviable on rent received from renting of immovable property; and (iii) whether penalty could be sustained.

Issue (i): whether affiliation fees, inspection fees and similar amounts collected by a University established under a statute are liable to service tax as consideration for a taxable service.

Analysis: The fees were collected in discharge of statutory powers and obligations conferred by the governing University Act. The circulars governing service tax clarified that amounts collected by sovereign or public authorities while performing statutory functions are in the nature of compulsory levy and do not constitute consideration for a taxable service. The collection of affiliation and inspection fees was therefore held to be a statutory levy and not a commercial service charge.

Conclusion: The levy of service tax on affiliation fees, inspection fees and similar statutory collections was held to be unsustainable and was quashed in favour of the assessee.

Issue (ii): whether service tax is leviable on rent received from renting of immovable property.

Analysis: Renting of immovable property stood on a different footing from the statutory fees. The University's letting of property involved a commercial element and was not merely the performance of a statutory function. That activity was therefore treated as taxable.

Conclusion: Service tax on renting of immovable property was upheld against the assessee.

Issue (iii): whether penalty could be sustained.

Analysis: The assessee was not a private entity, and there was no allegation of forgery or misrepresentation. In those circumstances, imposition of penalty was not justified.

Conclusion: The penalty was set aside in favour of the assessee.

Final Conclusion: The statutory-fee component was exempt from service tax, the renting income remained taxable, and the penalty could not stand.

Ratio Decidendi: Amounts collected by a public authority while discharging statutory functions are compulsory levies and do not amount to consideration for taxable service, whereas commercial renting activity remains amenable to service tax.

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