University affiliation fees to colleges exempt from service tax under section 66D Finance Act 1994

CESTAT New Delhi held that affiliation fees collected by a university from affiliated colleges are exempt from service tax under section 66D of the Finance Act, 1994. Following Karnataka HC precedent in Rajiv Gandhi University case, the tribunal concluded that education services provided through affiliated colleges fall under the exemption for educational services. The period 2014-2018 fell under the negative list regime, and services between educational institutions qualify for exemption under Entry 25/2012-ST. The impugned order was set aside and appeal allowed.

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Issues:
The issues involved in the judgment are the leviability of service tax on affiliation fees collected by a university and whether the services provided to affiliated colleges are taxable under the Finance Act.

Leviability of Service Tax on Affiliation Fees:
The appellant, a university, collected affiliation fees from various colleges/institutes. The revenue claimed that these fees were for services rendered and demanded service tax. The impugned order confirmed the demand. The appellant argued that the issue had been decided in their favor by the High Court of Karnataka in a similar case. The Tribunal noted the Karnataka High Court's decision in the case of Rajiv Gandhi University of Health Sciences, which held that affiliation fees collected by universities for providing education through affiliated colleges fall under the exemption for services by way of education. The Court emphasized that universities, by granting affiliation, are providing educational services as part of the curriculum for obtaining qualifications recognized by law. This activity was considered exempt from service tax under the Finance Act.

Taxability of Services Provided to Affiliated Colleges:
The Tribunal observed that the appellant, as a university, decides the curriculum, conducts examinations, and awards degrees to students, including those in affiliated colleges. The affiliation fees collected from these colleges were deemed to be for providing services in relation to education, which is exempt under the Finance Act. The Tribunal also referred to Entry No. 25/2012-ST, which exempts services provided by educational institutions to students, faculty, and staff. Since the appellant university and the affiliated colleges are educational institutions, the services provided by the appellant to these colleges were considered exempt from service tax. Therefore, the impugned order demanding service tax on services provided to affiliated colleges was set aside, and the appeal was allowed.

Conclusion:
The Tribunal concluded that the impugned order demanding service tax on affiliation fees collected by the university from affiliated colleges was not sustainable. The order was set aside, and the appeal was allowed with consequential relief, if any, as per law. The decision was based on the exemption for services by way of education under the Finance Act and the nature of services provided by the appellant university to the affiliated colleges.

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