Educational services for BS course leading to MD degree exempt from service tax under Section 66B Finance Act 1994

The CESTAT Mumbai held that educational services provided by appellant for BS course leading to MD degree were exempt from service tax during April 2013 to June 2017. The appellant collected tuition fees from students undertaking BS course as prerequisite for MD degree offered by Davos Medical School Foundation, Philippines. The tribunal found that MD degree is recognized under Schedule 3 of Indian Medical Council Act, 1956. Since the educational service was part of curriculum for obtaining a qualification recognized by law, it fell under negative list under Section 66B of Finance Act, 1994 and was exempted under Entry No.9 of Notification No.25/2012-ST. The impugned order was set aside and appeal allowed.

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Issues Involved:
1. Whether the educational services rendered by the appellant for the BS course are chargeable to service tax.
2. Whether the BS course provided by the appellant qualifies as a part of the curriculum for obtaining a qualification recognized by law.
3. Whether the services provided by the appellant are covered under the negative list or exempted under the relevant notifications.
4. Whether the appellant's collection of charges for arranging visas and air tickets for students is taxable.

Issue-wise Detailed Analysis:

1. Chargeability of Educational Services to Service Tax:
The appellant, a company registered under the Companies Act, 1956, provided a BS course as a prerequisite for an MD degree at Davos Medical School Foundation (DMSF) in the Philippines. The Revenue's investigation revealed that the appellant collected tuition fees from students, which was considered taxable under Section 65B(44) read with Section 65B(51) of the Finance Act, 1994. A show cause notice was issued to the appellant demanding service tax of Rs. 16,46,44,814/- for the period from April 2013 to June 2017. The appellant contested this, arguing that the educational service provided was recognized by law and thus exempt from service tax.

2. Qualification of BS Course as Part of Recognized Curriculum:
The appellant argued that the BS course is a recognized educational service as it is a prerequisite for the MD degree, which is recognized by the Indian Medical Council Act, 1956. The original authority, however, did not accept this argument, stating that the BS course was not part of the curriculum for obtaining a qualification recognized by law, as the MD course was entirely conducted in the Philippines.

3. Coverage under Negative List and Exemptions:
The appellant contended that the educational services provided were covered under the negative list as per Section 66D of the Finance Act, 1994, until 14.05.2016, and were exempt under Entry No. 9 of Notification No. 25/2012-ST dated 20.06.2012 thereafter. The Tribunal noted that the BS course was a prerequisite for the MD degree, which is recognized by the Indian Medical Council Act, 1956. Therefore, the educational services provided by the appellant were part of the curriculum for obtaining a recognized qualification and were covered under the negative list and exemptions for the entire period of dispute.

4. Taxability of Charges for Visa and Air Tickets:
The Revenue pointed out that the appellant collected charges separately for arranging visas and air tickets for students. However, the Tribunal noted that these amounts were accounted for as tuition fees in the appellant's P&L and ledger extracts. Since services provided by an educational institution to its students were exempt under Entry No. 9 of Notification No. 25/2012-ST dated 20.06.2012 from 11.07.2014, these additional services were also exempt from service tax.

Conclusion:
The Tribunal held that the educational services provided by the appellant for the BS course were part of the curriculum for obtaining an MD degree recognized by the Indian Medical Council Act, 1956. Therefore, these services were covered under the negative list until 14.05.2016 and were exempt under Entry No. 9 of Notification No. 25/2012-ST dated 20.06.2012 thereafter. The charges for arranging visas and air tickets were also exempt. Consequently, the Tribunal set aside the impugned order and allowed the appeal, ruling that the appellant was not liable to pay service tax for the entire period of dispute.

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