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of <h1>University college affiliation fees and fines treated as statutory duty, not taxable service; service tax demand set aside</h1> Affiliation fees, late fees, fines and related receipts collected by a statutory university for grant, renewal, or withdrawal of college affiliation were ... Levy of service tax - affiliation fees received by the appellant during the period w.e.f. 01.10.2013 to 30.06.2017 - substantive definition of ‘service’ - appellant is a university established under the Uttarakhand Technical University Act, 2005 - demand of service tax along with interest and imposed equal penalty under section 78 of the Finance Act, 1994 and imposed a penalty under section 77 HELD THAT:- The issue is no longer res-integra and has been decided by this Tribunal in the case of Registrar M/s University of Kota [2025 (8) TMI 97 - CESTAT NEW DELHI] where it was held that Affiliation creates a kind of umbilical chord between affiliating body and the affiliated entity. Section 2(a) of RGUHS Act, defines ‘Affiliated College’ to mean a college or institution affiliated to the University in accordance with the Statutes. It also includes the institutions that are deemed to be affiliated to the University. Deeming part is not relevant for our discussion. Section 4 of this Act which enlists the powers & functions of the University, at clause (vii) reads ‘to affiliate or recognise colleges and institutions and to withdraw such affiliation or recognition’. Section 45 provides for affiliation and the procedure therefor. For grant of admission, affiliation is a pre-condition under subsection (10). Section 48 provides for withdrawal of affiliation on fault grounds. For the grant or renewal of affiliation, the University levies fees, late fees, fines & penalties in terms of extant statutes of the University. However, the act of granting, renewing or withdrawing is done in discharge of public duties enjoined by law. Therefore, such acts do not fit into the expression ‘activities carried on for consideration’, more particularly, when they do not have commercial elements, as rightly contended by Mr.Raghuraman. Added, the idea of ‘activities carried on for consideration’ as employed in the definition of service u/s 65B(44) of the Finance Act ordinarily obtains in the realm of freedom of contract and not in the field of public law. Of course, the concept of sovereign function being impertinent, does not factor in the discussion. The function related to affiliation cannot be treated as a ‘bundled service’ under clause (3) of section 66F of the Finance Act, 1994, either. The interests/fines/penalties leviable on account of default also have a thick connect with the fees regularly leviable and therefore, they would partake the character of fees only. Revenue is not justified in levying Service Tax on the income accruing to the University on account of affiliation during the academic year between 2012-13 and 2016-17. The periodicity of collection of affiliation related fees pales into insignificance The impugned order is set aside - appeal allowed. Issues: Whether service tax is leviable on affiliation fees charged by a university to affiliated colleges for grant/renewal/withdrawal of affiliation.Analysis: The decision applies the statutory definition of 'service' under Section 66B of the Finance Act, 1994 and the concept of consideration as explained in Section 67 Explanation (a). The analysis isolates the components of 'service'—an activity carried out by one person for another for consideration—and examines whether the act of granting, renewing or withdrawing affiliation is an activity performed for consideration in the commercial/contractual sense. The nature of affiliation under the university statute (including provisions governing grant, renewal and withdrawal and attendant fees) is considered in the context of statutory duties and supervision conferred by law. The statutory framework and authorities relied upon were held to show that affiliation-related acts are performed in discharge of public/statutory functions and lack the requisite commercial quid pro quo to constitute a taxable service; ancillary amounts like fines, penalties and interest are considered aspects of statutory fees rather than separate commercial services. Prior tribunal and High Court rulings and subsequent dismissal of special leave by the Supreme Court are treated as binding precedents for the legal proposition that affiliation fees are not taxable as service.Conclusion: Service tax is not leviable on affiliation fees charged by the university; conclusion is in favour of the assessee.
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