Statutory affiliation charges were not taxable as service tax because they arose from public functions, not commercial services.

Service tax was not leviable on affiliation and related regulatory charges collected by a statutory educational body when those amounts were recovered in the course of statutory functions. The controlling test was whether there was an activity carried out by one person for another for consideration; charges linked to affiliation, renewal, supervision, and withdrawal, performed under statute and lacking commercial reciprocity or quid pro quo, did not satisfy that test. Interest, fines, and penalties attached to the statutory fee structure were treated as incidental and not as consideration for a taxable service. The Revenue's challenge therefore failed.

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Issues: Whether service tax was leviable on affiliation and related regulatory charges collected by a statutory educational body while discharging its statutory functions.

Analysis: The issue was held to be covered by prior Tribunal and High Court decisions dealing with affiliation fees collected by statutory educational institutions. The governing test under the service tax law is whether there is an activity carried out by one person for another for consideration. Fees collected while performing public duties imposed by statute, without the commercial reciprocity ordinarily associated with a contractual service, do not answer that description. The character of affiliation, renewal, supervision, and withdrawal as statutory functions, and the absence of a commercial element or quid pro quo, were treated as decisive. The related levies, interest, fines, and penalties were also viewed as incidental to the statutory fee structure rather than as consideration for a taxable service.

Conclusion: Service tax was not leviable on the income arising from affiliation and allied statutory charges, and the Revenue's appeal failed.

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