Campus recruitment fees taxable only when linked to recruitment activity; participation fee outside manpower recruitment service
Campus recruitment fees are taxable as manpower recruitment or supply agency service only where they represent consideration for recruitment activity; recruitment fee collected from corporates after student selection was held taxable, while participation fee for use of campus facilities and selection participation was not. The extended limitation period was not available because the department already knew the fee structure, prior notices had been issued, and the amounts were recorded in books and audit records, so suppression was not established. Penalty was therefore unsustainable, and the demand was restricted to the normal period with cum-tax benefit.
Issues: (i) Whether the amounts collected as participation fee and recruitment fee were liable to service tax under the category of manpower recruitment or supply agency service; and (ii) whether invocation of the extended period of limitation was justified.
Issue (i): Whether the amounts collected as participation fee and recruitment fee were liable to service tax under the category of manpower recruitment or supply agency service.
Analysis: The relevant statutory definition treated as taxable the service provided by a person engaged in recruitment or supply of manpower to another person. The Board's clarification specifically covered educational institutes such as IITs and IIMs to the extent they charged fees in relation to campus recruitment. Recruitment fees collected from corporates after selection of students were directly linked to campus recruitment and fell within the taxable category. Participation fee, however, was charged for use of campus infrastructure and participation in the selection process, and was not shown to be consideration for recruitment or supply of manpower.
Conclusion: Recruitment fee was liable to service tax, but participation fee was not liable to service tax under manpower recruitment or supply agency service.
Issue (ii): Whether invocation of the extended period of limitation was justified.
Analysis: The same activity had already been the subject of earlier notices, the department was aware of the fee structure, and the amounts were reflected in the books and audit records. In these circumstances, suppression of facts was not established. Since the dispute turned on interpretation of the statutory definition and its scope, penalty could not be sustained, and assessment had to be confined to the normal limitation period. Cum-tax treatment was also available in computing the demand.
Conclusion: Invocation of the extended period was not justified, and penalty was not sustainable; the demand was confined to the normal period with cum-tax benefit.
Final Conclusion: The demand was sustained only to the limited extent of recruitment fee for the normal period, while the demand on participation fee and the penalty were set aside.
Ratio Decidendi: Fees charged for campus recruitment are taxable under manpower recruitment or supply agency service only to the extent they are consideration for recruitment activity, and the extended period cannot be invoked absent suppression where the department was already aware of the practice.