TaxTMI 
TaxTMI 
2025 (3) TMI 270
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....e appellant; obligations of the appellants RCs, and LCs towards each other are governed by an MoU; the students admitted pay the fees to the university by way of Demand Drafts which are collected by the LCs and submitted to respective RCs, who in turn sent the same after due checks to the university; a nonrefundable authorization fee, for courses mentioned in the letter of authorization, is paid by the LCs; an additional authorization fee is also payable by the LCs for courses not mentioned in the initial letter of authorization; out of the total fee collected from the students and transmitted to PTU by the RCs as above, the share of PTU, RC & LC, is approximately 28-37;18-22 and 45-50% respectively. 2. Revenue entertained a view that PTU is providing Franchise Service to the RCs/LCs, in view of the above arrangement; investigations were conducted, statements were recorded and documents were collected; on completion of the investigation, a Show Cause Notice dated 12.03.2014 seeking to recover service tax of Rs.20,22,10,037/- along with interest and penalty was issued to the appellants; the proposals of the Show Cause Notice were confirmed by the Com....
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.... entry for classification than Franchise Service. 4. Learned Counsel submits further that the activities being undertaking by PTU and RCs/LCs are not for any commercial purpose but for imparting education to the students who are either not eligible to study in the regular college or are working and are not able to devote full time to study in regular college, as the time duration in LCs is shorter than the affiliated colleges. He submits that there is no relationship of provider of service and the recipient of service between PTU and RCs /LCs; no consideration has been received by PTU from RCs / LCs for alleged provision of franchise service; the alleged service is not a declared service within the meaning of section 66 E of the Finance Act and therefore, no tax is liable to be paid by PTU. He submits that as per section 65 (105) (zze) of the Finance Act, 1994, taxable service means any service provided or to be provided to a franchisee, by the franchisor, in relation to franchise; there is no service which has been provided by PTU to RCs / LCs; RCs and LCs are simply aiding PTU in spreading of technical education to far flung and remote areas as its extended arm under the publi....
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....ance is placed on the following case laws. • Stock Vs Frank Jones (Tipton) Ltd (1978) 1 All England Reporter 948 (Hl) (Page 951) • Tarulata Syam Vs Cit Air 1977 SC 1802 (Page 1811) • Oswal Agro Mills Ltd VS CCE 1993 (66) E.L.T. 37 (S.C.) 7. Learned Counsel submits in addition that private coaching institutes are those institutes which provide only coaching and having nothing to do with the conduct of examination, distribution of degrees / diplomas / certificates and MCs etc; the appellant be equated with the private coaching institutes which are out of the purview of the negative list of services; whereas in the facts of the present case, education imparted by LCs / RCs are nothing but conduct of degree courses etc. which leads to grant of qualifications recognized by law of the land; effect must be given to the clear meaning of words, without any amendment etc; clear meaning of the words to be given in a statute unless it leads to anomaly. He relies on • Hemraj Gordhandas Vs H.H. Dave ACCE 1978 (2) ELT J 350 (SC) • CCE Vs Parle Exports (P) Ltd 1988 (38) ELT 741 (SC) ....
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....a; the service is by way of education a part of curriculum for obtaining a qualification recognized by the law of the land; no element of commerce is involved; imparting of education by a university, is a statutory duty and cannot be called a commercial service. 10. Learned Counsel submits that the appellant PTU hasn't granted any representational right to any RC / LC; PTU / IGKPTU has kept with itself the essential and statutory functions of a university; the RCs / LCs simply assist PTU / IGKPTU in the discharge of its core functions of imparting education and carry out the activities of teaching technical education to the students as per the guidelines laid down by PTU / IGKPTU and act as its extended arms of under the public-private partnership scheme of outsourcing of teaching facilities to achieve the goal of spreading technical education to the last remote corners of India; the essential and statutory functions of university rests with itself; RCs / LCs haven't been granted with the representational rights at all; in no way, the money retained by Appellant out of fee received (except to the extent of share of LCs / RCs as per agreement being returned to L....
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....e findings of the impugned orders and submits that learned Commissioner has categorically referred to the classification of services only while discussing the previous Show Cause Notices issued to the appellants; in respect of the impugned order dated 31.03.2019, he only held that the nature of the services remained to be Franchise Services; learned Commissioner categorically held that they do not fall under Negative List. He submits that the contention of the appellants that they are not engaged in any commercial activity is incorrect; learned Commissioner held that the LCs/ RCs have been established for generating income in addition to income flowing through affiliated colleges; he relies on Hon'ble Madras High Court's decision in the case of Manonmaniam Sundaranar University - 2022 (58) GSTL 27 (Mad.) and Pradyumna Steel Ltd. - 1996 (82) ELT 441 (SC). 13. Learned Authorized Representative for the Department submits on the issue of constitutional protection under Article 243W of the Constitution of India read with Sl.No.13 of the 12th Schedule that the Adjudicating Authority has clearly dealt the issue in the impugned order. He relies on Hon'ble Supreme Court's decision ....
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....palities are entrusted with the functions of promotion of cultural, educational and aesthetic aspects is applicable; the appellant set up as an educational institution as a University under the State Act is exempt from service tax; educational service leading to award of a degree would be exempt as a service; benefit of exemption under Entry No. 39 of opening Para of Notification No. 25/2012-ST, dated 20.06.2012 is applicable to service provided; in view of clarification by CBIC, post 2012 Budget, under the Educational Guide', services are classifiable as an Education Service; there being an Education Service involved, the same service cannot be classified into another service; Educational Service is a more appropriate entry for classification than Franchise Service; the appellant not being engaged in a commercial activity is out of the net of service tax; the appellant has given any representational right to RCs/LCs, to exploit the same commercially, so as to be called a franchiser; if at all there is any service rendered, it is by the RCs/LCs to the appellant in the discharge of constitutional responsibility and the appellant is not rendering any service to RCs/LCs; demand ....
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....lare results, award degrees/diplomas and issue the DMC's (ix) The Questions paper would be prepared and supplied by the PTU with secrecy (x) The PTU will lay down all the requisite norms which shall be implemented by the LC's to ensure the imparting of quality education by the LC's to the student of PTU enrolled for the authorized course." A. Obligations of RCs under Section 4.2 of the MoU, which are as under:- (i) The RC will coordinate with the PTU on the one hand and the LC on the other hand in all matters as required by the PTU from time to time. (ii) The RC will provide logistic support to the PTU and LCs as per norms of the PTU to carry out the objects of and obligations under this MoU (iii) Provide information about each LC to the PTU and assist in its proper monitoring. (iv) In case any LC is closed by PTU then it would be the liability of the RC to assist the PTU to ensure that students do not suffer and their studies are conducted alternatively, in PTU's another authorized LC with the zone allotted to RC. Before officially closing the center, all student record files and "No Dues" must be submitted by RC....
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....The working of the RC and LCs shall also be monitored mechanism/reviewed by PTU's Regional Monitoring Committee (RMC) (xxi) In addition, to review by the RMs, continuous monitoring mechanism will be in place for assessment by the PTU of the performance of the RC and LCs (xxii) The format of the style of any advertising and hoarding to be placed/put up by the RC and LCs under the RC shall be done with the prior written approval of the PTU. Any advertisement and hoarding to be placed/put up by the RC/LCs should not bring down or cast aspersions on or discredit the PTU, and the decision of PTU ordering the withdrawal of the advertisement or removal of the hoarding shall be final and binding on the RC/LCs. (xxiii) The RC may take part in actively, with the PTU in image building exercises and must organize at least one public functions, seminar, counseling session in their region each semester (xxiv) The RC agrees to provide expertise for infrastructure, equipments, teaching and training necessary for the course as and when called to do so by the PTU in respect of any LC within the Zone allotted to the RC (xxv) The RC shall ensure that the le....
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..../32.2/37%, 18/20/22% and 45/47.5/50% respectively; however, Authorization Fee and Additional Authorization Fee collected is entirely retained by the appellant. On going through the clauses of the Agreement, we find that the appellant retains the core functions; eligibility for admission of the students, syllabus and qualification of the teachers, setting of question papers and examination time-table and award of degree/ diploma is decided by the appellant; LCs/ RCs are responsible for appointment of teachers, classroom coaching & practical training as per the syllabus, conduct of examinations; LCs/ RCs may advertise/ canvas about the courses in the university. In this background, it is required to examine whether the appellant-university is providing education service or rendering franchise service to the LCs. 19. We find that the appellants are established under an Act of State Legislature; the appellants submit that they are not engaged in any commercial activity and they are working in the field of education, discharging the functions of the Government/ Municipalities as per Article 243W of the Constitution of India read with Sl. No. 13 of the XII Schedule of the Consti....
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....son, including services relating to admission to such institution, conduct of examination, catering for the students under any mid-day meals scheme sponsored by Government, or transportation of students, faculty or staff of such institution;" (ii) Notification No. 6/2014 - ST dated 11.07.2014 "In exercise of the powers conferred by subsection (1) of section 93 of the Finance Act, 1994 (32 of 1994), the Central Government, being satisfied that it is necessary in the public interest so to do, hereby makes the following further amendments in the notification of the Government of India in the Ministry of Finance (Department of Revenue) No. 25/2012-Service Tax, dated the 20th June, 2012, published in the Gazette of India, Extraordinary, Part II, Section 3, Sub-section (i) vide number G.S.R. 467 (E), dated the 20th June, 2012, namely :- (1) In the said notification, in the opening paragraph,- (iii) for entry 9, the following entry shall be substituted, namely :- "9. Services provided, - (a) by an educational institution to its students, faculty and staff; (b) to an educational institution, by way of,- ....
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....ciations, Chandigarh. 8. Mother Teresa Public School, New Delhi. 9. BVM Global, Chennai. 10. Sastra University, Tanjavur. 11. HLC International, Chennai. 12. Sodexo Food Solutions, Mumbai. 13. Federation of Associations of Maharastra, Mumbai. 2. The matter is covered by two provisions of the Finance Act, 1994. Section 66D of the Finance Act contains a negative list of services and clause (I) thereof reads as under : "services by way of- (i) pre-school education and education upto higher secondary school or equivalent; (ii) education as a part of a curriculum for obtaining a qualification recognized by any law for the time being in force; (iii) education as a part of an approved vocational education course;". Further Section 93(1) of the Finance Act, 1994, enables the Government to exempt generally or subject to such conditions taxable service of specified description. By virtue of the said power, Government has issued a Notification No. 25/2012S.T., dated 20th June, 2012, exempting certain services. Sl. No. 9 thereof reads as follows: "Services provided to an educati....
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....ng for the students under any mid-day meals scheme sponsored by Government, or transportation of students, faculty or staff of such institution, rendered in relation to education are exempt, there is no reason or rhyme as to why the benefit of the exemption should not be extended to the university which is designing its own course and awarding degree/ diploma. 22. We find that Hon'ble Kerala High Court in the case of Malappuram District Colleges Association - 2006 (2) STR 321 (Ker.) held that: 3. The Central Excise authorities have issued the impugned notices to petitioners demanding registration and payment of service tax on their finding that the service rendered by parallel colleges attracts service tax under the charging section read with definition clause and since petitioners are denying the same, this Court has to examine this as a preliminary issue and the challenge against constitutional validity particularly on the ground of discrimination under Art. 14 need be gone into only if the parallel colleges answer the description of "commercial training or coaching centre" defined under Section 65(27) of the Act, which is subject to tax under Section 66 r....
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....versities. According to the petitioners, the regular colleges, whether aided or self-financed affiliated to Universities, are also rendering the same service to students and though they are not awarding any degrees or diplomas, they are not subjected to levy of service tax by the Department and so much so, if such colleges are not liable for payment of service tax, then there is no reason why the petitioners who are rendering same services should be treated differently and subjected to tax. Alternatively they contended that the regular colleges, whether aided or selffinanced, affiliated to Universities, which are not awarding any degree or diploma also are liable to service tax as they also do not come under the exclusion clause. In other words, according to the petitioners, the respondents are not justified in exempting regular colleges, whether aided or selffinanced affiliated to Universities from service tax as no exemption is provided to them in the definition clause. I am unable to accept this argument of the petitioners because the category of institutions excluded from the definition clauses includes not only institutes or establishments issuing certificates or diplomas or d....
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.... University Regulations which is certainly an "educational qualification" prescribed by the University. So much so, affiliated colleges whether aided or selffinanced are different and come within the description of the exempted category under the definition clause, while petitioners who are engaged in private coaching are not covered by the exemption clause. In the circumstances, the petitioners' contention that students trained by them are getting diploma or degree certificate after writing University or Board examinations in the same way as students studying similar subjects in regular aided or self-financed colleges does not make them eligible for exemption under the exemption clause. Therefore the service rendered by the petitioners in coaching and training private students for examinations will attract service tax while regular aided or selffinanced colleges affiliated to Universities are outside the tax net. 4. The next question to be considered is whether the definition clause contained in Section 65(27) of the Act which makes the service rendered by the petitioners taxable under Section 66 (105)(zzc), is discriminatory and violative of Art. 14 of the Constitution o....
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....rallel colleges. It is also a well-known fact that in interior and remote areas of the State, poor students even if eligible for admission in regular colleges cannot afford out-station-study and they naturally go to parallel colleges. In fact counsel for the petitioners pointed out that many brilliant students who could not afford to go to regular colleges after study in parallel colleges have secured high ranks in the examinations conducted by the Universities. Therefore in most cases, students landing in parallel colleges are the less fortunate ones who are compelled to join parallel colleges for economic reasons. It is worthwhile to note that the State Government after appreciating these realities have granted the same concession in bus fare granted to regular college students, to students in parallel colleges also. Financial benefits are provided to students from SC and ST community studying in parallel colleges also. Therefore, the State Government also treats the students in affiliated colleges and parallel colleges as part of the same class. In any case there can be no distinction between students undergoing private study in the parallel colleges and those undergoing course ....
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....s filed an affidavit in Court wherein he has stated that though the State is helpless in regard to levy of service tax, the Government decided to bring it to the notice of the Central Government the difficulties experienced by parallel colleges in the matter of service tax. In the circumstances, it has to be assumed that the State Government is also in favour of exemption to the parallel colleges in the same way granted to regular colleges under the exemption in the definition clause. In view of the above findings, I hold that the impugned provisions of the Act authorising levy of service tax on parallel colleges are arbitrary and violative of Art. 14 of the Constitution of India. However, I make it clear that the judgment is rendered on the peculiar facts applicable to parallel colleges in Kerala and this is not to be treated as declaring the Section unconstitutional in so far as any other category of educational institution or training centre is concerned. The impugned proceedings in all the WP Cases are quashed and respondents are prohibited from demanding registration or service tax for the services rendered by petitioners, their members and other parallel colleges in Kerala. ....
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....uld come under the Negative List and would not be liable to Service Tax. 24. We find that Hon'ble Madras High Court in the case of Madurai Kamraj University - 2021 (54) GSTL 385 (Mad.) held that: 11. After having gone into these arguments and the connected records, this Court feels that, the only question posed before this Court for decision is that, whether the services rendered by the petitioner university by granting affiliation and its allied activities and also by providing shelter in their campus to the service providers like Bank, Post Office, or catering etc., directly beneficial to the students, staff and faculty of the university, are exempted services within the meaning of Section 66D of the Finance Act and also under the Mega Exemption Notification of the year 2012 as amended from time to time. 12. The history of introduction of service tax has been traced by the Learned Counsel for the petitioner, which has been discussed in the earlier paragraphs. Up to 2012, the term "service" seems to have not been explained. First time, the term "service" has been explained under Clause (44) of Section 65B, which has already been quoted hereinabove. ....
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....tly been inserted under mega notification referred to above, whereby, clause (9) has been inserted with effect from 11-7-2014, where, the services provided by the educational institution to its students, faculty and staff are mentioned. The word "students", that we can understand, with, the services provided, is nothing but imparting education, whereas, the services to be provided by the educational institution to its faculty and staff is concerned, certainly, it may not be a direct activity of imparting education. No staff or faculty is going to get any imparting of education either from the institution or from the university. Hence, it is not limited to the services of imparting education to students alone for the purpose of exemption, but, it expands beyond which, where, whatever the services to be provided by the educational institution to its faculty and staff shall also form part of the activity of education being provided by way of services by the educational institution. If we take up this language used, exactly, the services provided by the educational institutions including the university not only for students but also for faculty and staff would be covered under the exem....
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....s provided by the educational institution like the petitioner institution i.e., the university to give affiliation can be an integral part of the educational services, being provided jointly, both by the University and the college. The college cannot independently function without the affiliation of the university. Therefore, for the purpose of providing the services of education, both the university as well as the college concerned, who get affiliated to the university, cannot be separated. 20. This is the purposive interpretation which is only possible, because, the services relating to admission and also the conduct of examination by such institution has been exempted. When we talk about the conducting of examination, it is the vehement contention of the revenue as submitted by the Learned Standing Counsel by relying upon the advance ruling referred to above, stating that, exempted service on the conduct of examination is that, it relates to admission to institution and anything related to examination, based on which, degree, title or diploma is conferred to the students. 21. With respect, this Court is of the concerned view that, that kind of narrow or pedanti....
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....ons to the services rendered by the educational institutions. The word "educational institution", cannot denote only the college affiliated to the university, but, it includes the university. As stated above, without the university, college cannot impart education on its own. 23. Moreover, the regime of service tax, i.e., prior to the GST came into the field, had continuously made available the exemption provisions, initially by Section 66D, from 2012, subsequently the mega notification, wherein, in the year 2014 clause (9) was inserted and subsequently by Notification No. 9/2016, Clause (l) of Section 66D, which was omitted from the year 2016, had been reintroduced by introduction of clause (oa), where, under the heading "educational institution", the exact Clause (l) of Section 66D has been inserted. Therefore, throughout the regime between 2012 and 2017, the educational institution had been provided with the exemption as has been stated in various provisions of the Act as well as the mega notification, followed by the amended notification and during all these periods, these institutions including the universities can very well enjoy the exemption. Accordingly, the stand....
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....nition of "Franchise Service" as it existed before 01.07.2012, for a show cause notice issued for the period after 01.07.2012 when the concept of Negative List has been put in place and intends to levy service tax on the appellants under Franchise Service. Though, we are in agreement with the submission of the learned Counsel for the appellant that the definition of a service before 01.07.2012 cannot be transported to a period after 01.07.2012, we find it expedient to have a look at the erstwhile provisions so that it can be analyzed whether the appellant-university has rendered any taxable service post 01.07.2012. Erstwhile Section 65(47) of Finance Act, 1994 defines the "Franchise Service" as: "65. (47) "franchise" means an agreement by which the franchisee is granted representational right to sell or manufacture goods or to provide service or undertake any process identified with franchisor whether or not a trade mark, service mark, trade name or logo or any such symbol, as the case may be, is involved; (48) "franchisor" means any person who enters into franchise with a franchisee and includes any associate of franchisor or a....
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.... 502 (Tri. Chan.) held that the appellant-university is not rendering any Franchise Service. We find that the position of Swift Institute of Engineering and Technology and the LCs/ RCs in the impugned case is comparable. In fact, the position of the LCs/ RCs is on a better footing inasmuch as they are conducting courses approved by the appellant-university, who also award degree/ diploma. The Bench finds in the case of Swift Institute of Engineering and Technology (supra) that: 14. The issue to be decided by us is regarding the classification of the courses being provided by the appellant falls under commercial coaching services and franchise services or not. It is a fact that the main appellant are recognized as Research and Education Society and conducts various courses affiliated by the various universities and also as per AITC approved courses and awards degree to the students. Regarding courses, which are being provided in collaboration with Coventry Universities, the same are also recognized by the UK Government as well as the parallelly by the Punjab Technical Universities. As Students are being enrolled by the main appellant initially to their institute and s....
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....n isolation. Hon'ble High Court held that: 6. We have perused the order impugned in this appeal. The order under appeal is rendered by the CESTAT and it was aware of the definition of the term "franchise service" as appearing in Section 65(47) of the Finance Act, 1994. First, the definition of the term "franchise" as found in this clause means an agreement by which the franchisee is granted representational right to sell or manufacture goods or to provide service or undertake any process identified with franchisor, whether or not a trade mark, service mark, trade name or logo or any such symbol, as the case may be, is involved. Insofar as the understanding of the Revenue about the "franchise service" is concerned, it is apparent that this is to be found in sub-clause (zze) of clause (105) of Section 65 of the Finance Act, 1994. There, the definition of "taxable service" means any service provided or to be provided and, in the instant case, to a franchise by the franchisor in relation to franchise. 7. We do not see how by reading clause (10) of the agreement in isolation can the Revenue reach this conclusion. The Tribunal found that clause (10) of the agreement bet....