TaxTMI 
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2025 (9) TMI 385
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....n or order to quash impugned show cause notice bearing number C.C. No. GEXCOM/AR/INV/GST/2163/2022-AF-O/O Pr. CGST-Bengaluru(E) SCN NO. 05/2023-24/jc/ae/gst dated: 10.10.2023 issued by the Respondent, enclosed as Annexure-A for the reasons stated in the grounds. B) ISSUE a writ of certiorari or writ in the nature of certiorari or any other writ, order or direction calling for the records of the Circular NO. 151/07/2021-GST dated: 17.06.2021 issued by Respondent No.2, enclosed as Annexure-L and quash the clarifications relating to affiliation fee more particularly paragraph 4, along with consequential relief and pass any other writ, order or direction as this Hon'ble Court may deem fit and proper in the facts and circumstances of the case and in the interest of justice and equity. C) That this Hon'ble Court be pleased to issue a writ of Mandamus or Certiorari, or Writ in the nature of Mandamus or Certiorari, or any other Writ or Order or Direction calling for the records of the Circular 234/28/2024-GST dated: 11.10.2024, issued by the Respondent No.2 enclosed as Annexure-M and quash the clarifications relating to affiliation fee more particularly paragraph 2, along....
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....n the grounds. (E) Issue a writ of certiorari or writ in the nature of certiorari or any other writ, order or direction calling for the records of the Circular No. 151/07/2021-GST dated 17.06.2021 issued by Respondent No.4, enclosed as Annexure-T and quash the clarifications relating to affiliation fee more particularly paragraph 4, along with consequential relief and pass any other writ, order or direction as this Hon'ble Court may deem fit and proper in the facts and circumstances of the case and in the interest of justice and equity. (F) That this Hon'ble Court be pleased to issue a Writ or Certiorari, or Writ in the nature of Certiorari, or any other Writ or Order or Direction calling for the records of the Circular 234/28/2024-GST dated 11.10.2024, issued by the Respondent No.4 enclosed as Annexure-V and quash the clarifications relating to affiliation fee more particularly paragraph 2, along with consequential relief and pass any other writ, order or direction as this Hon'ble Court may deem fit and proper in the facts and circumstances of the case and in the interest of justice and equity. (G) That this Hon'ble Court be pleased to issue a a Writ or ....
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....exure-Q, for the reasons stated in the grounds. D) Issue a writ or direction in the nature of a writ of certiorari or any other writ or direction to quash Impugned Order u/s 73 of the CGST/KGST Act 2017 bearing number ACCT/Audit-3/2019-20/GST-224/B-286 dated 23.08.2024 issued by Respondent No. 5 enclosed as Annexure-R, for the reasons stated in the grounds. (E) That this Hon'ble Court be pleased to issue a Writ of Mandamus or Certiorari, or Writ in the nature of Mandamus or Certiorari, or any other Writ or Order or Direction calling for the records of the Circular 234/28/2024-GST dated 11.10.2024, issued by the Respondent No. 4 enclosed as Annexure-S and quash the clarifications relating to affiliation fee more particularly paragraph 2, along with consequential relief and pass any other writ, order or direction as this Hon'ble Court may deem fit and proper in the facts and circumstances of the case and in the interest of justice and equity. (F) That this Hon'ble Court be pleased to issue a Writ of Mandamus or Certiorari, or Writ in the nature of Mandamus or Certiorari, or any other Writ or Order or Direction calling for the records of the Press note dated....
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....n the State of Karnataka. Details of demand of GST on affiliation fees, PG registration fees and convocation fees collected from constituent colleges/students are as below: Document ref. and date Period covered Demands SCN: DGSTO-03/DC-3.7/SCN-01/Adj-55/2023-2024 dated 27.09.2023 2017-18 Nature of fee Amount of fee Affiliation fee 21,60,60,815 PG Registration fees 66,41,400 Convocation fees 60,81,970 GST demand on the above-Rs. 4,11,81,153/- Nature of fee Amount of fee SCN: DGSTO-03/DC-3.7/SCN-01/Adj-56/2023-2024 dated 17.10.2023 2018-19 Affiliation fee 31,74,89,991 PG Registration fees 9,26,39,400 Convocation fees 30,50,750 GST of Rs. 7,43,72,425/- on the above fees is demanded. Nature of fee Amount of fee (Rs.) SCN: DGSTO-03/DC-3.7/SCN-01/Adj-57/2023-2024 dated 17.10.2023 2019-20 Affiliation fee 38,70,08,859 PG Registration fees 10,35,51,500 Convocatio....
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.... "4. Taking into account the above, the GST Council has recommended, to clarify as below: (i) GST is exempt on services provided by Central or State Boards (including the boards such as NBE) by way of conduct of examination for the students, including conduct of entrance examination for admission to educational institution [under S. No. 66 (aa) of notif No. 12/2017-CT(R)]. Therefore, GST shall not apply to any fee or any amount charged by such Boards for conduct of such examinations including entrance examinations. (ii) GST is also exempt on input services relating to admission to, or conduct of examination, such as online testing service, result publication, printing of notification for examination, admit card and questions papers etc, when provided to such Boards [under S. No. 66 (b) (iv) of notif No. 12/2017-CT(R)]. (iii) GST at the rate of 18% applies to other services provided by such Boards, namely of providing accreditation to an institution or to a professional (accreditation fee or registration fee such as fee for FMGE screening test) so as to authorise them to provide their respective services." 5. The relevant impugned portion of Circular ....
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....rs-W.P.No.723/2024 dated 15.04.2025, which is directly and squarely applicable to the present petitions which deserve to be allowed. (c) In terms of Section 9(1) of the CGST Act, 2017, GST is attracted on supply of goods or services or both. Section 7 of the CGST Act, 2017, defines the scope of 'supply'. In terms of the above provisions, the primary ingredients to attract levy of GST are that the activity sought to be taxed shall be in the course or furtherance of business for a consideration. (d) Learned Senior Counsel invited my attention to the judgment of the Apex Court in the case of T.M.A. Pai Foundation v. State of Karnataka - (2002) 8 SCC 481 and other judgments and submitted that activities carried out by educational institutions cannot be termed as commercial in nature and education not being in the nature of business or commerce, does not fall under the definition of 'business' under Section 2(17) of the CGST Act, 2017. It was further submitted that incidental or ancillary activities to education would also not fall under the ambit of business. Consequently, the activities of universities do not qualify as 'supply' under Section 7 of the CGST Act, 2017.....
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....n Bench of this Court held that the affiliation fee collected by the University is not amenable to service tax as the same is in the nature of statutory function and not a commercial activity. Further, it was held that the University is also an educational institution and would be eligible for the exemption and that the said view would equally be applicable under the GST regime also. (j) Further, it was submitted that provisions of Section 74 cannot be invoked, as there is no intention to evade payment of taxes on the part of Universities, which are creatures of statute. (k) In support of his submissions, learned Senior Counsel relied upon the following judgments: (i) Goa University Vs. Joint Commissioner of Central Goods and Service Tax & Ors, [2025] 173 taxmann.com 562 (Bombay); (ii) All India Federation of Tax Practitioners Vs. Union of India, 2007 (7) STR 625; (iii) Union of India vs. VKC Footsteps India (P) Ltd, 2021 130 taxmann.com 193 (SC); (iv) Laxmi Engineering Works Vs P.S.G. Industrial Institute (1995) 3 SCC 583; (v) Sole Trustee, Lok Shikshana Trust v. CIT, (1976) 1 SCC 254; (vi) T.M.A. Pai Foundati....
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.... 68 taxmann.com 287 (SC); (xxx) CCE Vs. Ratan Melting and Wire Industries, 2008 (231) E.L.T. 22 (S.C.); (xxxi) Sandur Micro Circuits Ltd. Vs. CCE, Belgaum, 2008 (229) ELT 641 (SC); (xxxii) M/s Surana Telecom Ltd. Vs. Government of India in WP No. 15312/2003 [Affirmed by Supreme Court in Tata Teleservices Ltd. Vs. Commissioner of Customs, 2006(194) ELT 11 (S.C); (xxxiii) Torrent Power Ltd. v. Union of India 2020 (34) G.S.T.L. 385 (Guj.); (xxxiv) Association of Technical Textiles Manufacturers and Processors & Anr. Vs. Union of India, (2023) 12 Centax 195 (Del.); (xxxv) Union of India & Anr. vs. Mohit Minerals Pvt. Ltd, 2022 (61) G.S.T.L. 257 (S.C.); (xxxvi) Parle Agro (P.) Ltd vs UOI (2023) 12 Centax 199 (Mad.) (Para 33, 118); (xxxvii) Mother Superior v. State of Kerala, 2007 SCC OnLine Ker 578; (xxxviii) Canterbury Ladies Hockey Club vs The Commissioners for Her Majesty's Revenue and Customs in Case C-253/07 (ECJ); 8. Per contra, learned counsel for the respondent-Central Tax Authorities and learned HCGP for the State Authorities would jointly re-iterate the various contentions urged in their respec....
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....e exempt from GST in terms of Entry No. 66 of Notification No. 12/2017-CT (R) dated 28.06.2017? (vi) Whether the impugned Circulars dated 17.06.2021 and 11.10.2024 are legally valid ? (vii) Whether the affiliation fees, PG registration fees, admissions fees, convocation fees and other sums collected by the petitioners-Universities from the College/students would be exigible to payment of GST ? (viii) Whether the impugned Show Cause Notices and Orders warrant interference by this Court in the present petitions? Re: Issue No. (i) - Whether activities of Universities are commercial in nature and can be termed as 'supply' in the course or furtherance of business? 12. Before adverting to the aforesaid issue, it is relevant to refer to the relevant statutory provisions of the CGST/KGST Act. Section 9 of the CGST Act reads as under: Levy and collections (1) Subject to the provisions of sub-section (2), there shall be levied a tax called the central goods and services tax on all intra-State supplies of goods or services or both, except on the supply of alcoholic liquor for human consumption, on the value determined under section 1....
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....ory for the purpose of paying tax and such person shall be liable to pay tax. Section 7 of the CGST Act, reads as under: Scope of supply. (1) For the purposes of this Act, the expression "supply" includes-- (a) all forms of supply of goods or services or both such as sale, transfer, barter, exchange, licence, rental, lease or disposal made or agreed to be made for a consideration by a person in the course or furtherance of business; (b) import of services for a consideration whether or not in the course or furtherance of business;[and] (c) the activities specified in Schedule I, made or agreed to be made without a consideration;[****] (d) [*****]. (1A) where certain activities or transactions constitute a supply in accordance with the provisions of sub-section (1), they shall be treated either as supply of goods or supply of services as referred to in Schedule II. Section 2(17) of the CGST Act, 2017 reads as: "business" includes- (a) any trade, commerce, manufacture, profession, vocation, adventure, wager or any other similar activity, whether or not it is for a pecuniary benefit; ....
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....and includes all matters relating to imparting and controlling education. The expression 'education' has been interpreted by the Hon'ble Supreme Court in various cases. In Sole Trustee, Lok Shikshana Trust v. CIT (supra), the term "education" was held to mean (para 5) the systematic instruction, schooling or training given to the young in preparation for the work of life. It also connotes the whole course of scholastic instruction which a person has received. What education connotes is the process of training and developing the knowledge, skill, mind and character of students by formal schooling. 30. In T.M.A. Pai Foundation v. State of Karnataka (supra), Their Lordships observed that education plays a cardinal role in transforming a society into a civilized nation. It accelerates the progress of the country in every sphere of national activity. No section of the citizens can be ignored or left behind because it would hamper the progress of the country as a whole. It is the duty of the State to do all it could, to educate every section of citizens who need a helping hand in marching ahead along with others. 31. In P.A. Inamdar v. State of Maharashtra (2005) 6 SCC ....
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....edge and wisdom so that one may lead a better life and become a better citizen to serve the nation in a better way. While laying emphasis on the examination, the Hon'ble Supreme Court in Nidhi Kaim v. State of Madhya Pradesh (2016) 7 SCC615, held that the examination is considered as a common tool around which the entire education system revolves. 34. The High Court of Gujarat in Sahitya Mudranalaya Private Limited v. Additional Director General (supra), while examining the issue as to whether services in relation to examination conducted by the Education Boards were exempted from service tax, held that conducting of examinations are indispensable part of education process. The University confers degrees/diplomas etc. after holding examinations. Unless a student holds a certificate or degree issued by a Board/University, his or her school education would not be complete, similarly, without a degree or diploma being conferred by the University, college education would not be complete. Therefore, examinations are an indispensable component of education, without which such education is incomplete. Therefore, to say that Boards/Universities are not "educational institutions" w....
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.... interpreting Article 19 of the Constitution, their Lordships held that education is neither trade nor business but could be covered under the term "occupation"; vocation which keeps company with trade, commerce etc., will have to be interpreted noscitur a sociis as meaning gainful occupation which partakes the nature of words such as trade, commerce, etc., and generally does not cover education. 12.5 Further, in the decision of the Delhi High Court in the case of Central Electricity Regulatory Commission vs The Additional Directorate General of GST Intelligence - 2025(1) TMI 887 (Delhi), it was held that the regulatory functions discharged by statutory bodies do not fall within the scope of the word 'business' as defined in Section 2(17)(i) as hereunder: 27. The definition clauses referred to above assume significance in light of the language employed in Section 7 and which speaks of the supply of goods, services or both provided by a person for consideration being in the course or furtherance of business. When we revert to Section 2 (17), we find that the statute defines the said expression to mean any trade, commerce, manufacture, profession, vocation, adventure, wag....
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....scharged by Commissions would clearly not fall within the scope of the word "business" as defined by Section 2 (17). Thus, even if the fee so received by such Commissions were to be assumed as being consideration received, it was clearly not one obtained in the course or furtherance of business. We are thus of the considered opinion that the view as expressed by the respondents in the SCNs' impugned before us are rendered wholly arbitrary and unsustainable." 12.6 In view of the aforesaid, I am of the view that the activities of Universities are not commercial in nature and cannot be termed as 'supply' in the course or furtherance of business. Issue No.(i) is accordingly answered in favour of the petitioners-Universities. Re: Issue No. (ii) - Whether the activities incidental to education can be brought to tax under the GST regime on the ground that it amounts to a business? 13. At the outset, it is significant to note that from the definition of the first three clauses contained in Section 2(17), it would become clear that activities such as trade, commerce, etc., would be business and activities incidental, in connection with or ancillary to such trade, commerce, etc.,....
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....o prove such intention rests on the Department. Hence, where the main and dominant activity of the University is education, it cannot be termed as business activity to demand tax. We draw support from the decision of the Supreme Court in Commissioner of Sales Tax Vs. Sai Publication Fund, (2002) 4 SCC 57 for the view that we take. 59. Incomes such as rent/license fee received from teachers or staff are clearly exempt from tax being residential in nature and being services rendered to faculty. The interest income is exempt from tax in terms of serial 27 of Notification 12/2017-CT(R) dated 28.06.2017. 13.2 I am in respectful agreement with the view expressed above and for the reasons given by me independently in the aforesaid paragraph and the reasons given by the Bombay High Court and consequently, I hold that the income derived from students and colleges and other income incidental to the main functions of the University cannot be brought to tax under GST on this principle. Issue No. (ii) is accordingly answered in favour of the petitioners-Universities. Re: Issue No. (iii)- Whether the fee collected by the Universities is 'consideration' ? 14. Before adverting....
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....emptions) v/s. Ahmedabad Urban Development Authority (supra), in Para 160, it is held thus:- "Fee, cess and any other consideration" has to receive a purposive interpretation, in the present context. If fee or cess or such consideration is collected for the purpose of an activity, by a State department or entity, which is set up by the statute, its mandate to collect such amounts cannot be treated as consideration towards trade or business. Therefore, regulatory activity, necessitating fee or cess collection in terms of the enacted law, or collection of amounts in furtherance of activities such as education, regulation of profession, etc. are per se not business or commercial in nature. Likewise, statutory boards and authorities, who are under mandate to develop housing, industrial and other estates, including development of residential housing at reasonable or subsidised costs, which might entail charging higher amounts from some section of the beneficiaries, to cross-subsidise the main activity, cannot be characterised as engaging in business. The character of being "State", and such corporations or bodies set up under specific laws (whether by States or the Centre) woul....
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....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 it 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. In view of all this, the Revenue is not justified in levying Service Tax on the income accruing to the University on account of affiliation during the academic year between ....
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....for achieving public functions or services. Such amounts are excluded from the mischief of commercial receipts. 42. This Court in Commissioner of Central Excise, Nasik v. Maharashtra Industrial Development Corporation 2018 (9) GSTL 372 (Bom), while examining the levy of service tax on the maintenance activities undertaken by the corporation, held that Maharashtra Industrial Development Corporation is a statutory corporation which is virtually a wing of the State Government, and it discharges several sovereign functions. It was held that for providing amenities to plot holders the service fees or charges collected by the Corporation are obviously in the nature of compulsory levy which is used by the Corporation in discharging its statutory obligations and hence they cannot be subjected to service tax. 43. The High Court of Madras in the case of Manonmaniam Sundaranar University v. The Joint Director (GST Intelligence), 2021-TIOL-888-HC-MAD-ST, held that the affiliation fees as well as the inspection commission collected by the University are in the nature of statutory levies. It was held that by performing those activities, the Petitioner is only discharging statut....
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....ns. The Hon'ble Division Bench held as under: "VIII. AS TO TAXABILITY OF INCOME FROM AFFILIATION AND ALLIED FUNCTIONS: (a) The University being a statutory body, accords affiliation to the health science colleges on the recommendation of the State Government. This is done under Section 45 of the RGUHS Act. Affiliation results into certain benefits/privileges; at the same time, it also makes the affiliated colleges to undergo certain supervision at the hands of the Syndicate. Section 48 provides for withdrawal of affiliation. Similarly, Section 46 provides for grant of recognition by the Syndicate to any institution of health sciences, even if it is situated outside the University Area. Such recognition can be withdrawn also under sub-Section (2). Grant or renewal of affiliation/recognition is subject to payment of specified fees, late fees & penalties................." 15.5 In W.P. No. 4254/2024, M/s. Bengaluru North University (BNU) is established in the year 2017 under the Karnataka State University (Amended) Act, 2015. The Petitioner was part of Bangalore University and it was trifurcated by creating Bangalore North University and Bangalore Central Universit....
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.... Provided that nothing contained in sub-items (i), (ii) and (iii) of item (b) shall apply to an educational institution other than an institution providing services by way of pre- school education and education up to higher secondary school or equivalent: Provided further that nothing contained in sub-item (v) of item (b) shall apply to an institution providing services by way of, (i) pre-school education and education up to higher secondary school or equivalent; or (ii) education as a part of an approved vocational education course. Nil 16.1 Paragraph 2(y) of the Notification defines the phrase 'educational institution' as below: 2(y) "educational institution" means an institution providing services by way of,- (i) pre-school education and education up to higher secondary school or equivalent; (ii) education as a part of a curriculum for obtaining a qualification recognised by any law for the time being in force; (iii) education as a part of an approved vocational education course; 16.2 As pointed out by the learned Senior counsel the above exemption entry is similar to the exemption entry under the erstwh....
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....uct courses, conduct examinations and also award the degree to the students admitted to secondary education. The term 'education', in our opinion, and as rightly submitted by the learned Senior Advocate for the petitioner University, should not be restricted to the activity of teaching/providing instruction to students inside a classroom, rather it is a wider term which would involve the activity of designing the curriculum for the course of study which would be used by constituent colleges, giving affiliation to colleges so that the standard of education imparted by them is in accordance with the standards set by the Goa University, conferring the degree at the end of the course to the students. 16.3 Based on the above, the Bombay High Court observed as below on the aspect of exemption under clause (a) of Entry No. 66: 54. ................. The University is also an educational institution and students of the University, include students studying through affiliated colleges. Thus, the activities of the University, in so far as it relates to levying of affiliation fees is exempt from GST. 16.4 Further, the Bombay High Court observed that the affiliation and other ser....
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....9)]. 16.7 In light of the clarification issued by CBIC vide C.B.E. & C. Flyer No. 41, dated 01.01.2018, the purpose of the exemption entry is to promote education. Consequently, the exemption cannot be restricted to classroom teaching as held by the Bombay High Court in Goa University's case supra at Paragraph 48. 16.8 It is noticed that the very purpose of the notification is to ensure that students need not have to pay GST on the fees that they are paying. If GST levy is fastened on the Universities, they would necessarily pass on the same to the colleges (being an indirect tax), and in turn colleges will pass on the same to the students. Therefore, the very object of exemption will stand defeated. For these additional reasons and the reasoning given by the Bombay High Court, I hold that the exemption is available to the Universities. Issue No. (v) is accordingly answered in favour of the petitioners-Universities Re: Issue No. (vi) - Whether the impugned Circulars dated 17.06.2021 and 11.10.2024 are legally valid ? 17. On the aspect of validity of Circulars dated 17.06.2021 and 11.10.2024, the Bombay High Court held as under: 50. We are of the opinion that....
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....the affiliation services by universities to colleges are not by way of services related to the admission of students to such colleges or the conduct of examinations by such colleges, is erroneous. 55. The Hon'ble Supreme Court in Bhartia Education Society v. State of H.P., (2011) 4 SCC 527, in the context of the NCTE Act, observed that "affiliation" enables and permits an institution to send its students to participate in the public examinations conducted by the examining body and secure the qualification in the nature of degrees, diplomas, certificates, etc. In Principal and others Vs Presiding Officer and Others, (1978) 1 SCC 498, the Hon'ble Supreme Court observed that affiliation is meant to prepare and present students for public examination. In our view, affiliation is essentially an activity relating to admission and examination of students and hence the Circular dated 11.10.2024 in its application to the petitioner University is contrary to the settled legal position. The circular cannot take away the effect of the notification statutorily issued. The Respondents cannot whittle down the exemption notification and restrict the scope of the exemption notification by ....