Bharathidasan University vs. The Joint Commissioner Of GST

Facts

The petitioner, Bharathidasan University, a State University, challenged an order dated February 20, 2019, passed by the Joint Commissioner of GST and Central Excise. The respondent had issued a show cause notice on October 23, 2018, proposing to levy service tax on the University for the period from July 1, 2012, to March 31, 2017. The proposed tax was Rs. 54,24,258/-, covering two heads: renting of immovable properties (like banks, post offices) and other university services (affiliation fees, application fees for new courses, rent from commercial establishments). The University had paid some service tax but reserved its right to challenge the levy. The impugned order confirmed the demand, levied interest under Section 75 of the Finance Act, 1994, and imposed penalties under Sections 78 and 77 of the Finance Act, 1994.

Held

The Court held that the services rendered by the petitioner university, including affiliation fees and allied activities, as well as the renting of immovable properties for banks, post offices, and canteens within the campus, are exempt from service tax. The Court relied on its previous decision in Madurai Kamaraj University v. Joint Commissioner, GST & Central Excise. It reasoned that Section 66-D of the Finance Act, 1994, and subsequent notifications provided exemptions for educational institutions. The Court interpreted 'educational institution' to include universities and considered affiliation and allied services as part of the educational ecosystem. Furthermore, services provided within the campus for students, faculty, and staff, such as renting of space for banks or canteens, were also considered allied educational services and thus exempt. The Court found the revenue's narrow interpretation to be untenable and destructive to the concept of exemptions for educational institutions. The impugned order was set aside, and any tax paid pursuant to the demand was ordered to be refunded within 60 days.

Key Issues

1. Whether the services rendered by the petitioner university, including affiliation fees, application fees for new courses, and rent collected from commercial establishments within its campus, are taxable under the Finance Act, 1994, or are exempt under Section 66-D and the Mega Exemption Notification. Petitioner's argument: The petitioner contended that the issue is covered by a recent High Court decision in Madurai Kamaraj University v. Joint Commissioner, GST & Central Excise, which held that affiliating universities are not liable for service tax on affiliation and allied services, and that renting of premises for banks, post offices, etc., within the campus are allied services to education and thus exempt. Respondent's argument: The respondent argued that the facts of this case are different from the Madurai Kamaraj University case. They contended that renting of property to third-party service providers for commercial gain does not fall within the definition of educational services and therefore cannot be exempted.