The Acharya Nagarjuna University vs. The Commissioner

Held

The Court allowed the writ petition, holding that the impugned assessment order, which classified the Petitioner University's activities of granting affiliation and recognition as taxable services under Section 65B(51) read with Section 65B(44) of the Finance Act, 1994, was not sustainable. The Court relied on the legal position established by previous judgments. Specifically, it referred to a coordinate bench's decision in W.P.No.23535 of 2025 & batch, which held that the activities of universities in granting affiliations and No Objection Certificates were statutory functions and not business activities, thus not constituting a supply of service exigible to tax under the GST Act. The Court also noted the Karnataka High Court's decision in Principal Additional Director General v. Rajiv Gandhi University of Health Sciences, which was upheld by the Supreme Court, where it was held that services catered by the university were by way of education as part of a curriculum recognized by law and thus not taxable, particularly for the period before May 14, 2016, when such services were part of the Negative List. The Court concluded that the Petitioner's activities of collecting affiliation fees and other related charges were not exigible to service tax.

Facts

Acharya Nagarjuna University (Petitioner) received a show cause notice alleging non-payment of service tax on affiliation and recognition fees collected from self-financing colleges. The notice was based on intelligence indicating taxable services were provided from July 1, 2012. The University contended it was not a profit-making commercial organization and its statutory functions were outside the service tax purview. An Order-in-Original dated November 30, 2023, determined Service Tax at Rs. 11,96,164/-, imposed a 100% penalty of Rs. 11,96,164/-, and a subsequent notice dated February 27, 2025, sought recovery of Rs. 24,02,328/-. The University challenged this order through a writ petition.

Key Issues

1. Whether the services rendered by the Petitioner University in granting affiliation/recognition and collecting related fees constitute a taxable service under the Finance Act, 1994, particularly in light of its status as an entity established by State Legislature and discharging statutory functions? Petitioner's Arguments: The Petitioner argued that it is not a profit-making commercial organization but an entity established under a State Act, discharging statutory functions mandated by the Act and UGC Regulations. Therefore, its activities should not be considered 'business' and consequently not a 'supply of service' under the GST Act. They relied on a coordinate bench's decision in W.P.No.23535 of 2025 & batch. Respondent's Arguments: The Revenue contended that any supply of service by a governmental authority is taxable under Section 7 and Section 2(17) of the GST Act, unless exempted under Schedule-III or Section 7(2)(b). They argued that the universities' activities did not fall under Schedule-III nor were they exempted, making the collected fees taxable. They cited the Karnataka High Court's decision in Principal Additional Director General, Directorate General of GST Intelligence, Bengaluru v. Rajiv Gandhi University of Health Sciences and the Supreme Court's order against it.