No Service Tax on Supply of Food Stuff by Private Universities to Students: Himachal Pradesh HC rules in favour of JUIT [Read Order]

In a ruling in favour of Jaypee University of Information Technology (JUIT), the Himachal Pradesh High Court has held that private universities are not liable to pay tax on the supply of foodstuffs to students.

The Jaypee University of Information Technology Act No. 14 of 2002, which was passed by the Himachal Pradesh government, allowed the petitioner(s) to become a State Government university in 2002. According to Regulation 2.1 of the University Grants Commission (Establishment and Maintenance of Standards in Private Universities) Regulations, 2003, which were framed under Clauses (f) 81 (g) of Section 26(1) of the University Grants Commission Act, 1956, the university is classified as a "Private University" because it was established under Jaiprakash Sewa Sansthan (JSS), a registered Public Trust (not for profit basis).

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Due to non-availability of a market for the regular consumers in the vicinity of the University, it was considered essential to establish a facility in the University to cater to the needs of the students community. Thus, the University has established a mess, named as “Annapoorna”.

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Outsiders are not permitted to enter these sites. Mess facilities are only for university students and are not available to visitors for business purposes. The Petitioner(s)-University's books of accounts clearly showed the facts of the mess facility turnover, and a comprehensive accounting was done for every dollar spent and every dollar collected from the students.

A group of officers from the respondents' department paid a visit to the petitioner's university on March 6, 2013. The information on the Mess facilities had to be provided by the Petitioner. As a result, the petitioner sent in all of the documentation, including the daily receipts, the costs account, and the purchase records. Without giving anyone a chance to be heard, the respondent officer quickly and hurriedly imposed 38,17,348 in VAT under Section 21(7) of the Himachal Pradesh Value Added Tax Act 2005.

The petitioner argued that authorities threatened to seal the entire property if the petitioner would not pay the requested amount immediately. As part of protocol, the Respondent authority also requested blank documents that were properly signed. The entire process, which included searching every cabin, counter, chamber, etc., was conducted in a way that suggested the petitioner was engaging in grave criminal activity. Given the university's reputation, the petitioner gave in to departmental pressure and did as instructed, turning over the check for Rs. 38,17,348 and the blank, signed form on March 6, 2013. The sum of Rs. 8,36,451/-for the 2009–10 fiscal year is included in the total of Rs. 38,17,348.

The division bench of Justices Tarlok Singh Chauhan and Sushil Kukreja has noted that the Tribunal erred in concluding that the petitioner must pay taxes on the provision of food and other items to students on its property, despite the petitioner's primary purpose being education.

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Furthermore, it was believed that the tribunal lacked justification for concluding that the petitioner would be responsible for paying the tax on the provision of commodities to students during academic activities, even though the activities were not related to business. As can be seen from the Assessment Order, the court determined that Dr. Sunil Kumar, the then-AETC, had fixed the duty to pay the tax on the day of the visit, which was not only unprofessional but completely unlawful.

The court ruled that there was insufficient evidence to prove that the petitioner(s) had an independent intention to engage in business related to the auxiliary activities of providing canteen facilities to the children. As a result, in this instance, the auxiliary activity of offering university convicts cafeteria amenities would not qualify as business under the Act. After that, the petitioner was manifestly exempt from paying any taxes related to the aforementioned actions.

To Read the full text of the Order CLICK HERE

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