No Service Tax Payable on Student Recruitment Services Rendered to Foreign Universities: CESTAT [Read Order]

The New Delhi bench of the Customs Excise & Service Tax Appellate Tribunal (CESTAT) has held that foreign consultancy fee received by TC Global India, for providing student recruitment services such as marketing, promotion, roadshows, etc. is not liable to service tax and qualifies as an ‘Export of Service’. 

On an investigation by the Directorate General of Excise and Intelligence (DGCEI), it was found that the appellant/assessee, TC Global India Pvt. Ltd, were not paying service tax on commission received by them from foreign universities/institutes for arranging and facilitating provision of Student Recruitment Services to be provided in India to various foreign universities/institutes.

Read more: Consultancy Fees and Architect Fees paid to Non-Resident Entities would not amount to FTS as per Indo-Singapore DTAA: ITAT

On investigation, the department formed an opinion that the Australian university/institutes are required to render student recruitment services for which they entered into agreement with the education agents. The appellant/ assessee also entered into such agreement with various foreign education service providers for arranging or facilitating recruitment of students as their education agent in lieu of a commission termed as agents fee/consultancy income from the activities agreed to be performed by the appellant.

Your ultimate guide for mastering TDS provisions - Click here

The department was of the view that the appellants were providing intermediary services of arrangement and facilitation of student recruitment services to foreign education service providers in India. It was alleged that the appellants were liable to pay service tax on the commission received by them for the said activity.

Resultantly, a Show Cause Notice dated 17.12.2015 came to be issued to the appellant/assessee proposing to raise a service tax demand of ₹15,58,58,003/- along with proportionate interest and the appropriate penalties. The said demand was confirmed by the department vide order-in-original. Hence, an appeal was filed before the CESTAT.

Read more: Consultancy Services to a Foreign University/Foreign Group Entity does not fall under “Intermediary Services”: CESTAT

The counsel for the appellant/assessee, contended that the appellant has entered into various agreements with several foreign universities and engage in activities such as advertisement, website promotion, road shows, etc. without acting as an agent of these universities.

It was the specific contention of the appellant that the services rendered by the appellant are otherwise exempt from service tax in terms of notification no. 25/2012-ST dated 20th June 2012, entry no. 9 thereof, which exempts the services provided by an educational institution in respect of education by way of auxiliary educational services.

Your ultimate guide for mastering TDS provisions - Click here

It was further submitted that the foreign consultancy service received by the foreign universities amounts to “Export of Services” in terms of Rule 6A of Service Tax Rules, 1994. Lastly, it was submitted that the extended period of limitation has been wrongly invoked by the department.

The departmental Representative, contended that students counselling is part and parcel of the main service i.e. “Students Recruitment Service‟ and since the appellant is providing these services like an agent / broker / middleman it is rightly held to be engaged in providing services as Intermediary‟ in terms of rule to 2(f) of Place of Provision of Service Rules, 2012. 

It was submitted that Rule 9 of the Place of Provision of Service Rules, 2012 is applicable with respect to Intermediary service providers according to which, location of service provider is relevant for the purpose of taxability. Lastly, submitting about invocation of extended period of limitation while issuing SCN, the Departmental Representative mentioned that in ST – 3 returns “Business Auxiliary Services‟ and “Commercial Training or Coaching Services‟ have been declared by the appellants by concealing that they are also providing the exempted services.

Read more: Service Tax Leviable on professional fees/ Engineering charges considered under ‘Consulting Engineering Services‘: CESTAT

The question which fell for adjudication before the bench was whether the services rendered by the appellant to overseas universities/colleges amounts to „Export of Service‟ as contended by appellants or it is “intermediary service‟ as alleged by the department?

Your ultimate guide for mastering TDS provisions - Click here

The bench comprising Rachna Gupta and Hemambika Priya observed that in all the contracts entered into by the appellant with foreign universities, it is explicitly mentioned that the appellant is not an agent of such universities and there was a clear denial of agent-principal relationship. The bench further perused Rule 6A of the Service Tax Rules, 1994 and held that since the agreement is between the appellant/assessee and the foreign university, the place of provision is wrongly held to be in the taxable territory i.e India. Thus, it was held that foreign consultancy services provided by an assessee amounts to ‘Export of Service’ and they are outside the ambit of service tax.

To support its conclusion, the bench relied on the decision of the Delhi High Court in Verizon Communication India Private Limited (2018) wherein it was held that recipient of the service is determined by the contract between the parties and who has the contractual right to receive the service and who is responsible for the payment for the service.

Read more: Services provided to Universities in foreign Countries as Export of Services cannot be Treated as ‘Intermediaries’ u/r Rule 2(f) of Place of Provision of Service Rules: CESTAT

Accordingly, it was held that the services provided by the appellant/assessee, falls within the ambit of Rule 3 of the Place of Provision Rules, 2012 and the department has wrongly invoked Rule 9 of Place of Provision Rules.

On the question of invocation of extended period of limitation, the bench observed that the appellant/assessee has been filing its service tax returns regularly and has been discharging service tax payments on domestic consultancy. Thus, it was held that there can be no intent to evade tax and the show cause notice was barred by time.   

To Read the full text of the Order CLICK HERE

Support our journalism by subscribing to Taxscan premium. Follow us on Telegram for quick updates