The New Delhi Bench of the Customs, Excise and Service Tax Appellate Tribunal (CESTAT), observed that service tax is not leviable on hostel services and education services by way of pre-school education and education up to higher secondary school.
The appellant,Mody Education Foundation, is a society registered under the Societies Registration Act, 1860. It runs a boarding school called Mody School, for girls from third to twelfth standard.An investigation was initiated against the appellant whereafter it was observed that the appellant had failed to pay service tax in respect of various services provided/received by it.
B.L. Narasimhan, counsel for the appellant, submitted that the hostel services and education services provided by a boarding school are naturally bundled in the ordinary course of business, and it is the education service that gives the essential character to such a bundle. This apart, as hostel services cannot be provided on a stand-alone basis without the provision of education services by a boarding school, there is a clear nexus between the two services.
The Counsel further submitted Hostel services are naturally bundled with education services, which is covered under section 66D(l) of the Finance Act. As the two services i.e. hostel services and education services are naturally bundled in the ordinary course of business, in accordance with the provisions of section 66F(3)(a) of the Finance Act, the essential character of this bundle is education services, which is covered under section 66D(1) of the Finance Act.
Explanation to section 66F of the Finance Act which defines bundled services, provides that for a service to be a bundled service, an element of provision of one service needs to be combined with an element of provision of another service and there should be a nexus between the two services.
A Two-Member Bench comprising Justice Dilip Gupta, President and Hemambika R Priya, Technical Member observed that “The hostel service and education services are naturally bundled in the ordinary course of business and it is the education service that gives the essential character to such bundle. Education services by way of pre-school education and education up to higher secondary school or equivalent are enumerated in the negative list of services enumerated in section 66D of the Finance Act. Thus, it cannot be subjected to levy of service tax.”
Subscribe Taxscan Premium to view the JudgmentSupport our journalism by subscribing to Taxscan premium. Follow us on Telegram for quick updates
