Mahatma Gandhi University is ‘Non-Profit Trust as a Charitable Institute’ and not ‘Body Corporate’: CESTAT holds no Service Tax Liability under RCM [Read Order]

The New Delhi bench of Customs Excise and Service Tax Appellate Tribunal (CESTAT) held Mahatma Gandhi University is not a ‘Body Corporate’ and confirmed it as “Not-Profit Trust as a Charitable Institute” that is eligible for the refund of service tax under the reverse charge mechanism (RCM),and directed the full refund of ₹1,47,62,737

Mahatma Gandhi University, the appellant had filed for refund under the Reverse Charge Mechanism for payment of service tax on “Legal Service, Security Service, Manpower Service and Work Contract Services” under the reverse charge mechanism.

Priyanka Goel, the appellant counsel contended that the university is an autonomous education institute established for charitable purposes and is sponsored by the Indian Education Trust, Jaipur, and does not fall within the scope of definition of body corporate as under Rule 2 (bc) of Service Tax Rules, 1994. Hence, there is no infirmity when the refund claim has been sanctioned in toto, in favour of the university.

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The appellant claim was rejected by the commissioner as service tax claimed by the appellant as payment of service tax on “Legal Service, Security Service, Manpower Service and Work Contract Services” is not covered under the Mega Exemption Notification No. 25/2012-St dated 20.06.2012.

S. K. Meena, the respondent counsel, contended that the university under Section 3 of the Mahatma Gandhi University of Medical Science and Technology, Jaipur, Act, 2011 states that

"The first Chairperson and the first President of the University and the first members of the Board of Management of the Academic Council and all persons who may hereafter become such officers or members, so long as they continue to hold such office or membership, are hereby constituted a body corporate by the name of the Mahatma Gandhi University of Medical Sciences and Technology, Jaipur.", and therefore university is liable to pay service tax.

The tribunal observed the decision of the Supreme Court of India in S. P Mittal Vs. Union of India, AIR 1983 SC 1, wherein it summarised the essential features required for the “legal concept of a corporation”, identified as “continuous identity, the persons to be incorporated, the name by which the persons are incorporated, a place, words sufficient in law to show incorporation, and a corporation aggregate can express its will by deed under common seal”.

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The Judicial member Rachana Gupta and Technical member A. K. Jyotishi observed from the above principles that the University operates as a charitable trust without a profit motive and the University does not fall within the categories enumerated under Section 2(11) of the Companies Act, 2013, which defines the term “body corporate.”

The Tribunal held that the University is functioning as a non-profit charitable institution and, therefore, cannot be classified as a body corporate for the purpose of service tax.

Accordingly, the tribunal held that the University is eligible for a refund of ₹1.47 crore, paid under the reverse charge mechanism towards service tax on legal services, security services, manpower supply services, and works contract services, as the university is entitled to exemption under Mega Exemptions Notifications No.25/2012-St dated 20.06.2012.

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