No Service Tax Payable on affiliation fees collected from Affiliated colleges: CESTAT [Read Order]

The Customs, Excise & Service Tax Appellate Tribunal (CESTAT) of the New Delhi bench upheld the ruling of the commissioner that service tax is not payable on affiliation fees collected from affiliated colleges and dismissed the appeal of revenue.

The revenue has challenged the Order-in-Appeal, setting aside the demand of service tax on affiliation fees charged from educational institutions/colleges. M/s. Makhanlal Chaturvedi National University of Journalism & Communication, the respondent, is a University established under the Madhya Pradesh Makhanlal Chaturvedi Rashtriya Patrakarita Avam Sanchar Vishwavidyalaya Adhiniyam, 1990. The university offers education in journalism, mass communication, public relations, and related fields through its own institution as well as through various affiliated colleges. The university grants affiliation to these colleges, and in return, it collects affiliation fees.

From July,2012 to June,2017, the university collected a total of Rs.4,47,03,196/- on account of these affiliation fees.

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Show cause notice dated 23.03.2018 was issued to them alleging non-payment of service tax on the affiliation fees. Subsequently, the proceedings were finalized by the adjudicating authority vide Order-InOriginal dated 07.01.2019 wherein demand of service tax of Rs.60,02,520/- was confirmed with interest and equal mandatory penalty. Challenging the order in original, an appeal was filed by the appellant which has been allowed by the impugned order. Reviewing the said order, the revenue has filed the present appeal.

The Tribunal has relied on the decision of the KarnatakaHigh Court in Rajiv Gandhi University of Health Sciences, Karnataka where it has been held that the act of University in granting affiliation to a private college has to be considered as a service in furtherance of providing education and the decision of the department to consider otherwise is erroneous. The view expressed by the Single Judge has been affirmed by the Division Bench of the High Court.

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The Authorised Representative has relied on the decision of the Madras High Court in Pondicherry University versus Joint Commissioner of GST & CE 4, where the Single Judge had dismissed the writ petition challenging the levy of service tax on affiliation fees. H

A two member bench of Binu Tamta, Member (Judicial) and Hemambika R. Priya, Member (Technical) found that the Commissioner (Appeals) after considering the provisions in the post negative era, analysed the nature of affiliation fees paid by the educational institutions to the appellant and also the nature of activity involved in the process of receiving affiliation fees, concluded that the same is not chargeable to service tax.

The Tribunal refused to interfere with the findings recorded by the Commissioner and affirmed the impugned order, while dismissing the appeal filed by the Revenue.

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