Service Tax Exemption Limited to PGP and not to PGPPM, PGPEM, and EPGP Courses: SC Dismisses Revenue’s Delayed Appeal Against IIM [Read Order]

The Supreme Court has dismissed the Revenue’s appeal against the Customs, Excise and Service Tax Appellate Tribunal (CESTAT) order which held that only the Post Graduate Programme in Management (PGP) qualifies for service tax exemption, while other executive and specialised programmes remain taxable.

IIM Bangalore offers several long-term management programmes, including the two-year PGP, Post Graduate Programme in Public Policy and Management (PGPPM), Post Graduate Programme in Enterprise Management (PGPEM), and Executive Post Graduate Programme in Management (EPGP).

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During the audit, authorities alleged that service tax was not paid on fees collected for these courses. Show cause notices were issued demanding service tax of over ₹39 crore for 2010–2015, later reduced to ₹12.67 crore, and additional demands of ₹3.79 crore for 2015–2017.

The department argued that these courses fell within the definition of “Commercial Training or Coaching Services” under Section 65 of the Finance Act, 1994, and were not covered by exemptions or the negative list provisions.

IIM contended that all its long-duration programmes were recognised by law and equivalent to MBA diplomas, citing the Office Memorandum of the Ministry of Education (1977) and AIU communication (1978) recognising PG diplomas in management, letters from the Ministry of Human Resource Development (2014, 2016) clarifying the equivalence of IIM programmes to MBA and PhD degrees, notification No. 25/2012-ST and subsequent Notification No. 9/2016-ST, which exempted PGP and Fellowship Programmes.

The Indian Institutes of Management Act 2017 was also cited, declaring IIMs institutions of national importance, argued to have a retrospective effect. IIM maintained that PGPPM, PGPEM, and EPGP were diploma programmes recognised by government bodies and should be exempt from service tax.

The department countered that only the two-year PGP and Fellowship Programmes were explicitly exempted under Notification No. 9/2016-ST and CBEC Circular. Other executive and specialised diplomas were not equivalent to MBA or PhD degrees and were designed for working professionals, not as recognised qualifications for employment. The Commissioner also invoked the extended period of limitation, alleging suppression of facts.

The tribunal dropped the demand for PGP, holding it exempt under Notification No. 9/2016-ST and clarificatory circulars. However, it confirmed service tax liability for PGPPM, PGPEM, and EPGP.

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It was observed that,

“In these circumstances, it is difficult to accept the contention of the appellant that since the learned Commissioner has allowed to drop the demands against one programme viz., PGP which is specifically approved, the same is automatically be applicable to other three courses and to be considered at par with the said PGP course.”

It was also observed that,

“The claim of the appellant that Indian Institute of Management Act, 2017 since acknowledges such institute as an Institution of national importance and therefore, all the courses offered by the institute should be exempted, in our opinion, also cannot be acceptable as no such provision has been brought to our notice mentioned in the said Act.”

The tribunal held that the exemption applies only to PGP, while PGPPM, PGPEM, and EPGP remain taxable.

The Commissioner of Service Tax appealed to the Supreme Court against the CESTAT ruling. The bench of Justice Aravind Kumar and Justice Prasanna B Varale, however, dismissed the appeal solely on the ground of delay in filing, without examining the merits.

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