The Customs, Excise & Service Tax Appellate Tribunal (CESTAT), New Delhi in a recent judgment has set aside a service tax demand on affiliation fees imposed on the University of Kota along with equal amount of penalty and quashed the impugned order. The Tribunal held that affiliation fees collected by the university do not qualify as “services” rendered for consideration under the Finance Act, 1994, due to the absence of any commercial intent. [Registrar M/s University of Kota v. Commissioner, Central Goods Service Tax & Central Excise, Jodhpur (2025) 8 TMI 97 (Cestat, New Delhi)]
On facts, the appellant, University of Kota, a state government University in Rajasthan was a University enacted under special Act of State Legislative Assembly and not registered under Service Tax. It is engaged in providing services of education including affiliation to various self-financing/non-Government colleges under its jurisdiction as per the education policy of the State Government. An enquiry was initiated against the appellant and it was observed that the appellant was collecting Affiliation Fee/Recognition Fees on which they had not discharged service tax.
The appellant was served with a demand for service tax amounting to Rs. 1,18,35,056 by the Commissioner of Central Goods and Service Tax (CGST), Jodhpur. The department alleged that the university had failed to pay tax on affiliation and recognition fees collected from self-financed colleges between 2012 and 2017, before the advent of GST. No relief was granted at first appeal stage. The Revenue Authorities also imposed penalties of an equal amount under Section 78 of the Finance Act, Rs. 10,000 under Section 77 for failure to obtain registration and file returns, and ordered the recovery of applicable interest.
The appellant and the bench had relied on a string of earlier judgments and particularly emphasized the Karnataka High Court’s decision in Rajiv Gandhi University of Health Sciences Vs. DG of GST Intelligence, which held that statutory functions like granting affiliation by public universities are not “activities for consideration.” The Apex Court had dismissed the revenue appeal against Karnataka High Court order reported in (2025) 1 TMI 1550 (SC), thus, reinforcing the non-taxability of such affiliation fees. The issue is no longer res-integra and has been decided by this Tribunal in following cases:-
- Goa University vs. Joint Commissioner of Central Goods and Service Tax in Writ Petition No. 723 of 2024
- M/s Jiwaji Vishwavidhyalaya vs. Commissioner of Central Goods and Service Tax & Central Excise, Bhopal (2025) 5 TMI 153 (Cestat, New Delhi)
- Visvesvaraya Technological University vs. Additional Director General, Directorate General of GST Intelligence, Belagavi 2024 (167) com 201 (Karnataka)
- Devi Ahilya Vishwavidhyalaya (University) vs. Commissioner of CGST & Central Excise, Indore vide Final Order No. 50801/2025 dated 22.05.2025 [Cestat, Delhi]
- Principal Commissioner of CGST, Central Excise, Jabalpur vs. M/s Rani Durgawati Vishwavidyalaya vide Final Order No. 50698 of 2025 dated 16.05.2025 [Cestat, Delhi]
- Rajiv Gandhi University of Health Sciences vs. Principal Additional Director General, Directorate General of GST Intelligence (2022) 141 com 206 (Karnataka)
The Tribunal concluded that the collection of affiliation fees is a statutory function devoid of commercial elements. Such activities lack the necessary “quid pro quo” to be treated as a taxable service. The concept of “consideration” under service tax law necessitates a contractual arrangement involving service which was absent in this case.
Thus, it was held that the Revenue was not justified in levying Service Tax on the income accruing to the University on account of affiliation during the academic year between 2012-13 and 2016-17. The periodicity of collection of affiliation related fees pales into insignificance. The CESTAT thus set aside the earlier orders of both the Commissioner (Appeals) and the original adjudicating authority, effectively quashing the entire service tax demand, interest, and penalties.
Further, Supreme Court has dismissed and decided not to interfere in revenue appeal filed against Karnataka High Court judgment in Bangalore University case wherein High Court had quashed the show cause notice issued to the University for Service Tax demand on affiliation fee during the period 2012-2016 [Principal Additional Director General GST Intelligence & Others v. Bangalore University – Order dated 31.01.2025 in Civil SLP No. 1827/2025(SC)].
In yet another case, Supreme Court has issued notice vide Order dated 26.08.2025 in SLP filed by Revenue. [Joint Commissioner of CGST & Others v. Goa University – Order dated 26.08.2025 in Civil SLP No. 43441/2025(SC)].
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