Bharathidasan University Vs Joint Commissioner of GST and Central Excise (Madras High Court)
The writ petition was filed seeking quashing of the order dated 20.02.2019 passed by the respondent confirming service tax demand against the petitioner University. The petitioner, a State University established under “The Bharathidasan University Act, 1981,” is an affiliating university having territorial jurisdiction over specified districts and holding valid service tax registration. The revenue issued a show cause notice proposing levy of service tax amounting to Rs.54,24,258/- under two heads: renting of immovable property (such as banks and post office) and other services including affiliation fees, application fees for new courses, inspection charges, and rent collected from commercial establishments for the period 01.07.2012 to 31.03.2017. Though the petitioner paid the tax without prejudice, the order in original confirmed the demand along with interest under Section 75 of the Finance Act, 1994 and penalties under Sections 77 and 78.
The petitioner contended that the issue was covered by a prior decision of the Court in a similar matter concerning another university. The respondent argued that renting to commercial entities did not qualify as educational services and distinguished the earlier case.
The Court examined the exemption provisions under Section 66-D of the Finance Act, 1994 and the Mega Exemption Notification, particularly clause 9 inserted from 11.07.2014. It held that services provided by educational institutions, including services to students, faculty, and staff, were exempt. The Court observed that affiliation granted by the university is integral to imparting education, as colleges cannot function independently without affiliation. Admission of students and conduct of examinations are intrinsically connected to the university’s statutory functions. The Court rejected a narrow interpretation limiting exemption only to direct teaching activities and held that conduct of examinations includes university functions, not merely those of affiliated colleges.
