Case Law Details
National Board of Examination In Medical Sciences Vs Union of India & Ors. (Delhi High Court)
Fees for conducting screening test and for accrediting medical institutions are taxable under GST: Delhi HC
Delhi High Court held that services provided for conducting screening test and the fees charged for accrediting medical institutions does not fall within the scope of Serial No.66(a) and Serial No.66(aa) of the 2017 Notification and hence not exempt from payment of GST.
Facts- The petitioner impugns a Circular No.151/07/2021-GST dated 17.06.2021, inter alia, clarifying that the Central and State Educational Boards, such as the petitioner, are educational institutions insofar as they provide services for conduct of examination, including any entrance examination, to the students. Accordingly, such services would be charged at NIL rate in terms of Notification No.12/2017 – Central Tax (Rate) dated 28.06.2017 issued by the Government of India under Section 11 of the Central Goods and Services Tax Act, 2017. However, the services rendered by such State or Central Boards, such as providing accreditation to an institution or to a professional [accreditation fee such as fee for Foreign Medical Graduate Examination (FMGE) screening test] would be chargeable to GST at the rate of 18%.
Conclusion- Held that the services provided by the petitioner for conducting screening test and the fees charged for accrediting medical institutions does not fall within the scope of Serial No.66(a) and Serial No.66(aa) of the 2017 Notification. Thus, clearly, the petitioner is not exempted from payment of GST in respect of the said services by virtue of the 2017 Notification. As noted above, screening tests are not conducted as a part of the curriculum. The said tests are also not in the nature of entrance examinations but are for the purposes of recognising primary medical qualifications secured by candidates from institutions abroad. The accreditation fee is charged from medical institutions for accrediting them. These services are also not covered under the relevant entries of the 2017 Notification. The candidates appearing for the screening tests are not students of the petitioner. Thus, the petitioner’s contention that it is exempt from payment of GST in respect of such services, is unmerited.
FULL TEXT OF THE JUDGMENT/ORDER OF DELHI HIGH COURT
1. The petitioner has filed the present writ petition impugning various rejection orders (four in number) passed by respondent nos. 5 and 6 rejecting the petitioner’s claim for refund of the Goods and Services Tax (GST) in respect of the part of the Financial Year 202021 – April, 2020 to August, 2020. The petitioner claims that it had paid the tax under a mistaken understanding of the law.
2. The petitioner also impugns a Circular No.151/07/2021-GST dated 17.06.2021 (hereafter the impugned circular), inter alia, clarifying that the Central and State Educational Boards, such as the petitioner, are educational institutions insofar as they provide services for conduct of examination, including any entrance examination, to the students. Accordingly, such services would be charged at NIL rate in terms of Notification No.12/2017 – Central Tax (Rate) dated 28.06.2017 (hereafter the 2017 Notification) issued by the Government of India under Section 11 of the Central Goods and Services Tax Act, 2017 (hereafter the CGST Act). However, the services rendered by such State or Central Boards, such as providing accreditation to an institution or to a professional [accreditation fee such as fee for Foreign Medical Graduate Examination (FMGE) screening test] would be chargeable to GST at the rate of 18%.
3. It is the petitioner’s case that the 2017 Notification as amended by the subsequent notifications, does not admit the clarification provided by the impugned circular. According to the petitioner, the impugned circular is contrary to the 2017 Notification. The petitioner claims that it is an educational institution and the services rendered by it are exempted from payment of GST (chargeable at NIL rate) in terms of the 2017 Notification including in respect of accreditation fees and examination fees collected for conducting screening tests.
FACTUAL CONTEXT
4. The petitioner, is an autonomous body of Ministry of Health and Family Welfare and was established by the Government of India, inter alia, with an objective to improve the standard of post-graduate medical examination in modern medicines.
5. In order to maintain the standards of medical and dental education at undergraduate and post graduate levels throughout the country, Medical Council of India and Dental Council of India have been constituted under the Indian Medical Council Act, 1956 (hereafter IMC Act) and Dentists Act, 1956 (hereafter DA Act), respectively. The said councils are charged with the function, amongst others, to make recommendations to the Central Government regarding the matters pertaining to courses of study and the examination to be undertaken for the relevant professional qualifications.
6. The Medical Council of India notified a single and a uniform entrance examination called the National Eligibility-cum-Entrance Test (hereafter NEET) for admission to all medical educational institutions at the post-graduate level on an all India basis by Notification No. MCI-18(1)/ 2010-MED/49070 dated 21.12.2010. Similarly, Dental Council of India also notified a uniform entrance examination, that is, NEET for Masters of Dentist Surgery by Revised MDS Course Regulations, 2007. The aforementioned notifications were initially quashed by the Supreme Court in the case of Christian Medical College Vellore & Ors. v. Union of India & Ors.: (2014) 2 SCC 305. But thereafter, in review, the aforesaid order was recalled by an order dated 12.04.2016 in Medical Council of India v. Christian Medical College Vellore & Ors.: (2016) 4 SCC 342.
7. Section 10D of the IMC Act, which provides for a uniform entrance examination to all medical educational institutions at the undergraduate and post graduate level through a Designated Authority, was inserted in IMC Act by the Indian Medical Council (Amendment) Act, 2016 dated 24.05.2016. Correspondingly, in order to conduct a uniform entrance examination for all dental educational institutions at both undergraduate and post graduate level through such Designated Authority, Section 10D was inserted in DA Act by the Dentists (Amendment) Act, 2016 dated 24.05.2016.
8. The Ministry of Health and Family Welfare, by a letter dated 12.05.2016, appointed the petitioner as the Designated Authority to conduct NEET examinations for the Financial Year 2017-18. By Notification No. MCI-18(1)/2018-Med./100818 dated 05.04.2018, the petitioner was authorized as the Designated Authority to conduct entrance examinations – National Eligibility cum Entrance Test for Post-Graduate courses (hereafter NEET-PG) and National Eligibility cum Entrance Test for Super Specialty courses (hereafter NEET-SS) – for admission into all medical educational institutions.
9. The Medical Council of India and the Dental Council of India, in terms of the relevant provisions of the IMC Act read with Screening Test Regulations, 2002 and DA Act read with Dental Council of India Screening Test Regulations, 2009, authorized the petitioner to conduct various screening tests. The petitioner also conducts the tests as mandated by the Ministry of Health & Family Welfare.
10. Besides conducting various examinations and screening tests, the petitioner also awards medical qualification of Diplomate of National Board (hereafter DNB) and Fellow of National Board (hereafter FNB) by conducting separate entrance examinations and also by selecting the candidates through merit generated from NEET-PG. The petitioner claims that in order to provide qualifications of DNB and FNB, the petitioner prepares study plan, teaching material, and grants accreditation to schools, hospitals, and various institutions to provide training to the students. Additionally, the petitioner also sets the curriculum for the abovementioned courses.
11. The petitioner obtained the registration under the CGST Act and the DGST Act with effect from 27.07.2019 holding GST No. being GSTIN 07AAAAN4301J1ZW, and started levying the GST from the tax period August, 2019 on accreditation services and certain other charges. However, the petitioner did not levy taxes and collected GST on the services other than the aforementioned services till the Financial Year 2020-21 on the ground that the other services were chargeable at nil rate under S.No. 66(a) of the 2017 Notification
THE CONTROVERSY
12. The principal controversy involved in the present petition is whether the services rendered by the petitioner are chargeable to GST and if so, for which period.
13. As noted above, the services rendered by the petitioner can be broadly classified under four categories. The first being, conduct of the NEET for admission to medical institutions in India and other such examinations. The second being, the grant of qualifications of DNB and FNB courses. The third being the fees for conducting the screening test. And the fourth being, fees charged for granting accreditation for various institutions. According to the petitioner, none of the services rendered by it are chargeable since it is an educational institution within the meaning of Clause (y) of Paragraph 2 of the 2017 notification.
14. Respondent no.5 disputes that the petitioner is exempted from the payment of GST. According to the respondents, the petitioner is a Board and is entitled to the limited benefit of exemption from GST in respect of services relating to conduct of entrance examination and that too, from 17.06.2021 by virtue of the impugned circular. Respondent no.5 claims that the petitioner had filed an application seeking refund of taxes paid on the following services: “(i) conduct of NEET examinations; (ii) examination services provided for DNB and FNB courses (including thesis fee, caution money, training charges and other miscellaneous charges); (iii) DNB course fee; and an amount collected under head ‘recruitment fee’. According to the respondents, the petitioner was not entitled to refund of GST for any of the aforesaid services prior to 17.06.2021.
15. Gupta, learned counsel appearing for the petitioner submits that the petitioner had claimed refund of the GST paid from its own sources in respect of services for conducting the NEET examination, conducting examination/course of DNB and FNB including course fee. And, the said applications were wrongly rejected.
REASONS AND CONCLUSION
16. At the outset, it would be pertinent to refer to the relevant provisions of the 2017 Notification. In terms of the entry at Serial No. 66(a) of the 2017 Notification, the services provided by an educational institution to its student, faculty and staff is chargeable to Nil rate of duty. Paragraph 2(y) of the 2017 Notification defines the expression ‘educational institution’ for the purposes of the said Notification. The relevant entry at Serial No.66 of the 2017 Notification is set out below:
| Sl. No. | Chapter, Section, Heading, Group of Service Code (Tariff) |
Description of
Services |
Rate
(percent) |
Condition |
| (1) | (2) | (3) | (4) | (5) |
| 66 | Heading 9992 | Services provided-
(a) by an educational institution to its (b) to an educational institution, by way (i) transportation of (ii) catering, including any mid-day meals (iii) security or cleaning or house-keeping services performed in such educational institutions; (iv) services relating to admission to, or conduct of examination by, such educational Provided that nothing contained in entry (b) shall apply to an |
Nil | Nil |
17. Paragraph 2(y) of the 2017 Notification, which defines the term ‘educational institution’ for the purposes of the 2017 Notification is set out below:
“2. Definitions. – For the purposes of this notification, unless the context otherwise requires, –
(y) “educational institution” means an institution providing services by way of,-
(i) pre-school education and education up to higher secondary school or equivalent;
(ii) education as a part of a curriculum for obtaining a qualification recognised by any law for the time being in force;
(iii) education as a part of an approved vocational education course;”
18. On 18.01.2018, 25th Meeting of the GST Council was held. The Agenda for the said meeting included Agenda Item 10(ii) to address the issue regarding the applicability of GST exemption on the fee charged for conducting the entrance examinations in order to get admission into educational institutions. The relevant extract of the aforementioned Agenda Item 10(ii) is reproduced as under: –
| Sl. No. | Represented By | Proposal | Justification | Comments of Fitment Committee |
| 23. | Reference from PMO based on feedback received on issues and problems faced in GST. |
To address taxability and GST exemption on admission fee charged by educational institutions and entrance fee charged for appearing in entrance examinations for getting admission into educational institutions. | With a view to promote education, achieve higher gross enrolment ratio and enhance and upgrade education and skill levels of the students GST exemption may be provided for conduct of entrance examination. | 1. Services provided by an educational institution to its students are exempt [Notification No. 12/2017-Central Tax (Rate) S.No. 66(a)]. Educational institution has been defined to mean an institution providing services by way of –
Preschool and school education upto higher secondary school or equivalent; Education as part of curriculum for obtaining a qualification recognized by Education as part of an approved vocational education course. The admission fee charged by the educational institutions as referred above from its students is exempt from GST. However, the entrance fee charged for appearing in competitive entrance examinations for admission to educational institution is leviable to GST. This anomaly/ discrepancy exist as no specific exemption has been provided to the services provided for conducting the competitive entrance examinations for 2. These educational institutions may either conduct the entrance examination Fitment Decision: Agreed to exempt services relating to admission to, or conduct of examination provided to all educational institutions, as defined in the notification and to also exempt services by educational |
19. Pursuant to the approval of Agenda Item 10(ii) of the GST Council as set out above, the Central Government issued a Notification being Notification No.2/2018 – Central Tax (Rate) dated 25.01.2018 (hereafter the 2018 Notification I), whereby the 2017 Notification was amended to expressly provide that the services rendered by the educational institutions in respect of entrance fee for an entrance examination, entrance fee was also chargeable to GST at Nil rate – in effect, exempt from GST. The relevant extract of the 2018 Notification I is set out below:
| Sl. No. |
Chapter, Section, Heading,Group orService Code(Tariff) |
Description of Services | Rate (per
cent) |
Condition |
| (1) | (2) | (3) | (4) | (5) |
| 66 | Heading 9992
or Heading |
Services provided-
(a) by an educational institution to its student, faculty and staff; (aa) by an educational institution by way of conduct of entrance (b) to an educational institution, by way of,- (i) transportation of students, faculty and staff; (ii) catering, including any mid-day meals scheme sponsored by the Central Government, State (iii) security or cleaning or (iv) services relating to admission (v) supply of online educational journals or periodicals: Provided that nothing contained in sub-items (i), (ii) and (iii) of item (b) shall apply to an educational institution other than an institution providing services by way of preschool education and education up to higher secondary school or equivalent. Provided further that nothing contained in sub-item (v) of item (b) shall apply to an institution (i) pre-school education and (ii) education as a part of an approved vocational education course. |
Nil | Nil |
20. Thereafter, the proposal was made by the Fitment Committee to the GST Council seeking clarification whether Central and State Educational Boards were educational institutions for the purposes of the 2017 Notification. The Fitment Committee recommended that services provided by educational boards may be exempted from the charge of GST, but not the services that are provided by Boards. The recommendations of the Fitment Committee were considered at the 28th Meeting of the GST Council held on 21.07.2018. The relevant extract of the recommendations of the Fitment Committee considered by the GST Council at a meeting held on 21.07.2018 is set out below:
| Sl. No. | Proposal | Justification given in support of the proposal | Recommendation of Fitment Committee |
| 2. | Request for exempting supply of services to and by Educational Boards to students for conduct of examination from levy of GST. Also, to clarify that the various State and Central educational boards are educational boards as defined in the notification issued under GST Act. |
Sahitya Mudranalaya Pvt. Ltd. provide services to Gujarat Secondary and Higher Secondary Education Board (GS&HSEB), Maharashtra State Board of Secondary and Higher Secondary Education (MSB&HSE), Maharashtra State Councils of Examination (MSCE), Gujarat & Technical University (GTU) for conduct of examination. Such services are Barcode printing and scanning, OMR scanning, data entry for examination of certain Boards, printing of certificates, books/ study materials and question papers etc. It has been further stated that if these mentioned Boards are not considered educational institution, then a Pandora’s box would open. |
Recommendation:
Services provided by Vide clause 2(y) of (i) pre-school education and education up to higher secondary school or equivalent; (ii) education as a part of a curriculum for obtaining a qualification recognized by any law for the time being in force; (iii) education as a part of an approved vocational education course. The definition as provided above does not cover State Educational Boards, Central Government Boards and autonomous organizations responsible for administration of education in India. These boards are engaged for educational purposes, conduct of board examination, preparation of curriculum, prepare courses of studies, text books, teaching materials etc., issuance of certificates of the examinations conducted by the Board and equivalence certificate to the examinations of other State Boards, training of teachers, annual survey of school education and many more. All of these works are incidental to education and directly related to promotion of education. Further definition at clause 2 (zfa) of notification No 12/2017- CT (R), defines “Government Entity to mean an authority or a board or any other body (i) set up by an Act of Parliament or State Legislature; or (ii) established by any Government, with 90per cent. or more participation by way of equity or control, to carry out a function entrusted by the Central Government, State Government, Union Most of the state boards and central boards are either board/ society covered under Society Registration Act, 1860 and set up by an Act of Parliament or State Legislature. Therefore, all these examination Boards are Government Entity barring few. Therefore, vide sl. no. 9C of above notification, any grant received by these educational boards for providing services to the fee directly from students for sitting in the examination. Therefore, the Board shall have to pay GST. Under GST, services provided to an educational institution relating to admission to, or conduct of examination by, such institution are exempt vide sl. No. 66 of notification No. 12/2017- CT (R). Since Boards are directly providing services to students in relation to conduct of examination, ultimate burden of GST will fall on students. |
21. The Minutes of the GST Council also indicates that the Advisor (Financial Resources, Punjab) suggested that the recommendations of the Fitment Committee should be implemented through a clarification instead of issuing the notification as the field formations may issue demand notices for the past period. The Joint Secretary (TRU-II), CBIC suggested that an explanation be added to the Notification 14/2018-Central Tax (Rate) for clarifying the issue. The GST Council accepted the same. The relevant extract of the said Minutes of the GST Council is set out below:
“Annexure III and other issues
(i) Sl. No. 2 (Request for exempting supply of services to and by Educational Boards to students for conduct of examination): The Advisor (Financial Resources), Punjab suggested that the recommendation of the Fitment Committee that services provided by Educational Boards may be exempted but not the services provided by the Boards should be implemented through a clarification instead of issuing a notification, as otherwise field formations may issue demand notices for the past period. The Joint Secretary (TRU-II), CBIC suggested that an explanation could be added to the existing notification 14/2018-Central Tax (Rate) to clarify this issue. The Council agreed to this proposal.”
22. Pursuant to the recommendations of the GST Council, the Central Government issued a notification being Notification No.14 of 2018 – Central Tax dated 26.07.2018 (hereafter the 2018 Notification II) whereby an explanation was added by inserting Clause (iv) under Paragraph 3 for expanding the definition of educational institutions to include Central and State Education Boards for the purposes of conducting examination. Clause (iv) as introduced in Paragraph 3 by the 2018 Notification II reads as under:
“3. Explanation.- for the purposes of this notification,-
(iv) For removal of doubts, it is clarified that the Central and State Educational Boards shall be treated as Educational Institution for the limited purposes of providing services by way of conduct of examination to the students.”
23. According to the petitioner, its services are chargeable to GST at Nil rate by virtue of the 2017 Notification. The petitioner is thus, aggrieved by rejection of its application for refund as well as by the impugned circular to the extent the impugned circular seeks to clarify that GST at the rate of 18% is applicable to certain services provided by the Boards.
RE: PETITIONER’S CHALLENGE TO THE IMPUGNED CIRCULAR
24. At the outset, it is relevant to refer to the operative part issued by the impugned circular, which seeks to clarify the issue regarding the charge of GST on services provided by Central or State Boards such as the petitioner. Paragraph 4 of the impugned circular is relevant and is set out below:
“4. Taking into account the above, the GST Council has recommended, to clarify as below:
(i) GST is exempt on services provided by Central or State Boards (including the boards such as NBE) by way of conduct of examination for the students, including conduct of entrance examination for admission to educational institution [under S. No. 66 (aa) of notif No. 12/2017-CT(R)]. Therefore, GST shall not apply to any fee or any amount charged by such Boards for conduct of such examinations including entrance examinations.
(ii) GST is also exempt on input services relating to admission to, or conduct of examination, such as online testing service, result publication, printing of notification for examination, admit card and questions papers etc, when provided to such Boards [under S. No. 66 (b) (iv) of notif No. 12/2017- CT(R)].
(iii) GST at the rate of 18% applies to other services provided by such Boards, namely of providing accreditation to an institution or to a professional (accreditation fee or registration fee such as fee for FMGE screening test) so as to authorise them to provide their respective services.”
25. It is apparent from the above that the operative clarification, as relevant to the petitioner, is in two parts. First, the impugned circular clarifies that the services provided by the Central or State Boards (including the petitioner) by way of conduct of examination for the students including conduct of entrance examination for admission to educational institutions is chargeable to GST at Nil rate under Serial No.66(aa) of the 2017 Notification. Second, it clarifies that the GST at rate of 18% is chargeable to other services provided by the Boards, “namely of providing accreditation to institutions or to a professional (accreditation fee or registration fee such as fee for FMGE screening test) so as to authorize them to provide the respective services”.
26. It is apparent that the impugned circular is not exhaustive regarding the levy of GST on all kinds of services rendered by the Boards. It is clear that the impugned circular cannot be read to mean that all services provided by Central or State Boards are chargeable to tax except services by way of conduct of examination. Sub-paragraph (iii) of Paragraph 4 of the impugned circular is unambiguous and does not provide that 18% GST would be chargeable for all services other than conduct of examination, that may be provided by Central or State Boards. It merely specifies that if GST would be chargeable at such rate in respect of services of providing accreditation to institutions or to a professional so as to authorize them to provide the respective services. The use of the word, ‘namely’ has been used in Sub-paragraph (iii) of Paragraph 4 of the impugned circular to specify services that are chargeable to tax. It is trite law that the expression ‘namely’ in Webster’s Encyclopedic Unabridged Dictionary of English Language is to mean “‘that is to say’, explicitly, specifically to wit”. It is defined in the Oxford English Dictionary to mean as “particularly, especially, above all” and in Black’s Law Dictionary as “by name or particular mention” and “what is to be included by name”.
27. Thus, there is little doubt that the word ‘namely’ used in the impugned circular confines the clarification regarding applicability of 18% tax to only those services that are specified in Sub-paragraph (iii) of Paragraph 4 of the impugned circular.
28. It is important to note that the impugned circular has been issued to provide a clarification and does not purport to amend the 2017 Notification. On the contrary, it refers to the Serial No. 66(a) of the 2017 Notification and clarifies that the exemption from tax for the services provided by conduct of examination is referable to the said entry. In view of the above, the contention advanced by Mr. Aggarwal, on behalf of respondent nos.5 and 6 (Delhi GST Authorities), to the effect that the impugned circular introduces a substantive exemption regarding examination services prospectively from the date of its publication is, plainly, unmerited and the contention that the clarification provided is prospective, is without any basis.
29. The principal question to be addressed is whether the clarification as provided in Sub-paragraph (iii) of Paragraph 4 of the impugned circular is contrary to the 2017 Notification, as amended. According to the petitioner, it is an educational institution and therefore, all services provided by it are exempt of GST. We are unable to accept the said contention. The question whether the particular services provided by the petitioner is exempted from payment of GST is to be determined in reference to the substantive entries of the 2017 Notification.
30. In terms of Serial No.66(a) of the 2017 Notification, services provided by an educational institution to its students, faculty and staff is chargeable to GST at Nil rate. Even if it is accepted that the petitioner is an educational institution within the meaning of Paragraph 2(y) of the 2017 Notification, the fee charged for conducting screening test and accreditation fee charged from medical institutions would clearly not fall within the scope of services provided to students, faculty and staff.
31. The petitioner is the Prescribed Authority in terms of Section 13(4A) and 33(ma) of the IMC Act read with Regulation 2(e) and 5 of the Screening Test Regulations, 2002 issued by the MCI (Medical Council of India) for conducting screening test of Indian citizens, who have been awarded primary medical qualifications from institutions outside India. All such persons, who desire to secure professional or permanent registration with the Medical Council of India or the State Medical Council on or after 15.03.2022, are required to qualify the screening test before a foreign medical qualification is recognized as a medical qualification in India. It is apparent that the screening test is only for the purposes of recognition of qualifications awarded overseas for the purposes of ensuring that the candidate meets the standards as required. Similarly, the petitioner is also the Prescribed Authority for conducting the screening test in terms of the Screening Test Regulations, 2009 framed by the Dental Council of India in respect of recognizing dental qualifications awarded to candidates overseas. The said test neither qualifies as an entrance test nor meets the criterion of services rendered by the petitioner to its students. Thus, the petitioner’s contention that the fees collected by it for conducting the screening test is not chargeable to GST by virtue of entries at Serial No.66(a) or 66 (aa) of the 2017 Notification, is unmerited.
32. It is important to note that the services that are exempted (chargeable at Nil rate) are set out in the substantive entries of the 2017 Notification. Thus, for determining whether the services rendered by the petitioner are exempted, it would be necessary to refer to Serial No. 66(a) and 66(aa) of the 2017 Notification, which are:
“Services provided –
(a) by an educational institution to its students, faculty and staff;
(aa) by an educational institution by way of conduct of entrance examination in the form of entrance fee”
33. Thus, a tax entity, which falls within the definition of ‘educational institution’ would not be liable to pay GST on the services to its students, faculty and staff and by way of conduct of entrance examination in the form of entrance fee.
34. The impugned circular indicates that the clarification issued is based on the entry at Serial No. 66(aa) read with the Paragraph 3(iv) of the 2017 Notification. The impugned circular reads the scope of entrance examination in an expansive manner and clarifies that the services provided by Central or State Boards by way of conduct of examination for the students including conduct of entrance examination for admission to educational institution are exempt from GST. The petitioner has no cavil with this clarification.
35. The impugned circular does not preclude the petitioner from seeking the benefit of the 2017 Notification. It merely clarifies that the services of accreditation to an institution or a professional so as to authorize them to provide their respective services would be chargeable to GST at the rate of 18%. As noted above, this clarification, as discussed above, is in conformity with the 2017 Notification. In view of the above, the petitioner’s challenge to the impugned circular, is unmerited and is liable to be rejected.
36. Having stated the above, it is also necessary for us to reject the contention advanced by Mr. Aggarwal on behalf of Delhi GST Authorities to the effect that the petitioner is entitled to exemption from GST only in respect of (i) services rendered by way of conduct of examination for the students and no other services, by virtue of the impugned circular and (ii) that such exemption is available only with effect from the date of the impugned circular.
37. Paragraphs 3.1, 3.2 and 3.3 of the impugned circular notes the relevant provisions of the entries of the 2017 Notification, the definition of the expression ‘educational institution’ as defined at Paragraph 2(y) of the 2017 Notification, and in Clause (iv) of Paragraph 3 of the 2017 Notification. The opening words of Paragraph 4 of the impugned circular indicates that the GST Council has recommended issuance of clarification “taking into account” the aforementioned provisions.
Thus, the contention that the impugned circular sought to introduce a substantive amendment to the 2017 Notification or materially altered the scope of any of its relevant entries, militates against the plain language of the impugned circular. Circulars are not legislative instruments whereby statutory amendments can be carried out in absence of any statutory provision enabling issuance of such Circulars in exercise of powers of delegated legislation. The impugned circular does not indicate that it has been issued in exercise of any power under the CGST Act.
38. It is relevant to refer to Section 11 of the CGST Act which empowers the Central Government to grant certain exemptions. The said section is reproduced below:
“Section 11. Power to grant Exemption.
(1) Where the Government is satisfied that it is necessary in the public interest so to do, it may, on the recommendations of the Council, by notification, exempt generally, either absolutely or subject to such conditions as may be specified therein, goods or services or both of any specified description from the whole or any part of the tax leviable thereon with effect from such date as may be specified in such notification.
(2) Where the Government is satisfied that it is necessary in the public interest so to do, it may, on the recommendations of the Council, by special order in each case, under circumstances of an exceptional nature to be stated in such order, exempt from payment of tax any goods or services or both on which tax is leviable.
(3) The Government may, if it considers necessary or expedient so to do for the purpose of clarifying the scope or applicability of any notification issued under sub-section (1) or order issued under sub-section (2), insert an explanation in such notification or order, as the case may be, by notification at any time within one year of issue of the notification under subsection (1) or order under sub-section (2), and every such explanation shall have effect as if it had always been the part of the first such notification or order, as the case may be.
Explanation.- For the purposes of this section, where an exemption in respect of any goods or services or both from the whole or part of the tax leviable thereon has been granted absolutely, the registered person supplying such goods or services or both shall not collect the tax, in excess of the effective rate, on such supply of goods or services or both.”
39. In terms of Sub-section (1) of Section 11 of the CGST Act, the Central Government is empowered to exempt certain goods and services or both from the payment of taxes. However, the said exemption can be granted only by a notification. In terms of Subsection (2) of Section 11 of the CGST Act, the Government may by a special order exempt from payment of tax on any goods or services or both. However, the said order can be passed only if the Government is satisfied that it is necessary to do so in public interest and under circumstances of exceptional nature, which are required to be stated in the order granting such exemption. Clearly, the impugned circular has not been issued either under Sub-section (1) or Sub-section (2) of Section 11 of the CGST Act.
40. Sub-section (3) of Section 11 of the CGST Act empowers the Government to insert an explanation in any notification issued under Sub-section (1) of Section 11 of the CGST Act or in an order issued under Sub-section (2) of Section 11 of the CGST Act to clarify the scope or applicability of any such notification or order. However, the said explanation is required to be issued within one year of the notification or the order as the case may be. Further, the said explanation is also required to be inserted by a notification. It is apparent that the impugned circular has not been issued in terms of Sub-section (3) of Section 11 of the CGST Act either.
41. In view of the above, the impugned circular must be read for what it is: clarification in respect of the 2017 Notification. It cannot be read to substantially curtail the scope of any exemption or beneficial provision of the 2017 Notification. Mr. Aggarwal’s contention that exemption in respect of payment of GST payable on conduct of examination, is available prospectively from the date of the circular, must be rejected, for the aforesaid reason as well.
GST ON SERVICES RENDERED BY THE PETITIONER
42. The principal controversy in the present petition relates to the scope of examination of services in terms of the 2017 Notification. As stated hereinbefore, the question, as to whether the provision of any services is exempted (chargeable at Nil rate) from payment of GST, is required to be examined by reference to the 2017 Notification.
43. The services rendered by the petitioner can be broadly classified under four heads which are briefly summarized as under:
I National Eligibility-cum-Entrance Test (NEET) for admission to any medical institution in India.
43.1 The petitioner is the designated authority in terms of Section 10D and Section 33(mb) of the IMC Act read with Regulations 9(1) and 9(2) of the Postgraduate Medical Examination Regulations, 2000 for conducting uniform entrance examination to all medical educational institutions at the postgraduate level.
43.2 The petitioner is also the designated authority in terms of Section 10D and Section 20(2)(ha) of the Dentists Act, 1948 read with Regulations 2(d) and 6 of the Dental Council of India, Master of Dental Surgery Regulations, 2017 issued by the Dental Council of India for conducting uniform entrance examinations to all medical educational institutions at the postgraduate level.
43.3 The petitioner accordingly conducts the following entrance examinations:
a) NEET – Post Graduate (PG)
b) NEET – Super Specialty (SS)
c) NEET – Master of Dental Surgery (MDS)
II Degrees of Diploma of National Board (DNB) and Fellow of National Board (FNB) after conducting the examination.
43.4 The medical qualifications of DNB and FNB which are granted by the petitioner to students, are recognized qualifications under Section 11 of the IMC Act (now under Section 37(2) of the National Medical Commission Act, 2019). For the purpose of granting such qualifications, the petitioner conducts examinations and in some cases also considers the score of candidates in NEET examination. Based on the results, the petitioner conducts counselling sessions and allocates seats in accredited institutions. The petitioner specifies the curriculum for the said qualification. The students are required to undertake practical trainings with accredited medical institutions for a specified term. During the said period, the students are required to submit their thesis and have to appear for minimum prescribed number of Formative Assessment Tests (FAT) for securing the eligibility to appear for the final examination. The final examination is conducted at two stages – theory and practical. The petitioner conducts the following examinations for granting the qualifications mentioned hereafter:
(i) Fellowship Entrance Exam Test (FEET)
(ii) DNB-PDCET Exam
(iii) Formative Assessment Test (FAT)
(iv) DNB and FNB Final Examination (Theory & Practical)
(v) Fellowship Exit Exam (FEE)
43.5 The petitioner also provides other services in respect of such courses including thesis assessment, training through e-learning programmes and workshops on clinical research methodologies.
43.6 The petitioner also collects course fees for DNB and FNB courses from students, which is passed on to accredited medical institutions where the students are enrolled as a part of their curriculum for achieving the qualifications of DNB and FNB.
III Conducts Screening Tests
43.7 The petitioner is the Prescribed Authority under the IMC Act read with Regulations 2(e) and (f) of the Screening Test Regulations, 2002 issued by the Medical Council of India for conducting screening tests in respect of Indian citizens possessing a primary medical qualification awarded by medical institutions outside India for the purpose of enabling them to get professional or permanent registration with Medical Council of India or State Medical Council. The primary foreign medical qualification acquired by a candidate is recognized for the purpose of entering in the Medical Register only once a candidate qualifies the screening tests.
43.8 The petitioner is also the Prescribed Authority for conducting the screening tests for recognizing the primary / higher dental qualification awarded by dental institutions outside India. It is necessary for the candidates to qualify the screening tests for enabling their qualifications to be recognized for the purpose of the Dental Act.
43.9 The petitioner conducts the following dental screening tests:
(i) Foreign Medical Graduate Examination (FMGE)
(ii) Foreign Dental Screening Test (FDST)
IV Accreditation of Medical Institutions
43.10 The petitioner also accredits medical institutions as per its accreditation norms. The students undergoing the courses are required to enroll with the accredited institutions for undergoing the practical training. The petitioner also collects the accreditation fees from medical institutions.
44.. The question whether all the aforementioned services provided by the petitioner are exempt from payment of GST in terms of the 2017 Notification is required to be addressed in reference to the nature of the services and the relevant entries at Serial No.66(a) and 66(aa) read with the Explanation of the 2017 Notification.
NEET EXAMINATION
45. Insofar as NEET examination is concerned, there is no dispute that GST is not payable on the fees collected in respect of the conduct of NEET examination by virtue of the 2017 Notification. Thus, no tax is payable for holding Postgraduate NEET – Super speciality and NEET Master of Dental Surgery (MDS).
46. The only dispute relates from the date from which the petitioner is entitled to such exemption. Whereas, the petitioner claims that it is an educational institution and therefore, payment of GST on such services is exempt under the 2017 Notification from the date that it was issued. The learned counsel appearing for respondent no.5 disputes the same. According to respondent no.5, services provided for holding NEET examinations are exempt of GST from the date of issuance of the impugned circular.
47. Mr. Aggarwal, learned counsel appearing for respondent no.5 contended that a taxing statute must be construed strictly and any ambiguity in a provision relating to exemption from payment of tax must necessarily be resolved in favour of the taxing authority. He referred to the decision of the Supreme Court in Commissioner of Customs (Import), Mumbai v. Dilip Kumar and Company & Ors.: (2018) 9 SCC 1 in support of his contention. He submitted that the petitioner does not qualify as an educational institution as defined in Paragraph 2(y) of the 2017 Notification as it does not provide education as a part of its curriculum for obtaining a qualification recognized by law. He submits that the petitioner is recognized as an educational institution by virtue of the Paragraph 3(iv) of the 2017 Notification which was introduced by the 2018 Notification II. He submits that the fact that the Central and State Educational Boards were brought within the ambit of educational institutions lead to an obvious inference that the definition of educational institutions under Paragraph 2(y) of the 2017 Notification did not include such boards as educational institutions. He submitted that merely because the explanation reads as a clarification is not a reason enough to read the Paragraph 3(iv) of the 2017 Notification as clarificatory. He also referred to the decisions of the Supreme Court in Sree Sankaracharya University of Sanskrit & Ors. v. Dr. Manu & Anr.: 2023 SCC OnLine SC 640 and in District Collector, Vellore District v. K. Govindraj: (2016) 4 SCC 763 in support of his contentions. He submitted that interpreting the 2017 Notification in the manner as contended by the petitioner would render the introduction of the Explanation in Paragraph 3(iv) by virtue of the 2018 Notification II as otiose and such an interpretation ought to be avoided. He also referred to the decision of the Supreme Court in Hardeep Singh v. State of Punjab & Ors.: (2014) 3 SCC 92 for supporting the aforesaid propositions.
48. He contended that whilst the Central or State Boards fell within the definition of educational institutions limited to the purpose of holding examinations by virtue of the 2018 Notification II whereby, Paragraph 3(iv) was introduced in the 2017 Notification, the petitioner would be entitled to such benefit only from the date of the impugned circular. He contended that the impugned circular bought about a substantive change by expanding the scope of exemption under the 2017 Notification to include the petitioner as well. This being a substantive provision would also apply prospectively from the date of the impugned circular.
49. The contention that the services relating to holding of NEET examination were exempt from the date of the impugned circular, is clearly erroneous. By virtue of the 2018 Notification I, the Central Government had introduced Clause (aa) in Serial No.66 of the 2017 Notification expressly exempting the services by an educational institution by way of conduct of entrance examination against consideration in form of entrance fee. NEET examinations are in effect an entrance examination for the admission of students to various medical institutions. The same is squarely covered by the entry of Serial No.66(aa) of the 2017 Notification.
50. The question whether the petitioner is an educational institution for the purposes of Clause (aa) of Serial No. 66 of 2017 Notification was expressly clarified by introduction of Clause (iv) in Paragraph 3 of the 2017 Notification. The said explanation clarified that the Central and the State Educational Boards would be treated as educational institutions for the limited purposes of providing services by way of conduct of examination to the students. The opening words of Paragraph 3(iv) of the 2017 Notification are “for removal of doubts”. The said Explanation is clearly clarificatory. It is also important to note that the said clarification was introduced as an Explanation in the 2017 Notification pursuant to the suggestion made by the Advisor (Financial Resources), Punjab at the meeting of the GST Council, which was accepted. The reason stated was that if the amendment was brought by a notification, “field formations may issue demand notices for the past period”. Therefore, the intention of the GST Council to recommend introduction of the clarification by way of explanation was clearly for the purposes of clarifying the import of the entry at Serial No. 66(aa) of the 2017 Notification.
51. Clause (iv) Paragraph 3 of the 2017 Notification must be construed as the language reads – it is a clarification to remove doubts that educational institutions include State Boards and Central Boards, albeit, for the limited purposes of holding examinations. Thus, in respect of other services – services not specifically covered by entries of the 2017 Notification – the Central and State Boards may not be considered as educational institutions, However, in respect of holding examinations, the Central and State Boards are educational institutions.
52. Thus, the contention that introduction of Clause (iv) in Paragraph 3 in the 2017 Notification brought about a substantial change and therefore, the inclusion of the State and Central Boards as educational institutions for the purposes of holding examination must necessarily be held to be prospective from 26.07.2018, is unpersuasive. It is settled law that substantive statutory amendments may be applied retrospectively if the same is provided expressly or by necessary implication. In Govind Das & Ors. v. Income Tax Officer & Anr.: (1976) 1 SCC 906, the Supreme Court held as under:
“11. Now it is a well-settled rule of interpretation hallowed by time and sanctified by judicial decisions that, unless the terms of a statute expressly so provide or necessarily require it, retrospective operation should not be given to a statute so as to take away or impair an existing right or create a new obligation or impose a new liability otherwise than as regards matters of procedure. The general rule as stated by Halsbury in Vol. 36 of the Laws of England (3rd Edn.) and reiterated in several decisions of this Court as well as English courts is that
“all statutes other than those which are merely declaratory or which relate only to matters of procedure or of evidence are prima facie prospective”
and retrospective operation should not be given to a statute so as to affect, alter or destroy an existing right or create a new liability or obligation unless that effect cannot be avoided without doing violence to the language of the enactment. If the enactment is expressed in language which is fairly capable of either interpretation, it ought to be construed as prospective only.”
53. Thus, the contention that the introduction of Clause (iv) in Paragraph 3 of the 2017 Notification brought about a substantive amendment for granting exemption to State and Central Boards in respect of examinations, which prior to the said date was not available, therefore, the same must be held to be applicable prospectively, is liable to be rejected as the very purpose of introducing Clause (iv) in Paragraph 3 of the 2017 Notification was to address an anomaly, which was recommended to be addressed by the Fitment Committee. The GST Council had accepted the same. The manner in which the anomaly was addressed by the 2018 Notification II clearly indicates that the legislative intent was to include the Central and the State Board as educational institutions for the purposes of holding examination, retrospectively.
54. The GST Council had, on a representation, accepted that the services provided by educational institutions for entrance examination ought to be exempted from GST. The Fitment Committee had noted that the admission fee charged by educational institutions was exempted from GST, however, the entrance fee charged for appearing in competitive examinations for admission to educational institution was chargeable to GST. It is noted that this anomaly had existed as no specific exemption was provided for rendering services for conducting “competitive entrance examination for admission to these institutions”. Accordingly, the GST Council had decided to exempt services relating to admission to, or conduct of examination provided to all educational institutions as well as to exempt services by educational institutions by way of conduct of entrance examinations against consideration in form of entrance fee. Clearly, the object was to exempt entrance examinations from the levy of GST.
55. The question whether educational boards are to be exempted from services provided in conduct of examination was considered by the GST Council at its 28th Meeting held on 21.07.2018. The Fitment Committee had noted that the definition of educational institutions as contained in Paragraph 2(y) of the 2017 Notification did not cover State Educational Boards, Central Government Boards and autonomous organizations responsible for administration of education in India. It was noted that the boards are engaged for educational purposes, conduct of board examination, preparation and curriculum, preparation courses of studies, text books, teaching material etc. The boards issued certificates of examinations and equivalence certificate to examinations conducted by other State Boards. Additionally, the boards are engaged in training of teachers, annual survey of school education and other activities. It noted that these works are incidental to education and are directly related to promotion of education. It is also noted that the services provided by the boards by way of conduct of examination include various services such as in the nature of board of barcode printing and scanning, OMR scanning, printing of text books, printing of question papers, answer sheets, OMR sheets etc. Most of the State Boards and Central Boards were either boards set up by the Act of Parliament or State Legislatures or registered under the Societies Registration Act, 1860. Therefore, all examination boards except a few were Government entities. Any grant received by educational boards for providing services to government or any other person was also exempt.
56. It was noted that the boards collect admission fee directly from the students sitting in examination and therefore, such burden of GST would fall on the students. Accordingly, it was decided to extend the benefit of exemption from GST in respect of the said services.
57. It is important to note that Clause (iv) was added to the Paragraph 3 in the 2017 Notification, to address an anomaly and the choice of the language in which Paragraph 3(iv) of the 2017 Notification is couched, clearly indicates that the same was introduced to clarify the scope and applicability of the entries at Serial Nos. 66(a) and 66(aa) of the 2017 Notification.
58. It is also relevant to refer to Section 11(3) of the CGST Act. The said provision enables the Central Government to clarify the scope and/or applicability of any exemption notification issued under Subsection (1) of Section 11 of the CGST Act. The 2017 Notification was issued in exercise of powers under Section 11(1) of the CGST Act. The power under Sub-section (3) of Section 11 of the CGST Act is limited to clarifying the scope and applicability of the notification under Section 11(1) of the CGST. It does not contemplate a fresh exemption. The legislature, being conscious of the fact that such a clarification in respect of scope and applicability of an exemption notification may affect substantive rights, has provided an additional restriction, which enables issuance of such clarification (by way of an explanation) only within a specified period of one year from the date of the exemption notification. This addresses the principal concern that arises from the retrospective application of any provision, which is that it affects crystalized rights and obligations. Thus, the requirement of ensuring that a notification clarifying the scope and applicability of an exemption notification is issued by insertion of an explanation in the exemption notification, not later than one year from the date of the exemption notification, ensures that the retroactive import of such a clarification covers only the immediately preceding tax periods. In the present case, the Paragraph 3(iv) of the 2017 Notification clarifies the scope of the relevant entries of the 2017 Notification as covering Central and State Boards albeit for the limited purpose of holding examination. Thus, the contention that the explanation is applicable prospectively, notwithstanding that it expressly provides that it is “for removal of doubts” and to “clarify” that Central and State Boards are also treated as educational institutions albeit for a limited purpose of holding examinations, is unpersuasive.
59. In Sree Sankaracharya University of Sanskrit & Ors. v. Dr. Manu & Anr. (supra) the Supreme Court had referred to various decisions and had summarized the principles for determining whether a statute is applicable retrospectively. The Supreme Court held that if a statute is curative or merely clarificatory a retrospective operation thereof is permissible. The Supreme Court had also held that merely because a provision is described as clarificatory, the Court is not bound by the said statement and must analyze the nature of the amendment and conclude whether it is in reality clarificatory or whether it is a substantive amendment which is intended to apply prospectively. An amendment would be considered clarificatory if it would be impossible to reasonably interpret the provision unless the amendment is read.
60. Undisputedly, the question whether a provision is clarificatory or declaratory would not be dispositive of the question whether the same is applicable retrospectively. However, the fact that the language of the statute clearly reflects that it is for removal of doubts and to clarify doubts is a relevant indicator to determine whether the provision in fact intended to clarify and not intended to bring a prospective change. It is also relevant to determine whether the pre-amended law would admit such a clarification.
61. In the aforesaid context, it is relevant to note that in the present case, there is no change in the main exemption provision. Entries at Serial Nos.66(a) and 66(aa) of the 2017 Notification have not been amended. Paragraph 3(iv) to the 2017 Notification merely seeks to clarify the scope and applicability of the relevant entries as noted above.
62. As noted above, the CGST Act empowers the Central Government to issue a clarification by insertion of an explanation albeit not later than one year from the date of the exemption notification. This also clearly indicates the legislative intent to ensure that the exemption notification issued under Section 11(1) of the CGST Act be applied consistently and also cover the period prior to issuance of the clarification.
63. It is relevant to note that there is no principle that limits the power of the legislature to only enact prospectively. It is well settled that subject to the legislative competence and the constitutional guarantees, the legislature can enact legislations with retrospective effect. However, it is trite law that a statutory amendment to a substantive provision is not applicable retrospectively, unless it is provided expressly or by necessary intendment. However, statutory amendments in respect of procedural law may apply retrospectively. This is because retroactive amendments to substantive law may adversely affect the vested rights but procedural law does not, normally, vest any rights. However, there is no principle which precludes extending a beneficial provision retrospectively if the legislature so intends.
64. In Sree Sankaracharya University of Sanskrit & Ors. v. Dr. Manu & Anr. (supra), the controversy involved was regarding fixation of pay of the respondent who was placed in Selection Grade Lecturer. The appellant university did not, in fixing the pay of the respondent, grant two advance increments to the respondent payable on his placement as a lecturer in the selection grade, holding a PhD degree. This was provided under the University Grants Commission Scheme, 1998 (hereafter UGC Scheme). The respondent was denied the said increments relying on a Government Order dated 29.03.2001, which clarified that teachers who had already got the benefit of advance increments on account of holding a PhD degree – which the respondent had at the time of joining the service as a lecturer – would not be eligible for advance increments at the time of their placement in the Selection Grade. In the aforesaid context, the Supreme Court held that the Government Order dated 29.03.2001 could not be applied retrospectively. The Supreme Court explained that the “law provides that a clarification must not have the effect of saddling any party with an anticipated burden or withdrawing any party of an anticipated benefit.” The Supreme Court held that “permitting retrospective application of the said order would result in withdrawing vested rights of lecturers who had a PhD. at the time of their recruitment and who were placed in the selection grade before 29th March, 2001 with four plus two increments”. The said decision would have little application in a case where the legislative intent is to clarify the scope and applicability of an exemption notification to include a tax entity, which may not be extended the said benefit. Further, the Supreme Court in the said case referred to the Union of India & Ors. v. Martin Lottery Agencies Ltd.: (2009) 12 SCC 209 and Virtual Soft Systems Ltd. v. Commissioner of Income Tax, Delhi: (2007) 9 SCC 665. These decisions relate to tax laws and the controversy involved retrospective application of provisions that added to the burden of the tax payer.
65. It is relevant to refer to the following observations of the Supreme Court in Commissioner of Income Tax (Central)-1, New Delhi v. Vatika Township Private Limited.: (2015) 1 SCC 1:
“28. Of the various rules guiding how a legislation has to be interpreted, one established rule is that unless a contrary intention appears, a legislation is presumed not to be intended to have a retrospective operation. The idea behind the rule is that a current law should govern current activities. Law passed today cannot apply to the events of the past. If we do something today, we do it keeping in view the law of today and in force and not tomorrow’s backward adjustment of it. Our belief in the nature of the law is founded on the bedrock that every human being is entitled to arrange his affairs by relying on the existing law and should not find that his plans have been retrospectively upset. This principle of law is known as lex prospicit non respicit : law looks forward not backward. As was observed in Phillips v. Eyre [(1870) LR 6 QB 1] , a retrospective legislation is contrary to the general principle that legislation by which the conduct of mankind is to be regulated when introduced for the first time to deal with future acts ought not to change the character of past transactions carried on upon the faith of the then existing law.
29. The obvious basis of the principle against retrospectivity is the principle of “fairness”, which must be the basis of every legal rule as was observed in L’Office Cherifien des Phosphates v. Yamashita-Shinnihon Steamship Co. Ltd. [(1994) 1 AC 486 : (1994) 2 WLR 39 : (1994) 1 All ER 20 (HL)] Thus, legislations which modified accrued rights or which impose obligations or impose new duties or attach a new disability have to be treated as prospective unless the legislative intent is clearly to give the enactment a retrospective effect; unless the legislation is for purpose of supplying an obvious omission in a former legislation or to explain a former legislation. We need not note the cornucopia of case law available on the subject because aforesaid legal position clearly emerges from the various decisions and this legal position was conceded by the counsel for the parties. In any case, we shall refer to few judgments containing this dicta, a little later.
29. We would also like to point out, for the sake of completeness, that where a benefit is conferred by a legislation, the rule against a retrospective construction is different. If a legislation confers a benefit on some persons but without inflicting a corresponding detriment on some other person or on the public generally, and where to confer such benefit appears to have been the legislators’ object, then the presumption would be that such a legislation, giving it a purposive construction, would warrant it to be given a retrospective effect. This exactly is the justification to treat procedural provisions as retrospective. In Govt. of India v. Indian Tobacco Assn. [(2005) 7 SCC 396] , the doctrine of fairness was held to be relevant factor to construe a statute conferring a benefit, in the context of it to be given a retrospective operation. The same doctrine of fairness, to hold that a statute was retrospective in nature, was applied in Vijay v. State of Maharashtra [(2006) 6 SCC 289] . It was held that where a law is enacted for the benefit of community as a whole, even in the absence of a provision the statute may be held to be retrospective in nature. However, we are (sic not) confronted with any such situation here.
30. In such cases, retrospectivity is attached to benefit the persons in contradistinction to the provision imposing some burden or liability where the presumption attaches towards prospectivity. In the instant case, the proviso added to Section 113 of the Act is not beneficial to the assessee. On the contrary, it is a provision which is onerous to the assessee. Therefore, in a case like this, we have to proceed with the normal rule of presumption against retrospective operation. Thus, the rule against retrospective operation is a fundamental rule of law that no statute shall be construed to have a retrospective operation unless such a construction appears very clearly in the terms of the Act, or arises by necessary and distinct implication. Dogmatically framed, the rule is no more than a presumption, and thus could be displaced by outweighing factors.”
31. In the present case, the Central Government is expressly empowered to introduce an explanation for clarifying the scope and applicability of an exemption notification. As noted above, it is also apparent that the notification was issued as it was found that the Central and State Boards, inter alia, entrusted in conducting the examinations for evaluating students on a common standard were excluded. The relevant Minutes of the GST Council meetings indicate that the GST Council was fully conscious of the fact that amending any entry in the 2017 Notification may tend to reopen past cases and hence consciously chose the option of issuing the clarification as an explanation of the 2017 Notification.
66. We also find no merit in the contention that Paragraph 3(iv) of the 2017 Notification cannot be applied retrospectively as there is no ambiguity that the Central and State Boards including the petitioner did not fall in the definition of an “educational institution” and therefore were ineligible for availing the exemption in Serial nos.66(a) and 66(aa) of the 2017 Notification. It is the petitioner’s case that a definition is required to be read expansively to include the State and Central Boards. Concededly, in Sahitya Mudranalaya Private Limited v. Additional Director General: 2020 SCC OnLine Guj 3508, a Division Bench of the Gujarat High Court had accepted that the State Board would fall within the definition of an educational institution in terms of Clause (oa) of the Mega Exemption Notification No.25/2012 relating to Service Tax. The said clause is similarly worded as Paragraph 2(y) of the 2017 Notification.
67. The Special Leave Petition preferred by the Revenue Department against the said decision was dismissed and the said decision has attained finality. Thus, by virtue of the said decision – which is discussed in further detail later – the entities supplying services to State Boards were entitled to the benefit in respect of payment of Service Tax under the Finance Act, 1994 as available in respect of certain services provided to educational institutions. Thus, even if we accept that a clarificatory explanation cannot be applied retrospectively unless there is some ambiguity in the pre-amended provision. The said test is satisfied in this case as well.
68. Now we may proceed to examine whether the service of holding NEET examination is exempt from payment of GST under the 2017 Notification. It is material to note that NEET examination is in the nature of an entrance examination to various medical institutions. Further, the said services are not rendered to students of NEET but to various aspirants wishing to pursue their studies in other institutions. To that extent, there may be a slight difference in the examinations conducted by the Central or State Boards which are in respect of students enrolled with the said Boards and the NEET examinations. The service of holding an examination for aspirants to medical colleges, to provide a standard basis for entrance in medical institutions, the same would not fall within the ambit of Serial No.66(a) of the 2017 Notification, as the same covers services provided by an educational institution to its students, faculty and staff. The candidates appearing for NEET examination are not students of the petitioner.
69. More importantly, the Central Government has introduced a separate entry for exempting the services provided by an entrance examination – at Serial No.66(a) of the 2017 Notification. Since, NEET examinations are in the nature of an entrance examination, the petitioner would be entitled to the benefit of an exemption by virtue of Serial No.66(aa) of the 2017 Notification, which came into effect on 25.01.2018.
DEGREES OF DIPLOMATE OF NATIONAL BOARD (DNB) AND FELLOW OF NATIONAL BOARD (FNB)
70. As noted above, the medical qualifications of DNB and FNB are qualifications that are recognised under Section 37(2) of the National Medical Commission Act, 2019. The courses are structured where practical training is provided to students in medical institutions accredited by the petitioner. The course fee is also remitted to the said medical institutions. The petitioner conducts examinations for accepting the students as well as for evaluation of the students during the course and at its culmination. The petitioner asserts that the students are required to submit their thesis for guidance as to the research methodologies adopted by them. They are also required to appear for a minimum prescribed number of Formative Assessment Test (FAT) for being eligible to appear for the final examination. Appearing for FAT is an essential and integral part of their course. These assertions are not controverted. The final examination is conducted in two stages, theory as well as practical. As noted hereinbefore, the petitioner conducts the following examinations as a part of the DNB/FNB course leading to students achieving the said qualifications: Fellowship Entrance Exam Test (FEET), DNB-PDCET Exam, FAT, DNB and FNB Final Examination (Theory and Practical), and Fellowship Exit Exam (FEE)
71. In the aforesaid context, it is required to be considered whether the petitioner is an educational institution for the purposes of rendering the aforesaid services.
72. In Sahitya Mudranalaya Private Limited v. Additional Director General (supra), the Gujarat High Court had, inter alia, considered the question, whether a State Board could be considered as an educational institution within the meaning of Clause (l) of Section 66D of the Finance Act, 1994, which included certain services by education in the negative list. Clause (l) of Section 66D of the Finance Act reads as under:
“66D. Negative list of services.-The negative list shall comprise of the following services, namely:-
(a) to (k)…
(l) services by way of-
(i) pre-school education and education up to higher secondary school or equivalent;
(ii)education as a part of a curriculum for obtaining a qualification recognised by any law for the time being in force;
(iii) education as a part of an approved vocational education course.”
73. In terms of Entry No.9 of the Mega Exemption Notification no.25/2012-ST dated 20.06.2012, services provided to or by an educational institution in respect of education, inter alia, by way of auxiliary education services were exempted from the levy of service tax.
74. Auxiliary education services were defined as under:
“‘auxiliary educational services’ means any services relating to imparting any skill, knowledge, education or development of course content or any other knowledge-enhancement activity, whether for students or the faculty, or other services which educational institutions ordinarily canny out themselves but may obtain as outsourced services from any other person, including services relating to admission to such institution, conduct of examination, catering for students under any mid-day meals scheme sponsored by Government, or transportation of students, faculty or staff of such institution;”
75. Subsequently, Clause (oa), which defined ‘educational institution’ was introduced in the Mega Exemption Notification No.25/2012 with effect from 11.07.2014 by Notification No. 06.2014 – Service Tax. In terms of the said Clause, educational institution was defined to mean institution providing the services as specified in Clause (l) of Section 66D of the Finance Act, 1994. Thereafter, with effect from 14.05.2016, the definition of ‘educational institution’ in the Mega Exemption Notification No.25/2012 was amended to read as under:
“(oa) ‘educational institution’ means an institution providing services by way of:
(i) pre-school education and education up to higher secondary school or equivalent;
(ii) education as a part of a curriculum for obtaining a qualification recognized by any law for the time being in force;
(iii) education as a part of an approved vocational education course.”
76. The exemption granted to educational institutions within the meaning of Clause (oa) of Section 2 of the Mega Exemption Notification No.25/2012 is also continued in terms of 2017 Notification. In Sahitya Mudranalaya Private Limited v. Additional Director General (supra), the Gujarat High Court considered the aforesaid definitions and held that the term ‘education’ is required to be read in an expansive manner. Accordingly, the Gujarat High Court held that services rendered by the appellant (Sahitya Mudranalaya Private Limited) to a State Board / Central Board were also exempted from payment of Service Tax. It is important to note that the Court also drew support from the 2018 Notification II, whereby Clause (iv) in Paragraph 3 of the Explanation of the 2017 Notification was introduced. The relevant extract of the said decision is as under:
“13.21. In the light of the above principles enunciated in the decisions referred to hereinabove, this court is of the opinion that the word “education” cannot be given a narrow meaning by restricting it to the actual imparting of education to the students but has to be given a wider meaning which would take within its sweep, all matters relating to imparting and controlling education. Examination is an essential component of education as it is one of the major means to assess and evaluate the candidate’s skills and knowledge, be it a school test, university examination, professional entrance examination or any other examination. As held by the Supreme Court, the examination is considered as a common tool around which the entire education system revolves.
13.22. Thus, education would mean the entire process of learning, including examination and grant certificate or degree or diploma, as the case may be and would not be limited to the actual imparting of education in schools, colleges or institutions only. Unless the School Boards hold examinations, the education of school students would not be complete, so is the case with college students, whose education would be complete only when the university conducts examinations and awards degrees or diplomas. It is the school boards which issue the Secondary and Higher Secondary School Certificates after holding examinations and the university which confers degrees/diplomas, etc., after holding examinations. Unless a student holds a certificate issued by a Board, his or her school education would not be complete, similarly, without a degree or diploma being conferred by the University, college education would not be complete. Therefore, examinations are an indispensable component of education, without which such education is incomplete. Therefore, to say that Boards/universities are not “educational institutions” would amount to divorcing examinations from education.
13.23. Clause (1) of section 66D of the Finance Act may be examined in the light of the above. Sub-clause (i) of clause (1) refers to pre-school education and education up to higher secondary school or equivalent. When the sub-clause says education up to higher secondary school or equivalent, it goes without saying that it includes the examination leading to conferment of a certificate of having passed the higher secondary school or equivalent. Similarly when sub-clause (ii) says education as a part of the curriculum for obtaining a qualification recognized by any law for the time being in force, it is apparent that the Legislature meant the entire process of preparation of curriculum to the holding of examination leading to obtaining of a qualification recognized by any law for the time being in force. If the contribution of the Boards/Universities is excluded, there would be no curriculum for obtaining a qualification nor would there be examination leading to conferment of such qualification. Clearly, therefore, it was not the intention of the Legislature to exclude preparation of curriculum and holding of examinations from the ambit of clause (1) of section 66D of the Finance Act, 1994. As a necessary corollary, therefore, the School Boards and the University in, question would clearly fall within the ambit of the expression “educational institution” as contemplated under clause (oa) of entry No. 2 of Notification No. 25/2012-ST : MANU/DSTX/0065/2012 and services provided by such Boards/University would also fall within the ambit of the services as postulated under clause (1) of section 66D of the Finance Act.
13.24. The Government of India has also adopted a similar approach in its Notification No. 14/2018-Central Tax (Rate) : MANU/GSCT/0014/2018, dated July 26, 2018 issued in exercise of powers conferred by sub-section (1) of section 11 of the Central Goods and Services Tax Act, 2017, wherein it has been clarified that the Central and State Educational Boards shall be treated as educational institutions for the limited purpose of providing services by way of conduct of examination to the students.
14. Once the Boards/University to whom services have been provided by the petitioners, are held to be educational institutions, the very substratum of the impugned show-cause notices is lost inasmuch as the show-cause notices are premised on the allegation that the service recipients, namely, the Boards/University referred to hereinabove are not educational institutions and, therefore, the services rendered by them do not fall within the negative list of services as provided under section 66D(1) of the Finance Act, 1994 and that the Board/University are not “educational institutions” as defined under clause (oa) of entry No. 2 of the mega exemption Notification No.25/2012-ST : MANU/DSTX/0065/2012, dated June 20, 2012.”
77. It is material to note that the Special Leave Petition (SLP 13320/2020) preferred by the Revenue against the said decision was dismissed by the Supreme Court by an order dated 06.01.2021
78. Undeniably, the State Boards and educational boards are educational institutions. In the case of Secondary Board of Education, Orissa v. Income Tax Officer, Ward ‘E’, Cuttack: 1972 SCC OnLine Ori 154, the Orissa High Court had observed that the Board of Secondary Education is not a university but it is indisputably an educational institution. ‘Education’ is included within the definition of charitable purpose under Section 2(15) of the Income Tax Act, 1961 and the said expression has been read in an expansive manner. [Ref: Sole Trustee, Lok Shikshana Trust v. CIT, Mysore (1976) 1 SCC 254].
80. The term ‘educational institution’ for the purposes of the 2017 Notification cannot be construed with reference to the general meaning of educational institutions alone as the said term for the purposes of the 2017 Notification is defined in Paragraph 2(y) of the 2017 Notification.
81. The expression ‘educational institution’ is defined to include an institution providing services by way of “education as a part of a curriculum for obtaining a qualification recognized by any law for the time being in force”. The principal question that needs to be addressed is whether the petitioner, in so far as it conducts the course of DNB/FNB, is involved in providing education as a part of a curriculum.
82. The expression ‘education’ has not been defined in the 2017 Notification and therefore, must be construed in its ordinary sense.
83. In Sole Trustee, Lok Shikshana Trust v. CIT, Mysore (supra), the expression ‘education’ was held to mean as under:
“the systematic instruction, schooling or training given to the young in preparation for the work of life. It also connotes the whole course of scholastic instruction which a person has received… What education connotes… is the process of training and developing the knowledge, skill, mind and character of students by formal schooling”.
84. There is also no cavil that the petitioner is involved in imparting education. The recommendations of the Fitment Committee to the GST Council, which is relied upon by the respondents, also notes that the State/Central Government Boards are engaged for educational purposes. Their activities are directly related to promotion of education.
85. The only question is whether the services provided are a part of the curriculum for obtaining a qualification recognized by law for the time being in force. The word ‘curriculum’ is from a new Latin word, which means “a course of study”. It shares its roots in Latin where it mets. The word is defined in Oxford English Dictionary as “a regular course of study or training, as at a school or university”. DNB and FNB courses run and managed by the petitioner follow a curriculum. Indisputably, DNB and FNB degrees granted by the petitioner are on culmination of a structural course. As a part of their curriculum, students are required to undergo practical training in accredited medical institutes for a specified tenure. The students have to submit their thesis and also have to appear for the minimum number of FAT. The course of DNB and FNB is a structured course. Although the students conduct their training with accredited medical institutions, the course is structured and managed by the petitioner. There is also no doubt that the students undergoing the said course are enrolled with the petitioner. Thus, although there is no classroom teaching by the petitioner; it is, undoubtedly, involved in imparting education to the students enrolled with it as a part of a curriculum. The course fee collected by the petitioner is forwarded to various accredited hospitals.
86. Thus, for the purposes of DNB and FNB courses and conduct of Fellow Entrance Examinations, DNB-PDCET exam, FAT, DNB and FNB final examination (theory and practical) and the Fellowship Exit Exam, the petitioner clearly falls within the scope of an educational institution imparting education to students enrolled with, it as a part of a curriculum.
87. It is also relevant to note that Association of Diplomate of National Board of Doctors (an association of students enrolled with DNB) had preferred a writ petition [being W.P.(C) 10326/2021] impugning Notifications dated 15.01.2021, 15.02.2021 and 19.08.2021 issued by the petitioner. In terms of the said notification, the petitioner had called upon the trainees to directly deposit the annual course fee along with GST. The said association claimed that no GST was chargeable on the course fee. This was confirmed by the Union of India. The petitioner also acknowledged that the demand of GST from students was erroneous. Accordingly, this Court directed that the GST collected, be refunded.
88. In view of the above, there can be no dispute that no GST is chargeable in respect of the services rendered by the petitioner in connection with DNB and FNB courses. The petitioner is indisputably involved in conduct of DNB and FNB courses and therefore, squarely falls within the definition of an educational institution in respect of the services rendered to its students in connection with and as a part the said courses.
SCREENING TEST AND ACCREDITATION OF MEDICAL INSTITUTIONS
89. As discussed earlier, the services provided by the petitioner for conducting screening test and the fees charged for accrediting medical institutions does not fall within the scope of Serial No.66(a) and Serial No.66(aa) of the 2017 Notification. Thus, clearly, the petitioner is not exempted from payment of GST in respect of the said services by virtue of the 2017 Notification. As noted above, screening tests are not conducted as a part of the curriculum. The said tests are also not in the nature of entrance examinations but are for the purposes of recognising primary medical qualifications secured by candidates from institutions abroad. The accreditation fee is charged from medical institutions for accrediting them. These services are also not covered under the relevant entries of the 2017 Notification. The candidates appearing for the screening tests are not students of the petitioner. Thus, the petitioner’s contention that it is exempt from payment of GST in respect of such services, is unmerited.
90. In view of the above, the orders rejecting the petitioner’s application for refund, which are impugned in this petition, are set aside. The matter is remanded to the appropriate authority for considering afresh, in light of the observations made in this decision.
The present petition is disposed of in the aforesaid terms.
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