University of Mumbai Vs Union of India & Ors. (Bombay High Court)
Conclusion: The collection of affiliation fees by assessee University in the discharge of its statutory functions, as noted hereinabove, could at all amount to a ‘supply’ as defined under Section 7 of the CGST Act. Once such activity itself was not ‘supply’ and/or it was not business within the meaning and purview of sub-section 1(a) of Section 7, there was no question of the charging provision i.e. Section 9 which provides for levy and collection being applicable. GST demand of Rs. 16.9 crores raised on affiliation fees collected from colleges was quashed.
Held: Assessee – university challenged an order issued under Section 74(1) of the CGST Act confirming GST demand of Rs.16.90 crores along with equivalent penalty and interest on “affiliation fees” collected by the University for the period 2017-18 to 2022-23. The proceedings originated from a show cause notice alleging that affiliation fees collected by assessee from affiliated colleges constituted taxable supply under the GST regime. Assessee contended before the authorities that affiliation and renewal of affiliation were statutory functions discharged under the Universities Act; the affiliation fees were statutory levies and not consideration for any commercial service and the University was not engaged in “business” within the meaning of Sections 7 and 9 of the CGST Act. Despite such objections, Adjudicating Authority confirmed the GST demand along with penalty under Section 122 read with Section 74 of the CGST Act. Assessee thereafter filed a rectification application under Section 161 of the CGST Act pointing out errors in figures and computations. The rectification application was rejected on the ground that the issues raised were matters requiring adjudication in appeal. Assessee consequently invoked writ jurisdiction under Article 226 of the Constitution seeking quashing of the order-in-original and rectification order; declaration that GST was not leviable on affiliation fees; quashing of CBIC circulars dated 17.06.2021 and 11.10.2024 clarifying taxability of affiliation/accreditation services. The issues arose for consideration was whether collection of affiliation fees by a statutory university constituted “supply” under Section 7 of the CGST Act; whether affiliation fees were “consideration” received in the course or furtherance of “business”; whether GST could be levied under Section 9 of the CGST Act on statutory affiliation activities of a university; whether affiliation services were exempt under Entry 66 of Notification No. 12/2017-CT(R) dated 28.06.2017; whether the impugned circulars expanding GST liability on affiliation services were contrary to the statute; whether writ jurisdiction could be invoked despite alternate appellate remedy under Section 107 of the CGST Act. The Court examined the scheme of the Maharashtra Public Universities Act, 2016 and held that affiliation formed part of the statutory regulatory framework governing higher education; the University undertook inspections, academic scrutiny, infrastructure verification, curriculum oversight, and educational regulation under statutory mandate; such functions were not commercial in nature and were undertaken solely to fulfil legislative objectives. The Court held that all such activities did not admit of any commercial concept, so as to regard the activities of the university as any business activities. The Court emphasized that the object of the Universities Act was dissemination and regulation of education and not commercial gain. The Court applied ejusdem generis interpretation to Section 2(17) defining “business” and held statutory educational regulation could not be equated with commercial activity; affiliation granted by a university was fundamentally regulatory and educational in nature. The fee collected for affiliation fails to qualify as consideration. The proper officer in the present case had acted wholly without jurisdiction. The Court further held that students of affiliated colleges were ultimately students of the University itself. Hence, affiliation activities were independently exempt. The Court observed that CBIC circulars imposing GST on affiliation services could not override Sections 7 and 9; executive circulars contrary to substantive statutory provisions could not survive. However, since the petition succeeded on merits, the Court refrained from formally adjudicating validity of the circulars.
FULL TEXT OF THE JUDGMENT/ORDER OF BOMBAY HIGH COURT
