Mody Education Foundation Vs Commissioner of Central Excise (CESTAT Delhi)
CESTAT Delhi held that the hostel service and education services are naturally bundled in the ordinary course of business and it is the education service that gives the essential character to such bundle. Accordingly, hostel service is not subjected to levy of service tax.
Facts- The appellant is a society registered under the Societies Registration Act, 1860. It runs a boarding school called ‘Mody School’, located at Laxmangarh in Sikar, Rajasthan, for girls from third to twelfth standard.
An investigation was initiated against the appellant whereafter it was observed that the appellant had failed to pay service tax in respect of various services provided/received by it.
A show cause notice dated 20.09.2016 was, therefore, issued to the appellant proposing a demand of service tax of Rs. 02,02,01,879/- with interest and penalties. It was mainly alleged that the hostel services provided by the appellant to the students, being an auxiliary education services, was not exempted under Serial No. 9 of the Notification dated 20.06.2012 during the period 01.04.2013 to 10.07.2014 and thus, taxable.
The Commissioner by order dated 17.01.2017 confirmed the demand of Rs. 01,98,20,476/- along with interest and penalties.
Conclusion- Held that the hostel service and education services are naturally bundled in the ordinary course of business and it is the education service that gives the essential character to such bundle. Education services by way of pre-school education and education up to higher secondary school or equivalent are enumerated in the negative list of services enumerated in section 66D of the Finance Act. Thus, it cannot be subjected to levy of service tax.
FULL TEXT OF THE CESTAT DELHI ORDER
M/s. Mody Education Foundation1 (earlier Known as M/s. Mody Institute of Education & Research) has filed this appeal to assail the order dated 17.01.2017 passed by the Commissioner of Central Excise, Jodhpur2.
2. The appellant is a society registered under the Societies Registration Act, 1860. It runs a boarding school called „Mody School‟, located at Laxmangarh in Sikar, Rajasthan, for girls from third to twelfth standard. The school is affiliated to the Central Board of Secondary Education3. It has an accreditation from the National Accreditation Board for Education and Training. The school is also affiliated to the International Baccalaureate of Geneva, Switzerland for IB Diploma Programme for Classes XI and XII.
3. The appellant, with respect to the boarding school, receives hostel fees from the students, in addition to the tuition fee and other A small portion of the students are day scholars who do not opt for the hostel facility and thus, no hostel fees is collected from such day scholars.
4. The appellant has also rented out a building to M/s. Mody University of Science and Technology4and has received rent for the period 2014-15. The appellant has also provided transportation services to its students and staff. The appellant has also received goods transport agency services5.
5. An investigation was initiated against the appellant whereafter it was observed that the appellant had failed to pay service tax in respect of various services provided/received by it.
6. A show cause notice dated 20.09.2016 was, therefore, issued to the appellant proposing a demand of service tax of Rs. 02,02,01,879/- with interest and penalties. The allegations made against the appellant in the show cause notice are as follows:
(i) The hostel services provided by the appellant to the students, being an auxiliary education services, was not exempted under Serial No. 9 of the Notification dated 20.06.2012 during the period 01.04.2013 to 10.07.2014 and thus, taxable;
(ii) The hostel services are not naturally bundled with education services;
(iii) The hostel services are not in the nature of renting of residential dwelling for use as residence covered under section 66D(m) of the Finance Act, 19946;
(iv) The appellant is liable to pay service tax on the rent received from Mody University from July 2014 to March 2015;
(v) The transportation services provided by the appellant to the students, faculty and staff, being an auxiliary education services is leviable to service tax during the period 01.04.2013 to 10.07.2014;
(vi) The appellant is liable to pay service tax on the GTA services received by it during the period April 2014 to March 2015; and
(vii) The appellant had intentionally and wilfully suppressed the fact of provision and receipt of taxable services by it from the Department and so the extended period was invokable.
7. The appellant filed a detailed reply to the above show cause notice on 10.11.20 16.
8. The Commissioner by order dated 17.01.2017 confirmed the demand of Rs. 01,98,20,476/- along with interest and penalties.
9. The details of demand proposed, dropped and confirmed, have been tabulated below:
