University liable to Pay Service Tax on Renting of Immovable Property
Manonmaniam Sundaranar University Vs Joint Director (GST Intelligence) (Madras High Court)
The University is renting the property to other institutions and collecting rent from them. Therefore, the second respondent was justified in raising demand for the said service. However, there is no justification in levying penalty. The assessee is not a private entity. The respondents do not allege forgery or misrepresentation. I sustain the impugned order in so far as the demand for payment of Service Tax on renting of immovable property is concerned. In all other respects, it is quashed. The writ petition is partly allowed. No costs. Consequently, connected miscellaneous petitions are closed.
FULL TEXT OF THE HIGH COURT ORDER /JUDGEMENT
Heard the learned counsel appearing for the writ petitioner and the learned Standing counsel appearing for the respondents.
2. The petitioner is an University established by the Manonmaniam Sundaranar University Act, 1990. The second respondent issued notice dated 23.10.2018 calling upon the petitioner University to show cause as to why certain sums of money should not be paid by them towards service tax. It was also proposed to levy interest and penalty on the said principal amount. The show cause notice alleges that the petitioner had been collecting affiliation fees, inspection fees and other fees etc. from the affiliated colleges and charges by way of renting of immovable properties. The stand of the authority is that the University has been rendering service to the affiliated colleges also. Therefore, the fees collected by the University ought to have been reflected in the returns filed by the petitioner University. The second respondent also took objection that the petitioner did not even bother to register themselves as an assessee for the purpose of payment of Service Tax. The petitioner offered their objections. Not satisfied with them, the impugned order came to be passed confirming the proposals set out in the show cause notice. The said order is assailed in the writ petition.
3. The respondents have filed a detailed counter affidavit. In the said counter affidavit, the stand taken by the second respondent in the impugned order is The learned Standing counsel took me through the averments set out in the counter affidavit and called upon this Court to sustain the impugned order and dismiss this writ petition.
4. I carefully considered the rival contentions and also went through the materials on record.
5. The learned counsel appearing for the petitioner drew my attention to the Circular No.89/7/2006-ST dated 18.12.2006 issued by the Government of India, Ministry of Finance, Department of Revenue, Central Board of Excise and Customs. The said Circular reads as follows:-
Subsequent Circular No.96/7/2007-ST dated 23.08.2007 issued by the Government of India, Ministry of Finance, Department of Revenue, Tax Research Unit, reiterated the said proposition which is clarified from the following table:-
6. Now the only question that arises for consideration is whether the petitioner is collecting any compulsory levy and depositing the same into the Government account. The activities performed by the petitioner University is in the nature of statutory obligation.
7. Be that as it may, the fee collected by the petitioner will be in the nature of compulsory levy as per the provisions of the relevant statute. The petitioner University was established by legislation. Section 24(16) of the said statute enables the Syndicate of the University to prescribe the fees to be charged for the approval and affiliation of colleges, for admission to the examinations, degrees, titles and diplomas of the University, for the registration of graduates, for the renewal of such registration and for all or any of the purposes specified in Section
8. There can be no doubt that a college as per the UGC regulations will have to be affiliated to some Therefore, the commission collected by the University are in the nature of statutory levies. By performing those activities, the petitioner is only discharging a statutory function and the fees collected by the petitioner cannot be amenable to levy of Service Tax.
9. However, the demand of the respondents with regard to renting of immovable property will stand on a different footing. The learned counsel appearing for the petitioner draws my attention to Section 4(18) of the Act to sustain the contention that the petitioner was only discharging statutory function.
10. I am unable to accept the said proposition. It is true that authorisation is given to the University to maintain the property. But then, there is clear commercial element in these transactions. The University is renting the property to other institutions and collecting rent from them. Therefore, the second respondent was justified in raising demand for the said service. However, there is no justification in levying penalty. The assessee is not a private entity. The respondents do not allege forgery or misrepresentation. I sustain the impugned order in so far as the demand for payment of Service Tax on renting of immovable property is concerned. In all other respects, it is quashed. The writ petition is partly allowed. No costs. Consequently, connected miscellaneous petitions are closed.