2023 (5) TMI 609 - AT - Service Tax

Naturally bundled service - Education service - hostel fees received by the appellant from the students during the period 01.04.2013 to 10.07.2014 - education services - services are naturally bundled in the ordinary course of business or not - exempted under Serial No. 9 of the Notification dated 20.06.2012 or not - HELD THAT:- A perusal of the provisions of section 66F of the Finance Act would indicate that if there are various elements of service which are naturally bundled in the ordinary course of business, the taxability of such bundled services shall be based on the service which gives the essential character to such bundle. Explanation to section 66F of the Finance Act defines what a ‘bundled service’ would be. It provides that for a service to be a ‘bundled service’, an element of provision of one service needs to be combined with an element of provision of any other service or services. In other words, there should be a nexus between the two services.

The appellant has a boarding school and it receives hostel fees from students in addition to the tuition fee and other charges. However, students who are day scholars and who do not opt to pay the hostel facility are not required to pay the hostel fees. The hostel facility cannot be provided without the provision of education services by a boarding school as it is not the case of the department and it cannot be that students who are not receiving education services can also avail hostel services - There is, therefore, a nexus between the two services. It cannot, therefore, be doubted that the hostel services and education services provided by a boarding school are naturally bundled in the ordinary course of business, and the education service is the service which gives the essential character to such bundle.

Section 66D of the Finance Act provides for the negative list of services and it includes service by way of pre-school education and education up to higher secondary school or equivalent. Thus, education service would be covered within the purview of negative list contained in section 66D of the Finance Act. It would, therefore, not be taxable.

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 - it may not be necessary to examine the remaining contentions advanced by the learned counsel for the appellant regarding the exemption granted under serial no. 18 of the notification dated 20.06.2012.

The impugned order dated 17.01.2017 passed by the Commissioner cannot be sustained and is set aside - Appeal allowed.