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.

Summary

Issues Involved:
1. Service tax liability on hostel fees.
2. Whether hostel services are naturally bundled with education services.
3. Exemption applicability under section 66D(m) of the Finance Act.
4. Service tax on rent received from Mody University.
5. Service tax on transportation services provided.
6. Service tax on goods transport agency services.
7. Invocation of the extended period of limitation.

Summary:

1. Service Tax Liability on Hostel Fees:
The appellant contested the demand of service tax on hostel fees collected from students, arguing that the hostel services should be exempt as they are naturally bundled with education services. The Tribunal examined the amendments to Serial No. 9 of the Notification dated 20.06.2012 and noted that the auxiliary educational services provided by an educational institution were taxable from 01.04.2013 to 10.07.2014.

2. Whether Hostel Services Are Naturally Bundled with Education Services:
The Tribunal referred to section 66F of the Finance Act, which deals with bundled services. It concluded that hostel services and education services provided by a boarding school are naturally bundled in the ordinary course of business. The education service gives the essential character to such a bundle, making the entire bundle of services non-taxable as education services are covered under the negative list of section 66D of the Finance Act.

3. Exemption Applicability Under Section 66D(m) of the Finance Act:
The Tribunal noted that education services up to higher secondary school are included in the negative list of services under section 66D of the Finance Act, and thus, are not taxable. Consequently, the hostel services, being naturally bundled with education services, are also non-taxable.

4. Service Tax on Rent Received from Mody University:
The Tribunal did not specifically address the issue of rent received from Mody University in its detailed reasoning, as the primary focus was on the hostel services and their bundling with education services.

5. Service Tax on Transportation Services Provided:
The Tribunal did not provide a separate detailed discussion on the transportation services provided to students and staff, as the primary contention revolved around the hostel services and their taxability.

6. Service Tax on Goods Transport Agency Services:
The Tribunal did not elaborate on the service tax demand related to goods transport agency services in its detailed reasoning.

7. Invocation of the Extended Period of Limitation:
The Tribunal did not specifically address the issue of the extended period of limitation due to the primary focus on the nature of the hostel services and their exemption status.

Conclusion:
The Tribunal set aside the impugned order dated 17.01.2017, confirming that the hostel services provided by the appellant are naturally bundled with education services and are thus exempt from service tax. The appeal was allowed, and the demand of service tax on hostel fees was not sustained.