Schools or colleges managed by educational and charitable trusts are liable to pay Service Tax if they were providing special coaching or training on a commercial basis to students taking competitive examinations, the Madras High Court Bench here has held.
Justice M. Venugopal passed the ruling while dismissing a writ petition filed by a trust from Tirunelveli district challenging the Central Excise Superintendent's insistence to pay Service Tax for providing coaching to students in association with the Indian Institute of Professional Education.
“The petitioner is not able to show before this court that in the Service Tax rules or under the Finance Act, 1994, there is an exemption to the petitioner/charitable trust…. Therefore, this court comes to an inevitable conclusion that the petitioner has to pay the Service Tax,” the judge said.
He also pointed out that the Central Excise Superintendent in one of his letters to the petitioner trust had categorically stated that he would not insist on payment of Service Tax if the trust was providing coaching to the students of its schools as well as others without charging any fees.
“But even as a charitable trust you are running a school and in your own version you are also running an institute by name IIPE entrance coaching centre at Palayamkottai. It is a well-known truth that in our country most of the institutes/colleges/hospitals are run only by charitable trusts.
“Section 65 (26) of the Finance Act defines ‘commercial training or coaching' as any training or coaching provided by a commercial training or coaching centre. Hence, you are requested to pay the service tax dues with appropriate interest. Otherwise, necessary action will be initiated under Section 73 of the Finance Act.”