CESTAT Verdict: Examination Fees Not Taxable Under Manpower Recruitment Services
Professional Examination Board's Appeal Partially Successful; Penalties for Non-Compliance Upheld
In a significant ruling, the Customs, Excise, and Service Tax Appellate Tribunal (CESTAT) New Delhi Principal Bench has partially allowed the appeal of M/s Professional Examination Board, Bhopal, against the demand for service tax levied by the Commissioner of Customs, Central Excise & Service Tax, Bhopal. The tribunal ruled that examination fees collected by the Board cannot be considered as consideration for manpower recruitment or supply services provided to state government departments.
The bench, comprising Ms. Binu Tamta, Member (Judicial), and Mr. Sanjiv Srivastava, Member (Technical), determined that the essential elements for levying service tax-such as a contract for service and consideration-were absent between the appellant and the state government departments. The tribunal emphasized the necessity of identifying a service provider, service recipient, and consideration for service tax applicability. The examination fees collected from candidates were deemed not to qualify as consideration for providing manpower recruitment services.
The tribunal referenced prior judgments, including those from the Madras and Gujarat High Courts, underscoring the importance of contracts and the identification of service transactions for service tax purposes. The tribunal noted that the Professional Examination Board collected fees solely from candidates, covering costs related to conducting examinations, without any financial transactions with government departments.
While the tribunal set aside the service tax demand concerning examination fees, it upheld penalties imposed under Sections 77(1) and 77(2) of the Finance Act, 1994, for the Board's failure to register and file ST-3 returns. The tribunal also maintained the service tax demand concerning miscellaneous receipts and rental income, citing sufficient grounds for invoking the extended period of limitation.
The judgment offers clarity on the taxability of services provided by government-established bodies, reaffirming the importance of contractual relationships in determining service tax liability.
Bottom Line:
Service Tax - Examination fees collected by the Professional Examination Board from candidates cannot be considered as consideration for manpower recruitment or supply services provided to state government departments - However, penalties for failure to register and file returns under Sections 77(1) and 77(2) of the Finance Act, 1994, are upheld.
Statutory provision(s): Finance Act, 1994 Sections 65B(44), 66B, 66D, 77(1), 77(2), 76, 78
