The Madras High Court, Madurai Bench ordered the Manonmaniam Sundaranar University to pay Service Tax for renting of immovable property, but no penalty imposed.
The petitioner is a University established by the Manonmaniam Sundaranar University Act, 1990. The Joint Commissioner issued a notice 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 Joint Commissioner 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 petitioner contended that there can be no doubt that a college as per the UGC regulations will have to be affiliated to some University. Therefore, the affiliation fees as well as the inspection 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.
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.
The single judge bench of Justice G.R. Swaminathan observed that authorization is given to the University to maintain the property. But then, there is a clear commercial element in othese transactions. The University is renting the property to other institutions and collecting rent from them.
The court said that the respondent authority was justified in raising demand for the said service. However, there is no justification for levying the penalty. The assessee is not a private entity. The respondents do not allege forgery or misrepresentation. The court sustained 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.
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