Periyar univetsity service tax case mhc granted stay for petner senior adv isac mohanlal

IN THE HIGH COURT OF JUDICATURE AT MADRAS
[Special Original Jurisdiction]

W P No. of 2021

The Registrar
Periyar University
PeriyarPalkalai Nagar
Salem – 636 011 … Petitioner

– vs –

1. The Principal Chief Commissioner of GST and Central Excise
26, GST Bhawan, 1, Uthamar Gandhi Rd,
Thousand Lights West,
Nungambakkam,
Chennai – 600034

2. The Commissioner
Office of the Commissioner of GST and Central Excise
No. 1, Foulks Compound Anai Road, Salem – 636 001.

3. The Joint Commissioner Office of the Commissioner of GST and Central Excise
No. 1, Foulks Compound Anai Road, Salem – 636 001.

4. The Assistant Commissioner
Salem Division-I,
Office of the Assistant Commissioner Of GST and Central Excise, Salem I Division, No. 106, Varalakshmi Orchid, Ramakrishna Road, Salem – 636 007.

5. The Superintendent
Office of the Superintendent of
Customs, Central Excise & Service tax
Salem III Range
No. 1/276, Meyyanoor Road,
Shiva Towers, Salem – 636 004…. Respondents

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– 2 –

AFFIDAVITOFPETITIONER
—————

I, Dr. K. Thangavel, aged about 57 years, son of Thiru. Kuttiyannan, residing at No. 3T Majestic Apartments, 4th Floor, 2-79, Salem Main Road, Suramangalam, Salem – 636 005, Tamil Nadu, now temporarily come down to Chennai, do hereby solemnly affirm and sincerely state as follows:

1. I state that I am the Registrar-in-charge of the Periyar University, Salem and the petitioner herein. I am well acquainted with the facts of the case.

2. I state that the Periyar University [hereinafter referred to as ‘the University’ or ‘the petitioner University’] was established in the year 1997 vide the Tamil Nadu Periyar University Act 1997.The University has jurisdiction over the Districts of Salem, Dharmapuri, Namakkal and Krishnagiri. The University has 27 Departments offering Post Graduate programs and Research programs. It has presently 113 Affiliated Colleges under it. The University Grants Commission (UGC) has conferred 12(B) status to the
University in the year 2005. The National Assessment and Reaccreditation Council (NAAC) has also conferred ‘A’ Grade with CGPA 3.15 out of 4.

3. I state that the University is an autonomous body, independent of the Government. The University is a body corporate having perpetual succession and a separate seal.

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4. I humbly state an investigation was initiated by the office of the 2nd respondent against the petitioner University on the basis of the allegation that the University had not paid Service Tax on affiliation fees for inspection, addition of new courses, additional intake of students, etc., for the years between 2012 and 2017. Hence, the
2ndrespondent issued Show Cause notice to the petitioner
University vide proceedings in Letter
F.No.INT/DGCEI/MRU/I/2017-ST dated 06.06.2017 as to why service tax should not be demanded from the petitioner University along with interest and penalties for the years 2012 to 2017.

5. In response, the University submitted Audited Annual Accounts for the years 2012-13 to 2015-16and the list of the 95 affiliated colleges vide proceedings in No. PU/FO/011279/2017 dated 29.06.2017 and further informed the 2ndrespondent office that the Audit for the year 2016-17 was yet to be done.

6. I humbly state that subsequently, the Hosur Regional Unit of the 2ndrespondentissued Summons vide proceedings in F.No. INT/DGGSTI/HRU/01/2017 dated 18.12.2017 directing the University authorities to appear for recording statement. In response, on behalf of the University, Smt. Sangeetha, Bursar, submitted month-wise statement for the collection of affiliation and other fees from the colleges affiliated to the University from July 2012 to March 2016 vide proceedings in Ref. No. PU/FO/2017 dated 28.12.2017.

7. It is pertinent to state that since the post of Vice-
Chancellor was vacant then, the approval of the Convener of

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The Vice Chancellor Convener Committee had to be taken for submitting the details called for by the 2ndrespondent office. Therefore, in the statement recorded on 03.01.2018 under Section 14 of the Central Excise Act, 1944 read with Section 83 of the Finance Act, 1994, Smt. Sangeetha submitted that the details sought for would be submitted by 30.01.2018.

8. Thereafter, as per the authorization of the University vide proceedings in Ref.No. PU/FO/2018 dated
29.01.2018, Smt. Sangeetha’s statement was recorded on 30.01.2018. On behalf of the University, Smt. Sangeetha submitted in detail that the petitioner University is a statefunded University that was established in 1997 with the objective of promoting Arts and Science education and research and that the Affiliation fee and Inspection fee collected from the affiliated colleges are in relation to providing educational services to the students in the colleges and for the benefit of the students. The University further explained that the whole process of affiliation is based on the structured curriculum approved by an academic body of the University and that the services rendered by way of affiliation are related to education and are therefore covered under the Negative list in Section 66D of the Finance Act, 1994.

9. I humbly state that as per the directions of the 2ndrespondent Office, the University also submitted unaudited details of affiliation fee and other charges collected and the month-wise statements for the years 2016-17 & 2017-18 (upto June) and also the month-wise statements of Rent collected for the years 2012-13 to 2016-17.

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10. I humbly submit that personal hearing was fixed on 01.08.2018 and on behalf of the University, Counsel who was authorized by the University, attended the personal hearing and represented the University. The Counsel also submitted written submissions during the hearing.

11. Now, after more than 3 years, to our shock and surprise, the2ndrespondent officeissued the impugned order in C.No. V/15/RIS,AES/25/2018-ST dated 31.03.2021 demanding payment of service tax along with interest and penalty for the years from 2012 to 2017 on the ground that the service rendered by the petitioner University to the affiliated colleges and the fee collected therewithwas neither covered under the Negative list stipulated in Section 66D of the Finance Act, 1994 nor exempted under any notification issued by the Central Board of Excise and Customsand hence was a taxable service as defined under Section 65B (51) of Chapter V of the Finance Act, 1994 and that the University is therefore liable to pay service tax for the same along with interest and penalty as per the provisions of the Finance Act, 1994.

12. The 2ndrespondent further stated in the impugned order that the services rendered by the University towards ‘renting of immovable property’ is a taxable service as per Section 66E (Declared Services) of the Finance Act, 1994 and that the said service is neither covered under the Negative list nor exempted under any notification passed by the Central Board of Excise and Customs and hence is a taxable service w.e.f. 01.07.2012 onwards and that therefore the University is liable to pay service tax for the amount collected towards Rent from 01.07.2012 to 30.06.2017.

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13. The 2ndrespondent further stated that since the University failed to register with the Department of Central Excise and Service Tax and had suppressed the fact of providing the above taxable services, the extended period of 5 years specified under the provisions of Section 73(1) of the Finance Act, 1994 is invokable for demanding the service tax evaded by the University and that penalty for the same is also leviable on the University.

14. By stating the above reasons, the 2ndrespondent issued the following Order:

(i) I confirm the invocation of extended period for demanding Service Tax under proviso to Sub-
section (1) of Section 73 of the Finance Act, 1994;

(ii) I confirm the demand of service tax amounting to Rs. 2,87,82,662 (Service Tax: Rs. 2,78,72,470/- + Education Cess: Rs. 2,69,502/- + SHE Cess: Rs. 1,34,751/- + SB Cess: Rs. 2,94,490/- + KK Cess: Rs. 2,11,449/-) (Rupees Two Crore Eighty Seven Lakhs Eighty Two Thousand Six Hundred and Sixty Two only) payable on the affiliation fees collected under various heads from the affiliated colleges for the period from 01.07.2012 to 30.06.2017 under Section 73(1) of the Finance Act, 1994 read with Section 73(2), ibid, from M/s. Periyar University, PeriyarPalkalai Nagar, Salem –
636 011;

(iii) I confirm the demand of service tax amounting to
Rs. 1,18,866/- (Service Tax: Rs. 1,14,364/- + Education Cess: Rs. 1,112/- + SHE Cess: Rs. 557/- + SB Cess: Rs. 1,710/- + KK Cess: Rs. 1,123/-) (Rupees One Lakh Eighteen Thousand Eight Hundred and Sixty Six only) payable on the rent received from renting of immovable property from them for the period from 01.07.2012 to 30.06.2017 under Section 73(1) of the Finance Act, 1994 read with Section 73(2), ibid;

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(iv) I confirm the demand of interest under Section 75 of the Finance Act, 1994 from them on the amount
confirmed in (ii) and (iii) above;

(v) I impose a penalty of Rs. 10,000/- on them under Section 77(1)(a) of the Finance Act, 1994 for failure to take Service Tax registration within the time limit prescribed;

(vi) I impose a penalty of Rs. 10,000/- on them under Section 77(1)(b) of the Finance Act, 1994 for failure to assess the Service Tax payable and file ST-3 Returns; and

(vii) I impose a penalty of Rs. 2,22,09,472/- (Rs. 66,92,057/- being 50% of service tax confirmed for period from July, 2012 to April, 2015 and a penalty of Rs. 1,55,17,415/- for the period from May, 2015 to July, 2017) on them under Section 78 of the Finance Act, 1994.

15. I humbly state that the impugned order was communicated to the University by the 5threspondent Superintendent of Customs, Central Excise & Service Tax, Salem III Range vide proceedings in O.C. No. 24/2021 dated 05.04.2021 along with a direction to the University to make payment of service tax as per the impugned order and to submit the challans to the office of the 5threspondent immediately.

16. I humbly state that in response to the impugned order dated 31.03.2021, the University sent a reply vide letter in Ref. No. PU/FO/F1/ServiceTax/2021 dated 12.11.2021 to the 2ndrespondent stating that the University is a State established University that is engaging in educational services and that it does not fall within the purview of service tax. The
University further requested the 2ndrespondent to withdraw

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the impugned order. However, in reply, the 3rdrespondent denied the request to withdraw the order and reiterated the department’s earlier stand vide proceedings in File No.
GEXCOM/TECH/GST/1963/2020-TECH-O/o COMMR-
CGST-SALEM dated 23.11.2021.

17. It is humbly submitted that the impugned order issued by the 2ndrespondent and the consequential order issued by the 5threspondent directing the University to pay service tax immediately is arbitrary, illegal, ultra vires, without jurisdiction, violative of the principles of natural justice and null and void. They have been issued by the respondents on the basis of an incorrect understanding and erroneous interpretation of the relevant provisions under the Finance Act, 1994.

18. It is humbly submitted that the definition of “Service” is laid down under Sub-clause 44 of Section 65-B of the Finance Act, 1994, which was inserted by the Finance Act, 2012w.e.f. 01.06.2012. It reads as follows:

“(44) “service” means any activity carried out by a person for another for consideration, and includes a declared service, but shall not include-
(i) a transfer of title in goods or immovable property, by way of sale, gift or in any other manner; or
(ii) such transfer, delivery or supply of any goods which is deemed to be a sale within the meaning of clause (29A) of Article 366 of the
Constitution; or
(iii) a transaction in money or actionable claim;

19. Section 65B (51) of the Finance Act, 1994
stipulates that “taxable service” means any service on which
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service tax is leviable under Section 66B of the Act. Section 66B is the charging Section of the Act. It was introduced under the heading ‘Charge of service tax on and after Finance Act, 2012’ w.e.f. 01.07.2012. It reads as follows:

“66B. Charge of service tax on and after Finance
Act, 2012

There shall be levied a tax (hereinafter referred to as the service tax) at the rate of twelve percent on the value of all services, other than those services specified in the negative list, provided or agreed to be provided in the taxable territory by one person to another and collected in such manner as may be prescribed.”

20. A combined reading of the above two provisions would show that service tax shall be levied at the rate of 12% of the value of all services, other than those services specified in the Negative list. Section 66D provides the Negative list of services. Clause (l) of Section 66-D reads as follows:
“(1) services by way of –
(i) pre-school education and education up to higher secondary school or equivalent;
(ii) education as a part of a curriculum for obtaining a qualification recognized by any law for the time being in force;
(iii) education as a part of an approved vocational education service.”

Thereafter, Clause (l) was deleted from the Negative list by the Finance Act, 2016w.e.f. 14.05.2016.

21. It is humbly submitted that according to the 2ndrespondent,only the services provided by way of education as a part of curriculum for obtaining a qualification recognized 9th page

by any law for the time being in force, as stated under clause (ii) of Section 66D is exempted from the definition of taxable service. However, since the services of the University rendered to affiliated colleges/institutions towards granting affiliation and related activities are not covered under any of the clauses of the Negative list, it is a taxable service and consequently, the University is a service provider and colleges/institutions which seek for such recognition are Service Receivers under the Act.

22. In this context, in respect of services not covered by the Negative list, a Mega Exemption Notice No. 25/2012ST dated 20.06.2012 was issued by the Central Board of Indirect Taxes and Customs, Government of India by exercising the powers conferred under Sub-section (1) of Section 93 of the Finance Act, 1994 for providing exemption to various services. Serial No. 9/Entry 9 of the Notification which is with respect to education provides as follows:

“9. Services provided to or by an educational institution in respect of education exempted from service tax, by way of:
(a) auxillary education service; or
(b) renting of immovable property.”

23. Para 2(f) of the 2012 Notification defines “auxillary educational services” as follows:
“auxiliary educational services” means any services relating to imparting any skill, knowledge, education or development of course content or any other knowledge – enhancement activity, whether for the students or the faculty, or any other services which educational institutions ordinarily carry out themselves but may obtain as outsourced services from any other person, including services relating to

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admission to such institution, conduct of examination, catering for the students under any mid day meals scheme sponsored by Government, or transportation of students, faculty or staff of such institution;”

24. I humbly state that Serial No. 9/Entry 9 was subsequently amended by Notification No. 03/2013 dated 01.03.2013. The words ‘provided to or by’ were substituted by ‘provided to’ w.e.f. 01.04.2013. Entry 9 was further amended vide Notification No. 06/2014 dated 11.07.2014, as follows:

“9. Services provided,-

(a) by an educational institution to its students, faculty and staff;
(b) to an educational institution, by way of,-

(i) transportation of students, faculty and staff; (ii) catering, including any mid-day meals scheme sponsored by the Government;
(iii) security or cleaning or house-keeping services performed in such educational institution;
(iv) services relating to admission to, or conduct of examination by, such institution;”;

25. According to the 2ndrespondent, since the activity of affiliation and other related activities do not fall within the ambit of the exemptions under the Amended Entry 9 (w.e.f. 11.07.2014) and the fees collected for the same is not for providing any of the services under Entry 9, the services provided by the University with respect to affiliation cannot be exempted from the purview of service tax and is therefore a taxable service.

26. It is humbly submitted that the above analysis and reasoning given by the 2ndrespondent is a misconstrual

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of the statutory provisions and the exemptions provided under Entry 9ofthe notifications as amended from time to time. For the period between the date of the 2012 Mega Exemption Notification viz., 20.06.2012 and its amendment vide the 2014 Mega Exemption Notification dated 11.07.2014, the activities of the University squarely fall within the meaning of “auxillary educational services” as the University performed the roles of development of course content, enhancement activityfor the students and the faculty and services relating to admission to an institution and conduct of examination.

27. Also, the contention of the 2ndrespondent that services rendered by the University to affiliated colleges are outside the scope of Clause (l) of Section 66D in as much as the services are not services by way of education as part of curriculum is erroneous, because the University is very much involved in curriculum development and course content development in its affiliated colleges. It is pertinent to point out in this context that the primary role of the petitioner University is to impart education. The University’s predominant roles as stated in the Periyar University Act, 1997 include devising curriculum, prescribing training modules, regulating admission of faculties to own and affiliated colleges, prescribing standards and infrastructure norms for colleges to be affiliated and granting of recognition and affiliation to courses conducted by the affiliated colleges. All these roles played by the University are sine qua non for any college to lawfully function.

28. In fact, the petitioner University has been
pioneering the cause of education, particularly in the New Age

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Skills and has built strengths andresources to deliver innovative and quality courses both in its campus and in its affiliated, approved and constituent colleges. The University plays akey role not merely in conception and development of skill developmentinitiatives, but also implements its projectsthrough partnerships with and in the affiliated colleges. It regularly conducts training programs for the faculty and staff of the affiliated colleges and organizes conferences and seminars for them. Therefore, the services of the University are squarely covered under Clause (l) of Section
66D and until 11.07.2014, the services provided by the University clearly fall within the protection of Entry 9.

29. Also, the respondent has failed to take into consideration the definition given for “educational institution” under the Notification No. 06/2014 dated
11.07.2014, which reads as follows:
“(oa) “educational institution” means an institution providing services specified in clause (l) of section 66D of the Finance Act,1994 (32 of 1994);”

It is pertinent to point out that this clause (oa) finds no mention in the impugned order and has been conveniently omitted by the respondent.

30. A combined reading of the definition for educational institution under the 2014 Notification and Clause (l) of Section 66D of the Act would show that for the period from 01.07.2012 up to 14.05.2016 (when Clause (l) was deleted from the Negative list by the Finance Act, 2016), the exemption under the Negative list would apply for the University as it squarely fell under Sub-clause (ii)of Clause (l) of Section 66D i.e. education as a part of a curriculum for

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obtaining a qualification recognized by any law for the time being in force.

31. In the meanwhile, the 2012 notification was once again amended vide Notification No. 9 of 2016 dated 01.03.2016 in which Clause (oa) was expanded very similar to Clause (l) of Section 66D w.e.f. 01.03.2016:

“(oa)“educational institution” means an institution providing services by way of:

(i) pre-school education and education up to higher secondary school or equivalent;
(ii) education as a part of a curriculum for obtaining a qualification recognised by any law for the time being in force;
(iii) education as a part of an approved vocational education course;”;

32. Therefore, even though Clause (l) of Section 66D was deleted w.e.f. 14.05.2016, by virtue of the very same provision coming to life once again through the amended definition of Clause (oa) vide the 2016 Mega Exemption Notification dated 01.03.2016, the University continued enjoying the protection of the Negative list until 30.06.2017 when the service tax regime was substituted by the GST regime brought in by the Central Government w.e.f. 01.07.2017. Therefore, for the period between 14.05.2016 and 01.07.2017 also, the University fell within the exemption under Entry 9 read with Sub-clause (ii) of Clause (oa) in the 2016 Notification, as it provides education as a part of a curriculum for obtaining aqualification recognized by any law for the time being in force directly and through its affiliated colleges.

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33. The second leg of contention of the 2ndrespondent is that the fees collected towards affiliation are outside the scope of Clause (l) of Section 66D in as much as the services provided by the University are not services by way of education as part of the curriculum but are services provided in relation to granting affiliation to the colleges. It is also the 2nd respondent’s contention that the fees collected for affiliation is not from the students but from the colleges and therefore, it does not fall under the exemptions.

34. It is humbly submitted that the above contention is also based on a misconstrual of the provisions stated above and is against the letter and spirit of the service tax law. As per Clause (a) of Entry 9 as amended vide Notification No. 06/2014 dated 11.07.2014, services provided by an educational institution to its students, faculty and staffare exempted. If we apply the narrow interpretation adopted by the 2ndrespondent to this clause, then the question would arise as to how the service of education could be provided to faculty and staff of an University or institution apart from the students, because no imparting of education happens to faculty or staff in an educational setting. It is only for the students. But the provision expressly includes faculty and staff too. This makes it clear that the objective behind the provision is not only to purely exempt the activity of providing education to the students, but to include all kinds of services provided by an institution to its faculty and staff as well, apart from those to the students.

35. Moreover, though the affiliation fee is paid by the colleges, the colleges pay it from the permissible fee collected

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from the students for pursuing their respective courses in the colleges and for ultimately obtaining a legally recognized degree. It is ultimately for the benefit of the students.Therefore, this analogy of the 2nd respondent is also incorrect.

36. Secondly, as per Clause (iv) of Entry 9as amended vide Notification No. 06/2014 w.e.f. 11.07.2014, services relating to admission to, or conduct of examination by, such institution provided to an educational institution are exempted from service tax. The 2ndrespondent has failed to note that no admission of a student can be made by an institution that has not been granted affiliation by a University. Therefore, admission to an institution is directly related to affiliation granted by the University and the two are inseparable. This is also made clear from the definition of “Affiliated college” as stated under Section 2(a) of the Periyar University Act, 1997. It reads as follows:

“(a) “affiliated college” means any college situate within the University area and affiliated to the University and providing courses of study for admission to the examinations for degrees of the University and includes a college deemed to be affiliated to the University under this Act;
37. It is respectfully submitted that the above definition makes it explicit that affiliated colleges provide courses of study for admission to the examinations for degrees conferred by the University. Therefore, the courses of study provided by the affiliated colleges are only towardsobtaining the degrees conferred by the University. It is the University which plays a paramount role as far as education of the students are concerned.Therefore, it is respectfully submitted that Clause (l) of Section 66D and its resurrected
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form under Clause (oa) of the 2016 Mega Exemption Notification dated 01.03.2016 which define “educational institution,” must be broadly interpreted so as to include the services provided by the University within its ambit.

38. Also, the 2ndrespondent has failed to consider that conduct of examination is one of the main objects of the petitionerUniversity. Section 4(4) and (6) of the Periyar University Act, 1997 states as follows:
“(4) to hold examinations and to confer degrees, titles, diplomas and other academic distinctions on persons who.
(a) shall have pursued and approved course of study in a University college or laboratory or in an affiliated or approved collide, unless exempted therefrom in the manner prescribed by the statutes and shall have passed the prescribed examinations of the University; or
(b) shall have carried on research under conditions prescribed;

(6) to hold examinations and to confer degrees, titles, diplomas and other academic distinctions on persons who shall have pursued an approved course of study by correspondence, whether residing within the University area or not and to provide such lectures and instructions for persons not being residents within the University area under conditions prescribed;”

39. It is clear from the above objects that it is the primary object and function of the University to conduct examination and confer degrees, titles, diplomas and other academic distinctions and that the colleges are only facilitators. It is the University which conducts the examinations and confers degrees and the colleges only facilitate it. The service of the affiliated college and the University in this regard is inseparable.
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40. It is respectfully submitted that the contention of the 2ndrespondent that affiliation is not related to admission or conduct of examination is narrow, pedantic, redundant and against the objective behind the exemptions given to services provided by educational institutions under the Act and the notifications. The 2ndrespondent failed to note that the application fees, inspection fees, eligibility fees and affiliation fees are not consideration towards provision of any service, but the fee collected to discharge the objects of the University to recognize and grant affiliation to courses conducted by colleges and other educational institutions. In total, the demand of service tax for the period from 01.07.2012 to 30.06.2017 in the impugned order is arbitrary and illegal as the statutory provisions and the Mega notifications as amended from time to time make it clear that the services of the University are exempted from the purview of service tax.

41. It is humbly submitted that the second part of the impugned order deals with taxation over the rent from immovable properties located in the University. According to the 2ndrespondent, only the following clauses relating to ‘Renting of Immovable property’ are listed in the Negative list under Section 66D of the Finance Act, 1994:
“(d) services relating to agricultural produce by way of- (iv) renting or leasing of agro machinery or vacant land with or without a structure incidental to its
use;
(m) services by way of renting of residential dwelling for use as residence”

42. Apart from this, it is the contention of the
2ndrespondent that as per the 2012 Mega Exemption Notification dated 20.06.2012, renting of immovable property services

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provided to or by an educational institution only in relation to education are exempted and such renting for any other purpose is not exempted.According to the respondent, the University has rented out its premises to private/government departments/PSUs for the purposes such as canteen, post office, SBI ATM, Aavin, Student Amenity Xerox, Xerox shop, Auditorium, etc., and they are not for education purposes. Therefore, according to the respondent, all these services provided by the University are not exempted under the 2012 Mega Notification.

43. The respondent further goes on to say in the impugned order that the scope of the exemption under Entry 9 of the 2012 notification was further restricted vide the 2014 Notification dated 11.07.2014 which deals with specified services provided by and to an educational institution that are exempted, the ‘renting of immovable property service’ was not mentioned. Therefore, according to the 2ndrespondent, the amount received towards Rent by the University for the period from 01.07.2012 to 30.06.2017 attracts service tax.

44. It is humbly submitted that the above analogy of the respondent with respect to renting of immovable property is also a narrow and pedantic interpretation of the statutory provisions and the notifications. As stated above in paragraph 33 of this affidavit, services such as renting of immovable property for the purpose of canteen, post office, SBI ATM, Aavin, Student Amenity Xerox, Xerox shop, Auditorium, etc.,are also services provided to faculty and staff of the University apart from the students and would fall within the meaning of Clause (a) of Entry 9 as amended vide the 2014 Notification dated 11.07.2014.

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45. The 2ndrespondent failed to note that all the above services provided by the University namely, canteen, post office, SBI ATM, Aavin, Student Amenity Xerox, Xerox shop, Auditorium, etc., through renting of immovable property, are all to be included within the meaning of services provided by an educational institution to its students, faculty and staffas they are allfor the benefit and welfare for the students, faculty and the staff and aimed to facilitate the process of education in the University. They are not for any commercial or business purposes. Therefore, the demand of service tax in relation to renting of immovable property in the University is also unsustainable and liable to be set aside.

46. The final part of the impugned order deals with invocation of Extended Period wherein the 2ndrespondent states that the petitioner University has violated Sections 68(1), 69 and 70 of the Finance Act, 1994 and is guilty of contravention of provisions of the Act and therefore, the extended period of 5 years specified under Section 73(1) of the Act is invokable for demanding the service tax evaded by the University.The 2ndrespondent has also stated that the University is liable to pay penalty in terms of Sections 77 and 78 of the Finance Act, 1994.The sections are reproduced below:
“Section 68: Payment of service tax —
(1) Every person providing taxable service to any person shall pay service tax at the ratespecified in section[ 66B] in such manner and within such period as may be prescribed.

Section 69: Registration—
(1) Every person liable to pay the service tax under this Chapter or the rules made thereundershall, within such time and in such manner and in such form as may be prescribed, make anapplication for registration to the Superintendent of Central Excise.
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Corrns : nil
Section 70: Furnishing of returns—
(1) Every person liable to pay the service tax shall himself assess the tax due on the servicesprovided by him and shall furnish to the Superintendent of Central Excise, a return in such formand in such manner and at such frequency and with such late fee not exceeding twenty thousandrupees, for delayed furnishing of return, as may be prescribed.

Section 73. Recovery of service tax not levied or paid or short-levied or short-paid orerroneously refunded- (1) Where any service tax has not been levied or paid or has been short-levied or short-paid orerroneously refunded, Central Excise Officer may, within thirty months from the relevant date, serve notice on the person chargeable with the service tax which has not been levied or paid orwhich has been short-levied or short-paid or the person to whom such tax refund has erroneously been made, requiring him to show cause why he should not pay the amount specified in thenotice:

Provided that where any service tax has not been levied or paid or has been short-levied orshort-paid or erroneously refunded by reason of — (a) fraud; or
(b) collusion; or
(c) wilfulmis-statement; or
(d) suppression of facts; or
(e) contravention of any of the provisions of this Chapter or of the rules made thereunderwith intent to evade payment of service tax,

by the person chargeable with the service tax or his agent, the provisions of this sub-section shallhave effect, as if, for the words “thirty months”, the words “five years” had been substituted.”

47. A bare reading of the above provisions would
clearly show that only in cases of fraud, collusion, willful misstatement, suppression of facts or contravention of any of the provisions orthe rules made thereunder with intent to evade

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paymentof service tax, extended period of limitation can be invoked. In the instant case none of the above situations arise. The petitioner University sources its funds for functioning by way of Government grants and fees and all of those funds are deposited in the University fund as provided under the Periyar University Act, 1997.

48. Also, the University being a public body functioning under a State law, all its conditions regarding affiliation process, fee collected, etc., are available in the public domain. That being so, alleging suppression of facts with intent to evade is mischievous and malicious. There is neither a single allegation or averment in the impugned order to show that non-payment of tax was by reason of either fraud or collusion or willful misstatement or suppression of facts or contravention of any of the provisions of the Act or Rules made thereunder, with intent to evade payment of duty nor is there any evidence or proof or finding in the impugned order to that effect.

49. Further, it has been settled by a catena of decisions that when the notice/assesse is of the bonafide belief that it was entitled to claim exemption from payment of service tax by way of providing educational services, the revenue authorities cannot apply extended period of limitation and cannot impose penal interest and penalties.Since the petitioner University was of the bonafide belief that it is not liable to pay service tax, it cannot be penalized for the same. It is further submitted that since the petitioner University is not liable to pay any service tax, they are not liable to pay any interest on the tax too.

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50. With respect to imposition of penalty, the following are the relevant sections:

“Section 77:Penalty for contravention of rules and provisions of Act for which no penalty is specified elsewhere. —

(1) Any person, —
(a) who is liable to pay service tax or required to take registration, fails to take registration in accordance with the provisions of section 69 or rules made under this Chapter shall be liable to a penalty which may extend to ten thousand rupees;

Section 78: Penalty for failure to pay service tax for reasons of fraud, etc. —
(1) Where any service tax has not been levied or paid, or has been short-levied or short-paid, or erroneously refunded, by reason of fraud or collusion or willful mis statement or suppression of facts or contravention of any of the provisions of this Chapter or of the rules made thereunder with the intent to evade payment of service tax, the person who has been served notice under the proviso to sub-section (1) of section 73 shall, in addition to the service tax and interest specified in the notice, be also liable to pay a penalty which shall be equal to hundred per cent. of the amount of such service tax.”

51. As stated above, it is humbly reiterated that since the University was of the bona fide belief that it is not liable to pay service tax, there can be no penalty imposed by the authorities under Section 77 for non-registration under the Act. Secondly, penalty cannot be imposed under Section 78 as it can be invoked only in cases of fraud or collusion or willful mis-statement or suppression of facts or contravention of any of the provisions of this Chapter or of the rules made

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thereunder with the intent to evade payment of service tax. When there is no averment or allegation or any proof to that effect in the case of the petitioner University, the 2ndrespondent cannot invoke the provision.

52. Also, until the 2015 Amendment to the Finance Act w.e.f. 14.05.2015, Section 80 was in operation which stipulated that penalty can be waived when there is reasonable cause for failure to pay tax. The respondent, while imposing penalty on the University, has not taken this into consideration.

53. It is respectfully submitted that the petitioner University is a University established by the State through legislation viz., the Periyar University Act, 1997 and is recognized under Section 12(B) and Section 2(f) of the University Grants Commission Act and has been reaccredited by NAAC with ‘A’ grade in the year 2015. The University imparts higher education through the following three levels:
i. The Departments of Study and Research; ii. The Periyar Institute of Distance Education (PRIDE) iii. Affiliated colleges

54. It is important to point out in this context that as per Circular No. 89/7/2006 S.T. dated 18.12.2006 issued by the Central Board of Excise & Customs, the Central Government has clarified that carrying out of statutory functions/duties by sovereign/public authorities are not subject to service tax since such activities are undertaken purely in public interest and are mandatory statutory functions. The circular goes on to say that fee collected by them for performing such activities is in the nature of

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compulsory levy as per the provisions of the relevant statute, and it is deposited into the Government treasury. Such activity is not in the nature of service to any particular individual for any consideration. Therefore, such an activity performed by a sovereign/public authority under the provisions of law does not constitute provision of taxable service to a person and, therefore, no service tax is leviable on such activities. The same was confirmed and clarified vide Circular No.96/7/2007-ST dated 23.08.2007.

55. It is humbly submitted that the petitioner
University is also a public body that is created by a statute and is performing statutory functions. The granting of affiliation, the fee collected therewith, the supervision of affiliated colleges, the conduct of examination and conferring of degrees are all statutory functions that are not done for any consideration but only in discharge of statutory duties and obligations under the Periyar University Act, 1997. Therefore, it is not amenable to service tax.

56. It is humbly submitted that in a plethora of cases the Hon’ble Supreme Court of India and the Hon’ble High Court of Madras have held that Universities discharge a public function by way of imparting education for the benefit of the public. Therefore, to say that the University is not discharging the service of education is against the basic tenets of law.

57. It is respectfully submitted that any tax, including Service tax, being an item under ‘revenue expenditure’, if levied on the higher educational institutions like the

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petitioner University, could be passed on to the students in the affiliated colleges as part of the fee permitted to be collected and it would eventually tantamount to taxing education and be a burden on the students.

58. It is humbly submitted that all the immovable properties of the University and inside the University are used exclusively for the welfare of the students, faculty and staff of the University and are not used for any commercial or other related purposes. The petitionerUniversity does not make any gain or reap any profit from the fees collected or the services provided. It does not collect any donation from the students or the affiliated colleges. It is purely run on Government funds.

59. It is pertinent to point at this juncture that since 01.07.2017 when the Goods and Service Tax regime was brought in, the University has been paying GST for the affiliation fees collected from the affiliated colleges and have been paying it to the Government exchequer. That being so, the retrospective demand of service tax from the University is arbitrary, unconstitutional and would seriously affect the hallowed objectives of the petitioner University.

60. In view of all the above, it is respectfully submitted that the impugned order issued by the
2ndrespondentCommissioner of GST and Central Excisein C.No. V/15/RIS,AES/25/2018-ST dated 31.03.2021 demanding payment of service tax from the petitioner
University along with interest and penalty for the period from 01.07.2012 to 30.06.2017 and the consequential order passed by the 5th respondent Superintendent of Customs,
Central Excise &

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Service Tax, Salem III Range vide proceedings in O.C. No. 24/2021 dated 05.04.2021 directing the petitioner University to pay service tax immediately and submit the challans for the same, is arbitrary, illegal, unlawful, null, void and hence liable to be set aside on the following among other grounds:

G R O U N D S
——

A. The impugned order is arbitrary, illegal, without jurisdiction, void ab initio, unconstitutional and against the basic tenets of law.

B. The impugned order has been issued by the 2ndrespondent on the basis of an incorrect understanding and erroneous interpretation of the relevant provisions under the Finance Act, 1994.

C. The analysis of the provisions and reasoning given by the 2ndrespondent in the impugned order is a misconstrual of the exemptions provided under Entry 9 of the Mega Exemption notifications issued by the Central Board of Excise & Customs as amended from time to time.

D. 2012 – 14: For the period between the date of the Mega Exemption Notification viz., 20.06.2012 and its amendment vide the 2014 Notification dated
11.07.2014, the activities of the University squarely fall within the meaning of “auxillary educational services” as defined under Para 2(f) of the 2012 Notification, as the University performs the roles of development of
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E. course content, enhancement activity for the students and the faculty and services relating to admission to an institution and conduct of examination.

F. The 2ndrespondent ought to have seen that the University is very much involved in curriculum development and course content development in its affiliated colleges and therefore the services rendered by the University to affiliated colleges are well within the scope of Clause (l) of Section 66D of the Finance Act, 1994.

G. The 2ndrespondent ought to have seen that the primary role of the petitioner University is to impart education. The University’s predominant roles as stated in the Periyar University Act, 1997 include devising curriculum, prescribing training modules, regulating admission of faculties to own and affiliated colleges, prescribing standards and infrastructure norms for colleges to be affiliated and granting of recognition and affiliation to courses conducted by the affiliated colleges.

H. The 2ndrespondent failed to note that the petitioner University has been pioneering the cause of education, particularly in the New Age Skills and has built strengths and resources to deliver innovative and quality courses both in its campus and in its affiliated, approved and constituent colleges. The University regularly conducts training programs for the faculty and staff of the affiliated colleges and organizes conferences

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and seminars for them. Therefore, the services of the University are squarely covered under Clause (l) of Section 66D and until 11.07.2014, the services provided by the University clearly fall within the protection of Entry 9 of the Mega Exemption Notification.

I. 2014 – 2016: The 2ndrespondent has failed to note that as per the definition of “educational institution” as defined under Notification No. 06/2014 dated 11.07.2014, the exemption under the Negative list would apply for the University as it squarely fell under Sub-clause (ii) of Clause (l) of Section 66D i.e. education as a part of a curriculum for obtaining a qualification recognized by any law for the time being in force.

J. 2016-2017: The 2ndrespondent failed to note that since the University provides education as a part of a curriculum for obtaining a qualification recognized by any law for the time being in force directly and through its affiliated colleges, by virtue of operation of Subclause (ii) of the amended Clause (oa) which was amended vide Notification No. 9 of 2016 w.e.f. 01.03.2016, the University fell within the exemption under Entry 9 even for the period between 14.05.2016 (when Clause (l) of Section 66D was deleted) and
01.07.2017 (when GST regime was brought in).

K. The 2ndrespondent ought to have seen that his contention that the fees collected for affiliation is not from the students but from the colleges and therefore, it does not fall under the exemptions is erroneous,
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because the fee paid by the colleges is taken from the permissible fee collected from the students for pursuing their respective courses in the colleges and for ultimately obtaining a legally recognized degree. It is ultimately for the benefit of the students.

L. The 2ndrespondent ought to have seen that as per
Clause (a) of Entry 9 as amended vide the 2014 Notification, services provided by an educational institution to its students, faculty and staff are exempted. The very fact that the provision expressly includes faculty and staff too and not just the students, makes it clear that the objective behind the provision is not only to exempt purely the activity of providing education to the students, but to include all kinds of services provided by an institution to its faculty and staff as well, apart from the students.

M. The 2ndrespondent ought to have seen that the demand of service tax for the period from 01.07.2012 to 30.06.2017 in the impugned order is arbitrary and illegal as the statutory provisions and the Mega notifications amended from time to time make it clear that the services of the University are exempted.

N. The 2ndrespondent ought to have considered that as per the amended Clause (iv) of Entry 9 which came into effect from 11.07.2014, services relating to admission to, or conduct of examination by, such institution provided to an educational institution are exempted from service tax. In that regard, the respondent has failed to note that no admission can be lawfully made by

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an institution that has not been granted affiliation by a University. Therefore, admission to an institution is directly related to affiliation granted by the University and the two are inseparable. This is also made clear from the definition of “Affiliated college” as stated under Section 2(a) of the Periyar University Act, 1997.

O. The 2ndrespondent should have seen that the courses of study provided by the affiliated colleges are only for obtaining the degrees conferred by the University. It is the University which plays a paramount role as far as education of the students are concerned.

P. The 2ndrespondent ought to have broadly interpreted Clause (l) of Section 66D and its resurrected form under Clause (oa) of the 2016 Notification dated 01.03.2016 which defines “educational institution,” so as to include the services provided by the University within its ambit, instead of giving it a narrow and pedantic interpretation.

Q. The 2ndrespondent has failed to consider that conduct of examination is one of the main objects of the University as can be found in Section 4(4) and (6) of the Periyar University Act, 1997.

R. The 2ndrespondent ought to have seen the primary object and function of the University are to conduct examination and confer degrees, titles, diplomas and other academic distinctions and that the colleges are only facilitators. It is the University which conducts the

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examinations and confers degrees and the colleges only facilitate it. The service of the college and the University in this regard is inseparable.

S. The contention of the 2ndrespondent that affiliation is not related to admission or conduct of examination is narrow, pedantic, redundant and against the objective behind the exemptions given to services provided by educational institutions under the Act and notifications. The 2ndrespondent failed to note that the application fees, inspection fees, eligibility fees and affiliation fees are not consideration towards provision of any service but the fee collected to discharge the object of the University to recognize and grant affiliation to courses conducted by colleges and other educational institutions.

T. The 2ndrespondent ought to have seen that the services provided by the University such as renting of immovable property for the purpose of canteen, post office, SBI ATM, Aavin, Student Amenity Xerox, Xerox shop, Auditorium, etc., are also services provided to faculty and staff of the University apart from the students and would fall within the meaning of Clause (a) of Entry 9 as amended by the 2014 Notification dated 11.07.2014.

U. The 2ndrespondent failed to note that all the above services provided by the University namely, canteen, post office, SBI ATM, Aavin, Student Amenity Xerox, Xerox shop, Auditorium, etc., through renting of immovable property, are all to be included within the

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meaning of services provided by an educational institution to its students, faculty and staff as they are all for the benefit and welfare for the students, faculty and the staff and to facilitate the process of education in the University.

V. The 2ndrespondent ought not to have invoked the extended period under Section 73(1) of the Act, because a bare reading of Sections 68(1), 69 and 70 of the Finance Act, 1994 would clearly show that only in cases of fraud, collusion, willfulmis-statement, suppression of facts or contravention of any of the provisions or the rules made thereunder with intent to evade payment of service tax, extended period can be invoked. In the instant case none of the above situations arise. The petitioner University sources its funds for functioning by way of Government grants and fees and all of those funds are deposited in the University fund as provided under the Periyar University Act, 1997.

W. The 2ndrespondent ought to have seen that the University being a public body functioning under a State Act, all its conditions regarding affiliation process, fee collected, etc., are available in the public domain. That being so, there is no question of suppression of facts. There is not a single allegation or averment in the impugned order to show that non-payment of tax was by reason of either fraud or collusion or willful misstatement or suppression of facts or contravention of any of the provisions of the Act or Rules made thereunder, with intent to evade payment of duty nor is there any evidence or proof or finding in the impugned order to that effect.

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X. It has been settled by a catena of decisions that when the notice/assesse is of the bonafide belief that it was entitled to claim exemption from payment of service tax by way of providing educational services, the revenue authorities cannot apply extended period of limitation and cannot impose penal interest and penalties. Also, the petitioner University is not liable to pay any service tax, they are not liable to pay any interest on the tax too.

Y. The 2ndrespondent failed to consider that since the University was of the bonafide belief that it is not liable to pay service tax, there can be no penalty imposed by the authorities under Section 77 for non-registration under the Act. Secondly, penalty cannot be imposed under Section 78 as it can be invoked only in cases of fraud or collusion or willfulmis-statement or suppression of facts or contravention of any of the provisions of this Chapter or of the rules made thereunder with the intent to evade payment of service tax. When there is no averment or allegation or any proof to that effect in the case of the petitioner University, the respondent cannot invoke the provision.

Z. The 2ndrespondent failed to take into consideration that until the 2015 Amendment to the Finance Act w.e.f. 14.05.2015, Section 80 was in operation which stipulated that penalty can be waived when there is reasonable cause for failure to pay tax.

AA. The 2ndrespondent failed to consider that the University does not conduct any commercial activity for making

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any profit or gain by way of renting out its immovable properties but it is only for the purpose of facilitating education and creating a comfortable atmosphere for the welfare of the students, faculty and staff of the institution.

BB. The 2ndrespondent ought to have taken into consideration that in a plethora of cases the Hon’ble Supreme Court of India and the Hon’ble High Courts have held that Universities discharge a public function by way of imparting education for the benefit of the public. Therefore, to say that the University is not discharging the service of education is against the basic tenets of law and without any basis.

CC. The 2ndrespondent ought to have seen that any tax, including Service tax, being an item under ‘revenue expenditure’, if levied on the higher educational institutions like the petitioner University, could be passed on to the students in the affiliated colleges as part of the fee permitted to be collected and it would eventually tantamount to taxing education and be a burden on the students.

DD. The 2ndrespondent should have considered that all the immovable properties of the University and inside the University are used exclusively for the welfare of the students, faculty and staff of the University and are not used for any commercial or other related purposes. The petitioner University does not make any gain or reap any profit from the fees collected or the services

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provided. While so, the retrospective demand of service tax is unconstitutional and it would seriously affect the hallowed objectives of the petitioner University.

EE. The 2ndrespondent failed to take into consideration that as per as per Circular No. 89/7/2006 S.T. dated 18.12.2006 issued by the Central Board of Excise & Customs, the Central Government and as confirmed and clarified vide Circular No.96/7/2007-ST dated 23.08.2007, carrying out of statutory functions/duties by sovereign/public authorities are not subject to service tax since such activities are undertaken in public interest and are mandatory statutory functions. As per the circulars, fee collected by pubic bodies for performing such activities is in the nature of compulsory levy as per the provisions of the relevant statute, and it is deposited into the Government treasury. Such activity is purely in public interest and it is undertaken as mandatory and statutory function and are not in the nature of service to any particular individual for any consideration. Therefore, such an activity performed by a sovereign/public authority under the provisions of law does not constitute provision of taxable service to a person and, therefore, no service tax is leviable on such activities.

FF. The 2ndrespondent ought to have seen that the petitioner University is also a public body that is created by a statute and is performing statutory functions. The granting of affiliation, the fee collected therewith, the supervision of affiliated colleges, the conduct of

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examination and conferring of degrees are all statutory functions that are not done for any consideration but only in discharge of statutory duties and obligations.

GG. Overall, the2ndrespondent failed to note that through the regime between 2012 and 2017, educational institutions have been provided with the exemption from service tax under the provisions of the Finance Act, 2014 and the Mega Notifications issued and amended from time to time. The exercise of retrospective demand of service tax for the years between 2012 and 2017 would clearly frustrate the purpose of the exemption given by law to educational institutions and services.

HH. The 5th respondent ought not to have issued the consequential order directing the petitioner University to immediately pay the demanded service tax and submit challans for the same, in view of all the reasons stated above.

61. Having left with no other alternative efficacious remedy, the petitionerUniversity humbly approaches this Hon’ble Court invoking its extraordinary jurisdiction under Article 226 of the Constitution of India for redressal. Law is well settled that High Courts while exercising jurisdiction under Article 226 have the power to reach injustice wherever found and to mould the relief according to the peculiar and complicated requirements of the country. The petitioner University states has not filed any Writ Petition or instituted any other proceedings in any Court on this subject matter except what are stated above.

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62. In these circumstances, the petitioner humbly
prays that this Hon’ble Court may be pleased to issue a Writ, Order or Direction in the nature of a WRIT OF CERTIORARI calling for the records relating to the impugned orderissued by the 2ndrespondent Commissioner of GST and Central Excise in C.No. V/15/RIS,AES/25/2018-ST dated 31.03.2021 demanding payment of service tax from the
petitioner University along with extension of limitation period, interest and penalty for the period from 01.07.2012 to 30.06.2017 and the consequential order passed by the 5th respondent Superintendent of Customs, Central Excise & Service Tax, Salem III Range vide proceedings in O.C. No. 24/2021 dated 05.04.2021 directing the petitioner University to pay service tax immediately and submit the challans for the same, QUASH the same, and pass such further or other suitable Order / Orders as this Hon’ble Court may deem fit and proper in the circumstances of the case, and thus render Justice.
63. As explained above, the petitioner University is clearly exempt from the payment of service tax by virtue of the statutory provisions under the Finance Act, 1994 and the Mega Exemption Notifications as amended from time to time. Such huge amounts of tax along with interest and penalties would be a severe burden on the University and would empty the coffers of the University. It would hinder the discharge of

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the University’s statutory functions and obligations and ultimately it is the students who would be affected. The 5th respondent has directed the University to immediately pay the demanded amount and to submit the challans for the same. Unless the operation of the impugned order and the consequential order is stayed, the petitionerUniversity, its students and the affiliated colleges would be put into untold hardship and irreparable loss.

64. For the above reasons, the petitioner humbly prays that this Hon’ble Court may be pleased to grant an Order of Ad INTERIM STAY of the operation of the impugnedorder issued by the 2ndrespondent Commissioner of GST and Central Excise in C.No. V/15/RIS,AES/25/2018-ST dated 31.03.2021demanding payment of service tax from the petitioner University along with extension of limitation period, interest and penalty for the period from 01.07.2012 to 30.06.2017 and the consequential order passed by the 5th respondent Superintendent of Customs, Central Excise & Service Tax, Salem III Range vide proceedings in O.C. No. 24/2021 dated 05.04.2021 directing the petitioner University to pay service tax immediately and submit the challans for the same, and all proceedings in furtherance thereof pending disposal of the Writ Petition, and pass such further or other suitable Order / Orders as this Hon’ble Court may deem fit and proper in the circumstances of the case, and thus render Justice.
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65. It is further submitted that the petitioner does not have the original impugned orders passed by 2nd and
5threspondents dated 31.03.2021 and 05.04.2021 in hand. However, photo copies of the same are filed herewith. Hence, the petitioner humbly prays that this Hon’ble Court may be pleased to DISPENSE WITH the production of the original impugned order passed by the 2ndrespondent in C.No. V/15/RIS,AES/25/2018-ST dated 31.03.2021, and the 5th respondent in O.C. No. 24/2021 dated 05.04.2021 and thus render Justice.

Solemnly affirmed and BEFOREME signed his name in my presence at Chennai
on this the 30thday
ofNovember 2021 ADVOCATE : CHENNAI

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