CESTAT Quashes Service Tax Demand on Examination Fees, Cites Nil Consideration

CESTAT Quashes Service Tax Demand on Examination Fees, Cites Nil Consideration

Introduction

The New Delhi Bench of Customs, Excise, and Service Tax Appellate Tribunal (CESTAT) has held that a government examination board is not liable to service tax on examination fees collected from candidates.

Factual Background

The appellant, Professional Examination Board, was established by the Government of Madhya Pradesh to conduct examinations for recruitment of personnel for various departments and undertakings of the state government. The board charged examination fees from candidates.

Procedural Background

The department alleged that the examination fees collected by the board were liable to service tax under the category of "Manpower Recruitment or Supply Agency" services. The Adjudicating Authority confirmed the demand, and the assessee appealed.

Contentions of the Parties

Appellant: Contended that it is not a "Manpower Recruitment or Supply Agency" and that the examination fees collected from candidates cannot be considered as consideration for the supply of manpower recruitment and supply services.

Respondent: Alleged that the examination fees collected by the board are liable to service tax under the category of "Manpower Recruitment or Supply Agency" services.

Reasoning and Analysis

The coram of Binu Tamta (Judicial Member) and Sanjiv Srivastava (Technical Member) observed that the service tax cannot be demanded from the appellant as the consideration received against the provision of these services from the service recipient is nil. The board is deemed to be a part of the state government, and the services rendered by the appellant to the state government are exempt under S No 39 of the Exemption Notification No 25/2012-ST dated 20.06.2012.

Decision

The Tribunal partly allowed the appeal, holding that the examination fees collected from candidates are not liable to service tax. However, the demand of service tax on other categories of receipts was upheld.

Implications

The decision clarifies that government examination boards may not be liable to pay service tax on examination fees collected from candidates, provided the services are rendered to the state government and are exempt under the relevant notification.

In this case the appellant was represented by Ms Monisha Handa, Advocate. Meanwhile the respondent was represented by Mr. Anand Narayan, Advocate.