CESTAT: Educational Trust’s Campus Placement Services to MNCs Attract Service Tax Under ‘Manpower Recruitment’ Category
Pranav B Prem
The Bangalore Bench of the Customs, Excise, and Service Tax Appellate Tribunal (CESTAT) has held that placement services provided to multinational corporations (MNCs) and other recruiting organizations by an educational trust are liable to service tax under the category of "Manpower Recruitment or Supply Agency Service". The ruling came in two appeals filed by M/s. T.A. Pai Management Institute, Manipal, against orders passed by the Commissioner of Central Excise and the Commissioner (Appeals), Mangalore.
The Tribunal, comprising Judicial Member P.A. Augustian and Technical Member R. Bhagya Devi, considered whether the recruiting assistance extended by the institute to companies during campus placements fell within the ambit of taxable services under Section 65(68) read with Section 65(105)(k) of the Finance Act, 1994.
The appellant, an educational trust, was rendering taxable services under the head of 'Management Consultancy Services' and conducting various academic programs. During audit verification, it was noticed that the institute facilitated the recruitment process by allowing MNCs and other agencies to conduct campus interviews. The institution charged Rs. 25,000 per student for domestic placements and USD 1000 per student for international placements, which were credited to its corpus fund. This activity formed the basis of the Revenue's demand for service tax under the category of manpower recruitment services.
Challenging the tax demand, the appellant argued that it was a charitable trust engaged solely in educational activities. It submitted that the institute merely permitted recruiting companies to interview students and that the offers of employment were made directly by the companies without the institute’s involvement in the selection process. It was further contended that the payments received were voluntary donations towards the trust’s corpus fund and did not constitute “consideration” for a service rendered. Based on this reasoning, the appellant argued that the activity could not be classified as a taxable service.
However, the Tribunal rejected this defense. It observed that the claim of receiving voluntary donations was untenable given that the charges were collected on a per-student basis and predetermined, both for domestic and international placements. The Bench categorically stated that “the appellant being a trust cannot in any way rule out the profit motive for having received these payments and there is nothing on record to show that these are voluntary donations.”
The Tribunal emphasized that classification under the Finance Act does not depend on whether the organization is a trust or a commercial concern. It noted the legislative shift in the definition of manpower recruitment services—initially applicable to "commercial concerns" and later broadened to cover "any person". Accordingly, the trust status of the appellant was found to be irrelevant for the purpose of service tax liability.
The Bench also referred to decisions in similar cases, distinguishing the appellant's case from those where charges were collected from students and not employers. In this instance, the employers were paying upfront fees as part of the placement arrangement, and such payments were found to be within the taxable net.
While the Tribunal upheld the classification of the services and confirmed the tax liability, it took a nuanced view on the issue of limitation. In Appeal No. ST/2374/2011, covering the period from 13.05.2003 to 31.03.2005, the Tribunal found that the entire demand pertained to a period beyond the normal limitation. Since the Revenue had already conducted an audit in 2007 and issued the show-cause notice only in March 2009, the extended period of limitation could not be invoked. Thus, the demand in this appeal was set aside on limitation grounds.
As for Appeal No. ST/2323/2012, relating to the period from 01.05.2006 to 28.02.2009, the Tribunal upheld the demand for the normal period alone. It rejected the Revenue's attempt to invoke the extended limitation period again, observing that the first show-cause notice had already invoked suppression, and invoking it again for a subsequent period was not legally sustainable.
In conclusion, the Tribunal ruled that the placement services provided by the appellant to recruiting companies fell under the taxable category of "Manpower Recruitment or Supply Agency Services", and the service tax liability stood confirmed. However, the demand raised for the extended periods in both appeals was disallowed, leading to partial relief for the appellant.
Appearance
Counsel for Appellant/ Assessee: N. Anand
Counsel for Respondent/ Department: Rajesh Shastry
Cause Title: M/s. T.A. Pai Management Institute V. The Commissioner of Central Excise and Service Tax
Case No: Service Tax Appeal No. 2374 of 2011
Coram: P.A. Augustian [Judicial Member], R. Bhagya Devi [Technical Member]
