CESTAT Rules, SSI Exemption Available If Rental Services Does Not Exceed Rs. 10 Lakhs
Pranav B Prem
The Delhi Bench of the Customs, Excise and Service Tax Appellate Tribunal (CESTAT), comprising Ms. Binu Tamta (Judicial Member) and Ms. Hemambika R. Priya (Technical Member), has affirmed that Small Scale Industry (SSI) exemption is available in cases where the rental services rendered do not exceed the threshold limit of ₹10 lakhs in a financial year. Accordingly, it dismissed an appeal filed by the Revenue challenging the grant of SSI exemption to Rani Durgavati Vishwavidyalaya, Jabalpur.
The Revenue had approached the Tribunal challenging the Order-in-Appeal passed by the Commissioner (Appeals), CGST, Customs & Central Excise, Bhopal, which set aside a service tax demand of ₹1.58 crore against the University. The demand comprised service tax levied on two counts: affiliation fees collected from affiliated colleges and income earned from renting of immovable property.
Rani Durgavati Vishwavidyalaya, established under the Madhya Pradesh Vishwavidyalaya Adhiniyam, 1973, and subsequently incorporated as a Central University under the Central University Act, 2009, had collected a sum of ₹11,85,56,128 on account of affiliation fees between July 2012 and December 2016. In addition, it collected ₹9,25,250 from renting out immovable property during the same period, attracting a service tax liability of ₹1,21,917. A show cause notice was issued in April 2018, culminating in an adjudication order confirming a total service tax demand of ₹1,58,18,823 with interest and equal mandatory penalty.
The adjudicating authority had denied the benefit of exemption under both the negative list and the relevant exemption notifications. This decision was reversed by the Commissioner (Appeals), prompting the Revenue’s appeal to the Tribunal.
The Tribunal framed two principal issues:
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Whether affiliation fees collected from affiliated colleges could be subjected to service tax; and
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Whether the University was entitled to SSI exemption under Notification No. 33/2012-ST dated 20.06.2012 for the renting of immovable property services.
Addressing the first issue, the Tribunal noted that the matter stood covered by its earlier decision in M/s. Jiwaji Vishwavidyalaya v. Commissioner, CGST & CE, Bhopal [Final Order No. 50518/2025 dated 17.04.2025], which in turn had relied upon the Karnataka High Court’s decision in Rajiv Gandhi University of Health Sciences v. Commissioner of Service Tax [2022 (64) GSTL 465 (Kar.)]. In that case, the High Court held that granting affiliation to private colleges was an integral activity in furtherance of education and therefore exempt from service tax. The Supreme Court had dismissed the Revenue’s Special Leave Petition challenging that verdict, lending finality to the issue.
The Tribunal also examined the applicability of the negative list under Section 66D of the Finance Act, 1994 and the mega exemption notification No. 25/2012-ST. It held that services provided by a university to affiliated colleges, such as establishing curriculum standards, examination systems, and academic procedures, are educational services squarely covered under clause (l) of the negative list or alternatively under the amended mega exemption notification, especially as auxiliary services rendered to educational institutions.
The Tribunal quoted the Commissioner (Appeals) extensively, who had emphasized that services such as curriculum design, eligibility criteria for admission, conduct of examinations, and quality assurance in education are core to the educational function of a university. The Commissioner had further observed that the adjudicating authority failed to examine the scope of the negative list appropriately and overlooked critical CBEC circulars clarifying exemption applicability to education-related services.
Turning to the second issue regarding rental income, the Tribunal confirmed that SSI exemption under Notification No. 33/2012-ST was available, as the University’s aggregate rental receipts did not exceed ₹10 lakhs in any financial year. Citing its own earlier decision in M/s. Jiwaji Vishwavidyalaya, the Tribunal emphasized that the eligibility threshold for exemption is determined by examining the aggregate turnover from taxable services in the previous financial year. Since the receipts for renting of immovable property during the relevant period remained below the limit, the appellant was entitled to the benefit of the SSI exemption.
The Revenue's reliance on the Madras High Court judgment in Pondicherry University v. Joint Commissioner of GST & CE [CE 2024 (14) Centax 160 (Mad.)] was found to be unpersuasive, as the Tribunal noted that the decision of the Karnataka High Court in Rajiv Gandhi University had been upheld by the Supreme Court, thus carrying higher judicial weight.
In conclusion, the Tribunal found no merit in the Revenue’s appeal. It upheld the Commissioner (Appeals)’ order, reiterating that the services rendered by the University in granting affiliation fell within the protective umbrella of education-related exemptions and that SSI exemption was rightly granted for rental services that remained below the specified threshold. The appeal filed by the Revenue was accordingly dismissed, with the Tribunal affirming that “the appellant is entitled to the benefit of SSI exemption. Consequently, they are not liable to pay any service tax on such service.”
Appearance
Shri Anand Narayan, Authorized Representative for the Appellant
None for the Respondent
Cause Title: Principal Commissioner of CGST & Central Excise, Jabalpur V. M/s. Rani Durgawati Vishwavidyalaya
Case No: Service Tax Cross Application No. 50103 of 2020 In Service Tax Appeal No. 52139 of 2019
Coram: Hon’ble Ms. Binu Tamta [Member (Judicial)], Hon’ble Ms. Hemambika R. Priya [Member (Technical)]
[Read/Download order]
