Pranav B Prem

The Bangalore Bench of the Customs, Excise, and Service Tax Appellate Tribunal (CESTAT) has ruled that placement services offered by an educational trust to multinational corporations (MNCs) and other recruiting organizations are subject to service tax under the category of "Manpower Recruitment or Supply Agency Services." The ruling clarifies that the status of the assessee as a charitable trust does not preclude liability for service tax when profit-making activities are involved.

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The bench comprising Judicial Member P.A. Augustian and Technical Member R. Bhagya Devi passed the ruling in appeals filed by M/s T.A. Pai Management Institute (TAPMI), a private educational trust based in Manipal, Karnataka. The institute was engaged in offering management courses and also allowed companies, including MNCs, to conduct campus placements on its premises. The department initiated proceedings after audit revealed that TAPMI was collecting fixed sums—₹25,000 per student for domestic placements and USD 1,000 per student for international placements—from recruiting companies.

The primary issue before the Tribunal was whether these placement-related activities fell within the taxable ambit of "Manpower Recruitment or Supply Agency Services" as defined under Section 65(68) read with Section 65(105)(k) of the Finance Act, 1994. The Tribunal noted that between 2003 and 2008, the definition of manpower recruitment services evolved from applying to "commercial concerns" to "any person," thus removing any exemption that might have existed for trusts or non-profit entities.

TAPMI contended that it was not engaged in a commercial activity and the sums received from companies were voluntary donations, often credited to a corpus fund for infrastructure and faculty development. It was also argued that the institute played no role in the actual selection process and did not charge students any fees for recruitment. However, the Tribunal dismissed these arguments, stating that the collection of fixed amounts from recruiting companies negated the claim of voluntary donation. The structured nature of the payments and the tie-up agreements with employers indicated a systematic commercial operation.

The Tribunal emphasized that classification under taxable services should focus on the nature of the activity and not the status of the entity performing it. In this context, TAPMI's activities clearly fit the definition of manpower recruitment services. The Tribunal also cited the precedent set in Sydenham Institute of Management [2016 (44) STR 69 (Tri.-Bom.)] and rejected reliance on the Great Lakes Institute of Management case [2008 (10) STR 202 (Tri.-Chennai)], noting that the earlier decision had been referred to a Larger Bench and no longer held good law.

However, the Tribunal allowed partial relief to the assessee on the ground of limitation. It noted that for the period 2003–2005 (covered under Appeal No. ST/2374/2011), the show cause notice was issued well beyond the normal period of limitation and therefore the demand could not be sustained. Likewise, for the subsequent period of 2006–2009 (under Appeal No. ST/2323/2012), the Tribunal held that extended limitation could not be invoked again based on the same grounds as the previous show cause notice.

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In conclusion, while the Tribunal upheld the classification of the services under "Manpower Recruitment or Supply Agency Services" and confirmed the tax liability for the normal period, it set aside the demands made under the extended limitation period. This decision underscores that charitable trusts cannot claim exemption from service tax when engaging in revenue-generating placement services and highlights the importance of strict adherence to limitation principles in tax adjudication.

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: Hon'ble Mr. P. A. Augustian [Member (Judicial)], Hon'ble Mrs. R. Bhagya Devi [Member (Technical)]