Service Tax Leviable On Infrastructure Support To TCS, Educational Training Exempt: CESTAT Kolkata

The Kolkata Bench of Customs, Excise, and Service Tax Appellate Tribunal (CESTAT) on 18 February, confirmed service tax liability on infrastructure and allied facilities provided to Tata Consultancy Services (TCS) under “Business Support Service”, while setting aside the entire demand for training and educational activities under “Management or Business Consultancy Service”.

A Bench comprising Judicial Member Ashok Jindal and Technical Member K. Anpazhakan, decided the appeal filed by Kalinga Institute of Industrial Technology (KIIT) (appellant), a charitable educational institution registered under Section 12A of the Income Tax Act, against a service tax demand of Rs. 2.38 crore confirmed by the Commissioner of Central Excise, Customs and Service Tax, Bhubaneswar.

The Tribunal noted that “it is on record that the appellant is not a professional management or business consultant… the services rendered by the appellant do not fall within the scope of the definition of management or business consultancy service.”

KIIT had entered into an agreement with TCS to provide infrastructure and facilities for conducting training programmes at its Bhubaneswar and Noida campuses, including classrooms, laboratories, library, auditorium, residential accommodation, and allied facilities, for a fixed monthly consideration.

The Department alleged that these activities constituted taxable services under Business Support Service, Renting of Immovable Property Service, and Management or Business Consultancy Service, and invoked the extended period of limitation to raise the demand. The Commissioner confirmed the demand with interest and imposed penalties under Sections 77 and 78 of the Finance Act, 1994.

The Tribunal held that the facilities provided to TCS squarely fall within "infrastructure support services" as defined under Section 65(104c) of the Finance Act, 1994, and are therefore taxable as Business Support Services.

On the issue of Renting of Immovable Property Service, the bench held that the rental income received by KIIT was taxable only for the normal period, observing that the levy itself was under dispute during the relevant time and later validated through retrospective amendment. The bench stated that:

"....it is seen that only vide the Budget, 2010, the retrospective amendment was brought in. Therefore, we do not find any substance in the allegation of the Revenue in this regard that the appellant has intentionally not paid Service Tax on the rent received by them. In view of the above, we hold that the demand of Service Tax confirmed in this regard for the extended period of limitation is not sustainable."

Regarding Management or Business Consultancy Services, the Tribunal found that KIIT was not engaged in professional consultancy but was conducting educational and training programmes, with the amounts received being utilised for accommodation, food, and transport of trainees. Such activities were held to be outside the scope of taxable consultancy services.

Accordingly, the Tribunal confirmed service tax demands under Business Support Service and Renting of Immovable Property Service for the normal period, along with interest, and set aside the entire demand under Management or Business Consultancy Service.

For Appellant: Advocate, C.R. Das

For Respondent: Authorized Representative, K. Kalpana