U.Sudhakarreddy@timesofindia.comHyderabad: The Customs, Excise and Service Tax Appellate Tribunal (CESTAT), Hyderabad, has ruled that services provided to schools for conducting Olympiads and talent search examinations are exempt from service tax, as they are directly linked to the educational process.The tribunal set aside a service tax demand of ₹1.9 crore, along with interest and penalties, imposed on Malakpet-based Unified Council Educational Services for the period from April 2014 to June 2017. It also quashed the penalties imposed on the company’s director.The company organises national-level talent search examinations and Olympiads, including the National Level Science Talent Search Examination (NLSTSE), Unified Cyber Olympiad (UCO) and Unified International English Olympiad (UIEO).Schools, not students, received servicesThe dispute centred on whether activities such as preparing question papers, evaluating Optical Mark Recognition (OMR) sheets and declaring results for participating schools were covered by the service tax exemption.The provision exempts services relating to admission to, or the conduct of examinations by, an educational institution.The tax department had treated individual students as the recipients of the services. The tribunal, however, held that the participating schools were the service recipients, as a contractual and commercial relationship existed between the company and the educational institutions.The bench comprising technical member AK Jyotishi and judicial member Angad Prasad said the expression “services relating to conduct of examination” had a wide scope and covered activities having a direct connection with the examination process, including setting question papers, evaluation and declaration of results.It rejected the department’s contention that the exemption could apply only when an examination was mandatory or formed part of a formal board curriculum. The exemption notification contained no such restriction, the tribunal said.The bench held that examinations, including Olympiads and aptitude assessments, were an integral part of education as they tested the skills and knowledge acquired by students.Extended limitation period rejectedThe tribunal also found fault with the department for invoking the extended period of limitation.The show-cause notice was issued on Sept 29, 2020, for the tax period between April 2014 and June 2017. The original adjudicating authority confirmed the demand through an order dated March 1, 2024.CESTAT said the dispute arose from a bona fide difference in the interpretation of the exemption notification. There was no evidence that the company had wilfully suppressed facts with an intention to evade tax, it ruled.The tribunal also relied on judicial precedents, including a Gujarat high court ruling concerning examination-related services provided to schools. It said an exemption intended to promote education should be interpreted in a manner consistent with that objective.Allowing the company’s appeal on July 31, the Hyderabad bench set aside the original order and all consequential tax, interest and penalty demands. The final order was pronounced in open court.
