Service Tax Not Payable When Public Funded Research Institutions Like IIT Receive Grants From Govt: CESTAT
The Chennai bench of the Customs, Excise, and Service Tax Appellate Tribunal (CESTAT) has held that service tax is not payable when publicly funded research institutions like IIT receive grants or aid from the government for conducting research or project work.The bench of P. Dinesha (Judicial Member) and Vasa Seshagiri Rao (Technical Member) have observed that service tax is not payable...
The Chennai bench of the Customs, Excise, and Service Tax Appellate Tribunal (CESTAT) has held that service tax is not payable when publicly funded research institutions like IIT receive grants or aid from the government for conducting research or project work.
The bench of P. Dinesha (Judicial Member) and Vasa Seshagiri Rao (Technical Member) have observed that service tax is not payable when publicly funded research institutions receive grants or aid from the government for conducting research or project work. Had the nature of the service been in the form of a consultancy service for which consideration was received, then service tax could have been payable.
The appellant or assessee is in the business of rendering scientific and technical consulting services. The officers of the Internal Audit Section, Service Tax Commissionerate, visited the premises of the appellant during May and June 2008, and during verification, certain irregularities, such as non-payment of service tax on the services rendered and wrong availment of CENVAT credit, were noticed. Hence, the matter was referred to the Survey, Intelligence, and Research Unit of the Service Tax Commissionerate for a detailed investigation.
The assessee contended that the appellant was under the bona fide belief that receipts from grants for activity relating to pure research would not be covered under the service tax net and that all materials relating to grants for sponsored research were well within the domain of the department.
The department contended that scrutiny of various projects undertaken by the appellant for industries, alumni, and other private persons indicates that the appellant is rendering scientific and consulting services.
The tribunal held that, in respect of sponsored research, there is no provision of service. The services provided are in the nature of furthering education and promoting the sharing of knowledge. Many times, the projects include organizing workshops, international conferences, and conducting seminars.
Counsel For Appellant: I. Dinesh
Counsel For Respondent: Rudra Pratap Singh
Case Title: M/s. Indian Institute of Technology Versus Commissioner of GST and Central Excise
Case No.: Service Tax Appeal No. 41770 of 2013