LI Network
Published on: December 22, 2023 at 18:50 IST
The Chennai bench of the Customs, Excise, and Service Tax Appellate Tribunal (CESTAT) has issued a noteworthy ruling, stating that service tax is not applicable to publicly funded research institutions like the Indian Institute of Technology (IIT) when they receive grants or aid from the government for research or project work.
The bench, comprising P. Dinesha (Judicial Member) and Vasa Seshagiri Rao (Technical Member), emphasized that service tax is not levied when publicly funded research institutions receive grants or aid from the government for research or project work.
The tribunal clarified that service tax would only be applicable if the nature of the service provided was in the form of consultancy services for which consideration was received.
The case involved an appellant or assessee engaged in providing scientific and technical consulting services.
Following a visit by officers from the Internal Audit Section of the Service Tax Commissionerate, certain irregularities, including non-payment of service tax on services rendered and incorrect availment of CENVAT credit, were identified during May and June 2008.
The matter was subsequently referred for a detailed investigation to the Survey, Intelligence, and Research Unit of the Service Tax Commissionerate.
The appellant argued that they genuinely believed that receipts from grants for activities related to pure research would not fall under the service tax purview. They contended that all materials related to grants for sponsored research were well within the department’s knowledge.
In response, the department asserted that a scrutiny of various projects undertaken by the appellant for industries, alumni, and other private entities indicated that the appellant was indeed providing scientific and consulting services.
The tribunal’s ruling clarified that sponsored research activities did not involve the provision of services under the service tax framework.
Instead, the services offered aimed to further education and promote knowledge sharing, often involving the organization of workshops, international conferences, and seminars.
