Jawaharlal Nehru Technological University Kakinada & Other vs. Union of India [TU-IDT-06-HC-2026]
Background of the Case
A batch of writ petitions was filed before the Andhra Pradesh High Court by various State Universities including Jawaharlal Nehru Technological University Kakinada (JNTUK), Acharya Nagarjuna University, Adi Kavi Nannayya University, Vikrama Simhapuri University, and Krishna University challenging GST demands raised on affiliation fees and No Objection Certificate (NOC) charges collected from affiliated colleges. The GST authorities had treated such receipts as consideration for supply of services and accordingly passed assessment orders demanding GST along with interest and penalty under the CGST Act, 2017. The Universities contended that they were statutory bodies established under State Acts and the activities of granting affiliation and issuing NOCs were mandatory statutory functions carried out under UGC guidelines and State legislation.
It was argued that such activities were not commercial in nature and therefore could not be treated as taxable supply under GST. The Universities further submitted that even otherwise the services were exempt under Entry No. 66 of Notification No. 12/2017-Central Tax (Rate).
Arguments by the Appellant (Assessee)
The petitioners submitted that no educational institution could admit students without obtaining affiliation from the concerned University and therefore grant of affiliation was a statutory and regulatory function rather than a commercial activity. The Universities argued that they merely discharged duties imposed upon them under the governing State enactments and UGC regulations and had no discretion in such matters except to verify compliance with prescribed norms. It was further contended that Section 7 of the CGST Act taxes only those supplies which are made in the course or furtherance of business, whereas statutory functions performed by State Universities do not constitute “business” under Section 2(17) of the Act. The petitioners also argued that the services were otherwise exempt under Entry No. 66 relating to educational institutions and additionally under Entries 4 and 5 of Notification No. 12/2017 applicable to governmental authorities.
Reliance was placed on various High Court decisions including Goa University, Bengaluru North University, and Central Electricity Regulatory Commission wherein similar issues had been decided in favour of the assessees.
Respondent’s Response (Revenue)
The Department contended that the definition of “business” under Section 2(17) of the CGST Act was wide enough to include activities undertaken by governmental authorities and therefore any supply of service for consideration would attract GST unless specifically exempted. It was argued that affiliation services and issuance of NOCs did not fall within the exemptions claimed by the Universities and consequently GST was rightly levied on such receipts. The Revenue further relied upon the Telangana High Court decision in W.P. No. 34617 of 2022 and batch wherein similar exemption claims were rejected. According to the Department, the activities undertaken by the Universities amounted to taxable supply of services and therefore the assessment orders passed under the GST law were legally valid.
Court Findings and Decision
The Hon’ble Andhra Pradesh High Court held that the petitioner Universities were independent statutory entities established under State legislation and could not be equated with the Central Government, State Government, or Local Authorities for the purpose of Section 2(17)(i) and Section 7(2) of the CGST Act. The Court observed that the activities of granting affiliation and issuing NOCs were statutory obligations mandatorily carried out under the governing enactments and UGC regulations and therefore lacked the essential element of business activity. It was held that statutory functions performed under compulsion of law cannot be treated as supply of services in the course or furtherance of business under Section 7 of the CGST Act. Accordingly, the Court concluded that affiliation fees and NOC charges collected by the Universities were not taxable under GST at all.
Since the Court held the activities themselves to be outside the scope of taxable supply, it observed that the question of exemption under Notification No. 12/2017 became academic. Consequently, all the impugned assessment orders were set aside and the writ petitions were allowed.
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