Hon’ble CESTAT Ahmedabad held that merely by charging a higher fees an institution cannot be treated as commercial institute; accordingly the reasoning on this count of the Lower Authority is absolutely illegal and incorrect. The relevant para of the order is as under:
Para 5.7 The Lower Authorities have also discarded the status of the appellant as Charitable Trust on the ground that the institution has charged higher fees. We find that merely on the basis of the quantum of fees the status of a charitable institution shall not be altered and the institution which is otherwise statutorily, a charitable trust cannot lose its identity as Charitable Trust. On this basis it cannot be construed that the institution is a commercial institution. This issue has been considered in the following Judgments:
Dr, Jivraj Mehta Smarak Health Foundation and Medical Centre Vs. Ahmedabad -2004 (176) ELT 638 (Tri. Mum.)
“5. We have heard both sides. The appellants have clearly established that
they are a Research Institution carrying out research in the field of cardiac
diseases and disorder. They are registered as Research Institution with
Ministry of Science and Technology, Department of Scientific & Industrial
Research. We, therefore, agree with the appellants that there has been no
contravention of the Notifications in so far as it relates to import by Research
Institute. Regarding recovery of charges by the appellants, as held by the
Tribunal in the case of Collector of Customs v. Murugappa Chettiar Research
Centre [1998 (100) E.L.T. 439 (Tri.)], merely because some fee is charged for
the service, it would not make any Institution a Commercial Institution, as
commercial activity has distinct connotation. It cannot be stated that the
appellants are engaged in any commercial activity, particularly when they
clearly stated that their Institution is running on “no profit no loss” basis. We,
therefore, hold that the benefit of the above Notifications is available to the
appellants, set aside the impugned orders and allow the appeals.”
Ratan Das Gupta & Co. Vs. Commissioner Of Central Excise – 2017 (3) GSTL 247 (T) (para 4)
“4. We have heard both the sides and perused the appeal records. For tax
liability under “commercial or industrial construction service”, the building
constructed should be used primarily for commerce or industry. In the
present case, we note that the buildings are for educational institutes
recognized to provide education in college/school level. This fact is not
disputed. The quantum of fee collected cannot be the criteria to decide the
commercial or non-commercial nature of a building. The building for college
or school, recognized by competent authority to provide education, are to be
considered as non-commercial building. We find that the lower authorities
heavily relied on the fee structure stating that collection of high fee will make
the institute/building as commercial. We are not in agreement with the said
proposition. Recognized educational institutions are governed by the
concerned Regulatory Authority which includes the terms for fee collection
also. In any case, collection of fee for providing education, per se, cannot
make the educational institute as a commercial institute or the building as a
commercial building. No other issue is raised in this appeal for decision.”
Vij Construction Pvt. Ltd. Vs. C.C.E, New Delhi – 2018 (11) GSTL 169 (Tr. Del.)
“5. Regarding the Headquarter building of National Rifle Association of
India, we find that the said association is an official representative of Rifle
Sports, which are duly recognized by the Ministry of Youth Affairs and Sports
and affiliated to Indian Olympic Association. They are engaged in recognized
sports activities and their headquarter is situated in the said building. We are of
the considered view that the building cannot be considered as commercial
building for service tax purposes.
6. With reference to building in the campus of ICFAI University, Dehardun,
it is clear that the said building is for use by a recognized university for
education. The same also cannot be considered as commercial building. We note
that the impugned original order proceeded to hold these as commercial
building only on the basis of fees collected for the activities or participation in
Rifle Association as well as by the university. We note that collection of fees for
promoting or allowing the person to use the facility by these bodies will not
make the building commercial. Considering the nature of occupants’ activities
carried out in the building, we are of the view that both these activities cannot
be considered as resulting in construction of commercial building. Accordingly,
we set aside the impugned order and allow the appeal of the appellant.”
In view of the above Judgments it is settled that merely by charging a higher fees an institution cannot be treated as commercial institute accordingly the reasoning on this count of the Lower Authority is absolutely illegal and incorrect.
Para 6. In the result, the impugned orders are set aside. The appeals are allowed with consequential relief, if any. (Pronounced in the open court on 22.06.2023)
