Unrecognised Courses Merely Facilitating Foreign Admission Are Liable To Service Tax: CESTAT Chennai

The Chennai Bench of the Customs, Excise, and Service Tax Appellate Tribunal (CESTAT) has held that programmes which merely facilitate admission to foreign universities, without conferring a degree recognised under Indian law, are liable to service tax.

The Bench comprising Judicial Member P. Dinesha and Technical Member Vasa Seshagiri Rao while hearing an appeal filed by the International School for Management Studies (ISMS) against the service tax demand held that its course did not lead to a qualification recognised under law. It merely facilitated admission to a foreign university, and therefore fell within the ambit “commercial training or coaching services,” which is taxable.

The ISMS conducted a one-year postgraduate foundation programme in management in India, under a twinning arrangement with Missouri State University, USA. Eligible students can pursue the second year of their MBA abroad.

The Department viewed that the first-year programme did not lead to a qualification recognised under Indian law and therefore was taxable under “Commercial Training or Coaching Service” in terms of the Finance Act. The Adjudicating Authority confirmed the demand, and the Commissioner (Appeals) upheld it.

The demand was confirmed by the Adjudicating Authority.. Aggrieved, the appellant filed an appeal before the Commissioner (Appeals), which was rejected.

The appellant argued that it is not a commercial coaching centre, but an educational institution run by a charitable society without a profit motive.

Rejecting the appellant's contention, the CESAT held that profit motive or charitable status is irrelevant after the retrospective Explanation inserted by the Finance Act, 2010, which expressly provides that any centre imparting training for consideration is taxable, irrespective of profit motive or charitable character.

On the issue of recognition of the course by law, the Tribunal observed that the ISMS course was "at best a facilitating programme enabling students to seek admission abroad" and "it does not culminate in a degree recognised under Indian law."

The Bench observed that the course conducted by the appellant did not lead to any recognised qualification and is only a preparatory stage for a foreign degree.

“The services rendered by the Appellant are classifiable under “Commercial Training or Coaching Service” and are liable to service tax,” held the bench.

However, as there was no suppression of facts or intent to evade tax, the Bench clarified that penalties under Sections 76 (failure to pay service tax) and 77 (failure to file returns or comply with notices) cannot be imposed.

Accordingly, while the service tax demand and interest were upheld, the appeals were partly allowed to the extent of deletion of penalties.

Citation: 2026 LLBiz CESTAT (CHE) 27

Case Title: M/s. International School for Management Studies Societies for Social Education and Research v. Commissioner of GST and Central Excise

Case Number: Service Tax Appeal No. 42493 of 2015

Counsel for Appellant: M.N. Bharathi

Counsel for Respondent: Anandalakshmi Ganeshram