Judicial Analysis Court Copy Headnote Facts Arguments Court observation

2026 Supreme(Online)(CESTAT) 1917

CUSTOMS EXCISE & SERVICE TAX APPELLATE TRIBUNAL
P. K. Choudhary, Judicial Member, P. Anjani Kumar, Technical Member
Schoolnet India Limited – Appellant
Versus
Commissioner, Central Goods & Service Tax, Noida – Respondent
Service Tax Appeal No.70470 of 2020|Service Tax Appeal No.70045 of 2021

Advocates:
For the Appellants/Petitioners: B. L. Narasimhan
For the Respondents: Santosh Kumar

Composite educational services involving infrastructure installation are 'naturally bundled'. Where the predominant character is imparting education prescribed by a curriculum, such services are exempt from service tax and cannot be artificially split into taxable and non-taxable components for valuation purposes.

Headnote:(A) Finance Act, 1994 - Sections 65B(44), 66B, 66D(l), 66F(3)(a), 75 and 78 - Mega Exemption Notification No. 25/2012-ST dated 20.06.2012 - Service tax liability on bundling of services related to computer aided education and installation of infrastructure in educational institutions - Services provided by way of education up to higher secondary level or as part of a curriculum for a recognized qualification are within the negative list or exempt - Composite service of implementing a technology-driven education scheme constitutes a 'naturally bundled' service where the essential character is 'education' - Predominant nature of the service determines taxability - Setting up of infrastructure for imparting such education cannot be artificially split from the educational service itself; such infrastructure is merely the medium of delivery - Legislative intent was for revenue-neutral transition of education exemptions from statute to notification, not to create new tax liabilities. (Paras 19, 22, 23, 27, 31, 35, 36)

(B) Appellate Jurisdiction - Principle of non-vivisection of composite contracts - Service tax demand on a composite or integrated course cannot be sustained by artificially splitting the service into taxable and non-taxable components - Reliance on past circulars and judicial precedents affirms that all services directly related to the educational process are outside the service tax net. (Paras 5, 23, 27, 29, 37)

Facts of the case:
The appellant provided computer-aided education services under a government scheme in schools. These services included the supply, installation, and commissioning of IT infrastructure, along with computer training for students and teachers. Revenue sought to levy service tax on the premise that these activities were distinct services and not purely educational, while the appellant contended they were naturally bundled services under the negative list or exempt under notifications.

Findings of Court:
The court found that the ICT-enabled educational services form an integrated whole. The predominant nature is the delivery of education, and the hardware/infrastructure is an inseparable medium for achieving this purpose. Therefore, the activity is a single, naturally bundled service eligible for exemption under the negative list and subsequent notification regimes.

Issues: Whether the activities related to the implementation of an education scheme comprised of both infrastructure installation and training are taxable as distinct services or exempt as bundled educational services; and whether the transition of provisions from the Act to a notification resulted in new tax liability.

Ratio Decidendi: Services that constitute an integrated educational process involving both curriculum and infrastructure fall within the negative list and exempt categories. A composite educational contract should not be artificially vivisected for tax purposes, as the essential character of the bundled service remains educational, which is inherently exempt.

Result: Appeal filed by the service provider allowed; Appeal filed by the Revenue dismissed.

Table of Content
1. factual background of the ict@ school scheme and service tax history. (Para 1 , 2 , 14 , 15)
2. appellants argue services are bundled and exempt as education. (Para 3 , 4 , 5 , 6 , 7 , 8 , 9 , 10 , 11)
3. revenue challenges bundling and seeks re-valuation of services. (Para 12 , 13)
4. defining education services and bundling under finance act, 1994. (Para 16 , 17 , 18 , 19 , 20 , 21 , 22)
5. education services are tax-exempt, either via negative list or notification. (Para 23 , 24 , 25 , 26 , 27 , 28 , 29 , 30 , 31 , 32 , 33 , 34 , 35 , 36 , 37)
6. appeal of the assessee allowed; revenue appeal dismissed. (Para 38)

P. ANJANI KUMAR:

M/s School Net India Limited (SNIL, formerly known as ‘IL&FS Educational & Technology Service) arraign the impugned Order-in-Original dated 31.7.2020, vide Service Tax Appeal No. 70470 of 2020, for the reason that a demand of Rs. 39, 56, 57,281 was confirmed and Revenue is in appeal against the same order, vide Appeal No. 70045 of 2021, for the reason that a demand of Rs. 34, 11, 31,936 was dropped.

2. Brief facts of the case are that M/s SNIL are engaged in education, skill development, healthcare and cluster development for long term and sustainable impact and are registered with the Service tax department as a service provider under the category of taxable services namely, Management or Business Consultant Services, Commercial Training or Coaching Services, etc. Ministry of Human Resource Development (HRD) launched the ICT@ School’s Scheme in 2004 (revised in 2010) to provide opportunities to secondary stage students to mainly build their capacity on Information and Communication Technology (ICT) skills and make them learn through computer aided learning process. The Scheme is run by State Governments with funding support from the Ministry of HRD. The students and teachers are the beneficiaries of the activities undertaken under the ICT@ School’ scheme. As per the guidelines issued w.e.f. 15.02.2011

• the scheme is envisaged for providing computer aided education in Secondary and Higher Secondary Government and Government aided schools;

• States are engaged and encouraged to implement the program through a BOOT (Build-Own-Operate-Transfer) model under which the supplier would make available the ICT infrastructure for the duration of the contract period (normally five years) on the basis of a service level agreement and assurance of a periodic payment subject to satisfactory maintenance;

• the State/UT Governments are free to partner with private organizations or integrate it with other similar schemes for implementation of the ‘ICT in schools’ scheme including providing for maintenance.

• the purpose of the scheme is to make all students of Government and Government aided secondary and higher secondary schools’ IT literate.

• the scheme would involve formulation and transaction of curriculum and syllabus on computer literacy for each of the classes from IX to XII.

2.1. The Appellant was selected through bidding process and have entered into agreements with authorities of various States’s Education Department or their authorized agencies of the States namely Maharashtra, Odisha, Bihar, West Bengal, Rajasthan, and Himachal Pradesh, for implementation of the ICT@ Schools Scheme. Agreements were entered into with the primary aim of providing computer aided learning and computer education training among the students and teachers of the government and government aided higher secondary schools.

2.2. On conduct of an audit of records of the Appellant, it appeared to the Revenue that Appellant’s had undertaken the activities of Installation & Commissioning of IT infrastructure and providing education related services to the Education Boards/authorised companies of various States; these activities were exempted under Serial No. 9 of the Mega Exemption Notification No. 25/2012-ST dated 20.06.2012 as ‘Auxiliary Educational Services’ only till 10.07.2014; vide the Notification No. 06/2014-ST dat

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2026 Supreme(Online)(CESTAT) 1917

CUSTOMS EXCISE & SERVICE TAX APPELLATE TRIBUNALP. K. Choudhary, Judicial Member, P. Anjani Kumar, Technical MemberSchoolnet India Limited – AppellantVersusCommissioner, Central Goods & Service Tax, Noida – RespondentService Tax Appeal No.70470 of 2020|Service Tax Appeal No.70045 of 2021

Cases Referred (2)

CUSTOMS EXCISE & SERVICE TAX APPELLATE TRIBUNAL
P. K. Choudhary, Judicial Member, P. Anjani Kumar, Technical Member
Schoolnet India Limited – Appellant
Versus
Commissioner, Central Goods & Service Tax, Noida – Respondent
Service Tax Appeal No.70470 of 2020|Service Tax Appeal No.70045 of 2021