Educational-institution rental exemption requires proof that the lessee is an educational institution.

The appellant, an individual proprietor and owner of immovable property in Jaipur, had leased the premises under a deed dated 1 May 2004 to Ritnand Balved Education Foundation.

The Department received information from the Income Tax Department indicating that the appellant had income reported under sections 194(C) and 194(J) of the Income-tax Act but had not filed service-tax returns for 2012–13 or paid service tax.

A demand of ₹2,15,769, with interest and penalties under sections 70 and 78 of the Finance Act, 1994, was proposed by show-cause notice dated 25 April 2018.

The demand was confirmed by the adjudicating authority on 14 May 2019 and upheld by the Commissioner (Appeals) on 16 June 2020.

Before the Tribunal, the appellant claimed exemption under clause 9(b) of Notification No. 25/2012-ST on the ground that the premises were rented for imparting education.

The Department contended that the lease deed did not establish that the lessee was an educational institution and that the extended limitation period was validly invoked.

1. Whether the appellant was entitled to exemption under clause 9(b) of Notification No. 25/2012-ST for renting immovable property to Ritnand Balved Education Foundation for purposes connected with education.

2. Whether the extended period of limitation could be invoked on the allegation that the appellant had suppressed relevant facts by not filing service-tax returns or paying service tax.

3. What relief, if any, was payable to the appellant regarding the demand and penalties.

Clause 9 of Notification No. 25/2012-ST exempted services provided to or by an educational institution in respect of education exempt from service tax, including renting of immovable property under clause 9(b).

The eligibility for an exemption notification rests on the assessee, and exemption notifications must be strictly construed, as held by the Supreme Court in Commissioner of Customs (Import), Mumbai v. Dilip Kumar and Company.

For invoking the extended limitation period, mere non-payment of tax is insufficient; there must be a positive act of suppression or intent to evade tax, consistent with Pushpam Pharmaceuticals Company v. Collector of Central Excise, Bombay.

The relevant service-tax liability, interest and penalties arose under the Finance Act, 1994, including sections 70 and 78.

The Tribunal held that the service involved was renting of immovable property, but exemption under clause 9(b) was available only where the service was provided to or by an educational institution in respect of exempt education.

The lease deed identified the lessee as Ritnand Balved Education Foundation, a society, but did not establish that it was an educational institution.

Further, clause 4(a) permitted use of the premises for office or commercial purposes, education, counselling, research and student hostel facilities; therefore, education was not shown to be the exclusive or determinative purpose of the tenancy.

The certificate produced from Amity University, Rajasthan, could not cure the evidentiary deficiency because Amity was not the lessee, the certificate did not establish its legal relationship with the lessee, and it was issued after the Commissioner (Appeals)’ order.

Applying the strict-construction principle, the Tribunal concluded that the appellant had failed to discharge the burden of proving exemption eligibility.

On limitation, however, the Tribunal reiterated that non-payment alone does not establish suppression or intent to evade.

It nevertheless held that the demand could not be sustained in full on the extended limitation period: the portion falling beyond five years from the relevant date was set aside, while the demand for the remaining period, including the normal limitation period, was confirmed.

The penalties were proportionately reduced.

The appeal was accordingly partly allowed.