Refund of service tax + fees taken by coaching classes??

In Mumbai, the daughter of my relative, who appeared for CA-CPT exam in June 2011 and even before CPT Exam Results were out, had paid Fees of Rs.40,000 + Service Tax 4,120 to a Reputed Coaching Classes for Tution for CA-IPCC, with the understanding that, if the student failed in CA-CPT exam or for any other reason, didnot start the CA-IPCC Coaching, will get refund of Fees Rs.40,000/- only and Service Tax of 4,120 will not be refundable.

She failed in CA-CPT Exam.The Coaching Classes has agreed for Refund of fees Rs.40,000/- after 3 months and not Service Tax 4120.

Query= Is it correct on the part of Coaching Classes in its stand that Service Tax 4,120 is not Refundable?

I, in my common sense, feel that since the
 service of Coaching has not been taken and Fees is being refunded, then Service Tax 4,120 should also be refunded by Coaching Classes. The Coaching Classes can claim refund / reversal of Service Tax in its subsequent returns.

Experts are requested to guide me, with actual position, with reference to section/ rule / circular.

Thanks in Advance.