2015 (11) TMI 1602 - AT - Service Tax

Levy of tax - members subscription - Club or Association service - Held that - On going through the factual matrix of the constitution of the association and the activities carried out by the association and also the relationship of the members of association, we find that the association was formed by the members only for the purpose of mutual benefit of the members in regard to the mining/trade of the minerals. In view of this position, we find that there is a mutuality of interest of the members and the associations, therefore the service provider and service recipient concept does not exist. The issue of judgments of the case of Sports Club of Gujarat Ltd. v. Union of India 2013 (7) TMI 510 - GUJARAT HIGH COURT are squarely applicable in the facts of the present case, where it was held that Section 65(25a), Section 65(105) (zzze) and Section 66 as incorporated / amended to the extent that the said provisions purport to levy service tax in respect of services purportedly provided by the petitioner club to its members, to be ultra vires The demand for the period 1-7-2012 to 31-3-2013 confirmed in the impugned order is not sustainable and the same deserves to be deducted from the total demand confirmed in the impugned order, subject to verification by the Commissioner the correctness of claim of the appellant. In view of our above discussion, we hold that the demand of service tax for the period 2008-09 to June, 2012 is not sustainable in the light of the above cited judgments. Similarly the interest and penalties are also dropped. Needless to say that the service tax admittedly paid by the appellant for the period 1-7-2012 to 31-3-2013 stand maintained as the appellant is not contesting the taxability during that period. The appeal is allowed in above terms.

Summary

Issues: Service tax liability on members' subscription, applicability of judgments, rectification of mistake in adjudication order

Service Tax Liability on Members' Subscription:
The appeal challenged the confirmation of service tax liability amounting to Rs. 1,11,73,501 for "Club or Association service" rendered from 1-10-2008 to 31-3-2013, along with interest and penalties. The appellant, an industrial association for the mining industry, collected membership fees from mineral exporters/mine owners within Goa for various activities. The association, a non-profit organization controlled by its members, faced the demand for service tax on members' subscription. The appellant argued that the service tax liability post-July 2012 was not disputed and was paid regularly. However, the Adjudicating Authority failed to reduce the service tax liability for the period from 1st July 2012 to 31st March 2013 despite the appellant's submission.

Applicability of Judgments:
The appellant cited various judgments, including cases involving sports clubs and other associations, to support their claim that the service tax liability on members' subscription was not sustainable due to the mutuality of interest between the members and the association. The Tribunal agreed with the appellant, emphasizing the mutual benefit nature of the association's formation for mining/trade activities. The Tribunal held that the service provider and recipient concept did not apply due to the members' mutual interest, as consistently decided in the cited judgments. Additionally, the Tribunal noted that the appellant had raised the issue of paying service tax post-July 2012 during adjudication, but the Adjudicating Authority did not consider this submission, leading to a rectification application that was not acted upon by the Commissioner.

Rectification of Mistake in Adjudication Order:
The Tribunal found that the demand for service tax from July 2012 to March 2013 was not sustainable and should be deducted from the total demand confirmed in the impugned order. The Tribunal also ruled that the demand for service tax from 2008-09 to June 2012 was not sustainable based on the cited judgments. Consequently, the interest and penalties were dropped, and the service tax paid by the appellant for the period from 1st July 2012 to 31st March 2013 was maintained as uncontested. The appeal was allowed based on the above findings, highlighting the importance of verifying the correctness of the appellant's claim by the Commissioner.