2010 (10) TMI 534 - AT - Service Tax

Waiver of pre-deposit - Club or Association services -The person desirous of being a member of KGA is required to pay an amount as advance - Person who has paid an advance, needs to undergo rigorous test of playing 26 rounds of golf before he is admitted as a member, during which period, he has been considered as temporary member or member-elect - All the legal issues raised needs to be gone into detail - Appellant has not made out a prima facie case for complete waiver of pre-deposit of amounts involved - There is no plea of financial hardship - The appellant is a society registered under the Mysore Societies Registration Act - The amount taken as an advance from the persons who are desirous for becoming member of KGA, we direct the appellant to deposit an amount of Rs. 30 lakhs - Waiver of pre-deposit of balance amounts involved is allowed.

Summary

Issues: Stay petition for waiver of pre-deposit of service tax, interest, and penalties. Interpretation of the definition of "Club or Association" under the Finance Act, 1994 regarding service tax on advance fee collected by a golf association.

Analysis:
The case involved a stay petition seeking the waiver of pre-deposit of service tax, interest, and penalties totaling a significant amount. The appellant argued that the service tax demand was related to advance fees collected by a golf association from individuals desiring membership. The appellant contended that as per the Finance Act, 1994, only services provided to existing members are taxable, not to those seeking membership. The appellant highlighted that individuals paying advance fees were not considered members until admitted, undergoing a rigorous selection process. The appellant emphasized that the advance fees were not profit but part of the membership process, as per the association's rules and memorandum.

The Departmental Representative (DR) countered by stating that the appellant failed to prove refunding fees to unsuccessful membership applicants. The DR referenced the Adjudicating Authority's findings and Rule 63 of the Service Tax Rule, 1994, allowing adjustments for refunded amounts. The Tribunal considered both arguments and examined the definition of "Club or Association" under the Finance Act, 1994. The main issue was whether individuals paying advance fees to join the golf association could be taxed as members. The Tribunal noted that applicants had to undergo a lengthy process before membership, being considered temporary or member-elect during that time. The Tribunal acknowledged the complexity of legal issues raised, requiring detailed scrutiny during the final appeal hearing. Despite no plea of financial hardship, the Tribunal recognized the appellant's status as a society under the Mysore Societies Registration Act, 1960.

Ultimately, the Tribunal directed the appellant to deposit a specified amount within three months and report compliance. Upon compliance, the waiver of pre-deposit for the remaining amounts was granted, and recovery stayed pending appeal disposal. The decision balanced the appellant's status as a registered society and the nature of advance fees in the membership process, ensuring partial deposit while allowing the appeal to proceed without immediate financial burden.