2011 (2) TMI 1131 - AT - Service Tax

Service tax on certain facilities to persons who are non-members of club - Held that - Those who are not members get facilities and advantages by virtue of introduction made to the Club by a member of the club. We may not rule out at this stage about the liability that the appellant may be incurring. The matter shall be examined in detail while hearing the matter for final disposal. To work out an interim measure direct the appellant to deposit Rs. 10 lakhs (over and above the amount already paid as submitted aforesaid) within eight weeks from today and report compliance.

Summary

Issues:
1. Service tax demand based on interpretation of law regarding charges received by a Club for providing facilities to non-members.
2. Insistence on pre-deposit due to a slash in the demand amount during adjudication.

Analysis:

Issue 1: Service Tax Demand Interpretation
The appellant contested a service tax demand of Rs. 62,45,399, of which Rs. 20,69,155 had already been deposited. The demand of Rs. 4.2 lakhs was challenged, arguing that tax should only apply to services provided to club members, not non-members. The Tribunal acknowledged the need for detailed arguments during the full hearing but noted that non-members receiving club facilities through member introductions could potentially incur liability. To address this, the appellant was directed to deposit an additional Rs. 10 lakhs within eight weeks, with a stay on realizing the balance demand pending the appeal.

Issue 2: Pre-Deposit Requirement
The Department had initially proposed a demand of Rs. 1.62 crores, which was reduced during adjudication. The Department argued for pre-deposit given the reduced demand. The Tribunal considered the provisions cited in the adjudication order and the potential liability arising from services provided to non-members. While not ruling out the appellant's liability at this stage, the Tribunal ordered the additional deposit of Rs. 10 lakhs and stayed the realization of the remaining demand during the appeal process.

This judgment by the Appellate Tribunal CESTAT, New Delhi, addressed the service tax demand issue concerning charges received by a Club for non-member facilities, emphasizing the need for detailed examination during the full hearing. The Tribunal balanced the appellant's submissions with the Department's arguments, directing an interim deposit and stay on realizing the balance demand pending the appeal.