2012 (8) TMI 816 - AT - Service Tax

Club or association services - company incorporated, consequent upon the order of High Court for the purpose of treating the effluent discharged by the industries located in the GIDC area, Vapi - demand of service tax confirmed on the ground that the appellant is an association of industrial units in Vapi formed for the purpose of setting up and running common facility for treatment and recycling of effluent and solid waste discharged by the units who are required to become a member compulsorily and pay one time fee as well as monthly subscription - Held that - Notification No. 1/2012 - S.T. dated 17.03.2012, the words of dyeing units was omitted. Consequent upon amendment made by Notification No.1/2012-S.T., club or association service provided by an association in relation to a common facility set up for treatment and recycling effluent or solid waste is exempted from the service tax. This notification has been given retrospective effect by Section 145 of Finance Act, 2012 from June, 2005. Therefore appellant is squarely covered by the exemption Notification and the activities undertaken by them is not liable to service tax - Decided in favor of assessee

Summary

Issues:
1. Liability to pay service tax on services provided by the appellant company to its members under the category of club or association services.
2. Interpretation of the definition of "club or association" under the Finance Act, 1994.
3. Applicability of exemption under Section 145 of the Finance Act, 2012 to the appellant company.
4. Determination of whether the appellant company, being a limited company, is covered under the exemption available to associations.

Analysis:
1. The appellant company, formed for operating a Common Effluent Treatment Plant, was held liable to pay service tax on services provided to its members. The demand was based on the premise that the company, as an association of industrial units, collected fees from members for operating the treatment facility. A demand of Rs. 3,26,39,335/- was confirmed, along with penalties, under Section 78 of the Finance Act, 1994.

2. The definition of "club or association" under Clause (25a) of Section-65 of the Finance Act, 1994 was crucial in determining the liability for service tax. The definition excludes bodies established by law, trade unions, and entities engaged in public service. The appellant argued that the exemption under Section 145 of the Finance Act, 2012 applied to them, while the Revenue contended that only clubs or associations, not limited companies, were covered.

3. The Tribunal considered the retrospective exemption provided by Section 145 of the Finance Act, 2012, which exempted services related to common facilities for effluent treatment. Notifications issued exempted club or association services for effluent treatment, with retrospective effect from June 2005. The Tribunal found that the appellant fell within the scope of this exemption, thereby setting aside the demand and penalties.

4. The debate centered on whether the appellant, registered under Section 25 of the Companies Act, 1956, could be considered an association for the purpose of the exemption. The appellant's registration as a company under Section 25, without the term "limited," was argued to maintain their association status. The Tribunal held that the appellant, being an association for service tax liability, was eligible for the exemption, regardless of its corporate structure. Consequently, the appeal was allowed, and the demand for service tax and penalties were set aside.