2012 (11) TMI 727 - AT - Service Tax

Club and Association Service retrospective exemption - Denial of cenvat credit for common services - Export Promotion Council for Handicraft is engaged in arranging exhibitions etc. They have permanent members alleged that membership fee collected from the Members is liable to service tax under the category of Club and Association Service Held that - Club and association service , on which the demand of service tax stands confirmed by the Commissioner may become exempted services in view of the provisions of Section 96J, for which the matter is being remanded - there may be occasion to deny credit in respect of common cenvatable services used in both output services and club and association service. Commissioner is directed to look into the said aspect afresh, after dealing with the appellants contention that the denial of credit to the extent of 90% would be applicable only in respect of common cenvatable services and not in respect of services exclusively utilized for providing business exhibition service - provisions of Rule 6(5) are required to be taken into account for the purpose of denial of credit

Summary

Issues:
1. Taxability of membership fee under "Club and Association Service"
2. Denial of Cenvat credit on common services used for dutiable and exempted final services

Analysis:
1. The case involved a dispute regarding the taxability of membership fees collected by an Export Promotion Council for Handicraft under the category of "Club and Association Service." The appellant argued that a retrospective exemption under Section 96J of the Finance Act, 1994, rendered the service tax not applicable during the relevant period. The Tribunal noted that the newly introduced provisions of Section 96J were not considered by the Commissioner while passing the impugned order. Therefore, the matter was remanded to the adjudicating authority for a specific decision on this disputed issue.

2. Additionally, the appellant was denied Cenvat credit amounting to Rs. 3,30,85,436/- for various common services utilized in business exhibition services. The Commissioner held that the appellant failed to maintain separate records of inputs services for taxable and non-taxable services as required under Rule 6(2) of the Cenvat Credit Rules, 2004. The appellant contended that they were not providing any exempted services during the relevant period and that the denial of credit on common services was incorrect. The Tribunal agreed with the appellant, directing the Commissioner to reconsider the denial of credit, taking into account the appellant's arguments and the provisions of Rule 6(5) regarding the restriction of Cenvat credit.

In conclusion, the Tribunal set aside the impugned order and remanded the matter to the Commissioner for a fresh decision considering the observations made. The stay petition and appeal were disposed of accordingly.