2013 (5) TMI 752 - AT - Service Tax

Refund - unjust enrichment - mandap keeper services versus club - held that - The question involved in this case is whether the appellant is required to pass the hurdle of unjust enrichment in the facts and circumstances of the case or otherwise. - Refund claim arouse after the Decision of High Court in KARNAVATI CLUB LTD. Versus UNION OF INDIA 2009 (9) TMI 561 - GUJRAT HIGH COURT The members of the club cannot be seen separately as a client or customer and the mandap or the club is one and the same. Since the Service Tax is sought from the club and it has been set aside at the show cause notice stage, by the Hon ble High Court, it cannot be said that said club has passed on the incidence of Service Tax liability to its members, as the members are not separate from the club, is the ratio of their Lordships. If that be so, it cannot be said that by claiming the refund from self, the club itself will be unjustly enriched. Services rendered to self cannot be equated with the services rendered to a client or customer. The appellant has passed the hurdle of unjust enrichment - the provisions of Section 12B will not be applicable in this case as the club and the members are not separate and are one as held in this case by Hon ble High Court, the question of producing any other evidence in support of non-passing of Service Tax liability does not arise. - Refund allowed - decided in favor of assessee.

Issues Involved:
1. Refund of Service Tax paid by the appellant.
2. Applicability of the principle of unjust enrichment.
3. Classification of services provided by the appellant under "Mandap Keeper" services.
4. Whether the members of the club can be considered as clients for the purpose of Service Tax.

Issue-wise Detailed Analysis:

1. Refund of Service Tax paid by the appellant:
The appellant, holding Service Tax registration No. AAACK7865QSTOOl, paid Service Tax for services under the category of Mandap Keeper from December 2002 to June 2005. They filed a refund claim of Rs. 2,24,925/- on 10.12.2009, following a High Court directive. The adjudicating authority sanctioned the refund but ordered its deposit into the Consumer Welfare Fund, citing Section 12C of the Central Excise Act, 1944. The appellant contested this decision, leading to a series of appeals and remands. Ultimately, the Tribunal considered whether the appellant had passed the hurdle of unjust enrichment, concluding that the refund should be granted as the club and its members are not separate entities.

2. Applicability of the principle of unjust enrichment:
The core issue was whether the appellant had passed the Service Tax incidence to their customers, invoking the principle of unjust enrichment. The lower authorities held that the appellant failed to produce evidence proving non-passing of the tax burden. However, the Tribunal found that since the club and its members are not separate entities, the principle of unjust enrichment does not apply. The Tribunal cited the High Court's judgment, which established that services rendered to members cannot be considered as services rendered to clients, thus negating the possibility of unjust enrichment.

3. Classification of services provided by the appellant under "Mandap Keeper" services:
The High Court of Gujarat, in its judgment, had determined that the appellant's club does not fall under the category of "Mandap Keeper" as defined in the Finance Act, 1994. The court reasoned that the club's facilities were used exclusively by its members and not let out to third parties for consideration, which is a key requirement for classification as a Mandap Keeper. The Tribunal upheld this view, emphasizing that the club's activities do not involve a commercial transaction with an external client, and thus, the Service Tax liability under this category was incorrectly imposed.

4. Whether the members of the club can be considered as clients for the purpose of Service Tax:
The Tribunal referred extensively to the High Court's judgment, which clarified that the members of the club cannot be considered clients. The court defined a client as someone who seeks services from an external provider, which does not apply to club members who use the club's facilities. The High Court's interpretation of the terms "mandap," "mandap keeper," and "taxable service" under the Finance Act, 1994, concluded that the club's internal transactions with its members do not constitute a taxable service. Therefore, the Tribunal ruled that the Service Tax paid by the appellant was not justifiable, and the refund should be granted without the application of unjust enrichment principles.

Conclusion:
The Tribunal set aside the impugned order and allowed the appeals with consequential relief, affirming that the appellant had not passed the Service Tax burden to its members and thus was entitled to the refund. The judgment emphasized that the club and its members are a single entity, and services rendered within this entity do not attract Service Tax.

← Previous Next →