2014 (7) TMI 978 - AT - Service Tax

Club or association service - Whether the amount recovered from the members who opt for membership (with land) towards cost of land and handed over to M/s. Amrutha Estates (according to appellants) has to be levied to service tax under club or association service or not - Held that - If the actual amount reflected in the sale deed is less than what is shown as transferred to the sister company by the appellant, as submitted by the learned AR, it would amount to collection of membership fee in the name of land which would be inappropriate and incorrect in view of the fact that appellants have no grievance about paying service tax for membership fee during the relevant period. That being the situation, in our opinion, it would be in the interest of justice and fairness to require the appellants to produce the sale deeds. It would be sufficient if the appellants give all the names of members with land who have been provided membership (with land). The Commissioner can select approximately 10% or below at random and in respect of those members if the appellants produce sale deeds and the relevant extracts of books of accounts so that Commissioner can verify and satisfy himself with the amount shown as collected for sale of land and transferred to the sister company is actually equal to the amount reflected in the sale deed - in case appellant is not able to produce a few sale deeds in respect of selected members, Commissioner may select some other name at random - Matter remanded back.

Summary

Issues:
Whether the amount recovered from members opting for membership (with land) towards the cost of land and handed over to M/s. Amrutha Estates is subject to service tax under 'club or association service' or not.

Analysis:

1. Issue of Service Tax Liability: The Tribunal considered the issue of whether the amount collected from members opting for membership (with land) and transferred to M/s. Amrutha Estates should be subject to service tax under 'club or association service.' The Tribunal noted the appellant's contention that the membership fee included the cost of land and was transferred to the sister concern for land allotment. Referring to a previous order, the Tribunal emphasized the need for factual verification on the transfer of amounts to the sister concern. The Tribunal highlighted the relevance of Board's circular on the value considered for service tax levy and the necessity to exclude amounts transferred for land cost from the gross value. The Tribunal emphasized the importance of factual verification by the Adjudicating Authority to determine the applicability of service tax.

2. Inclusion of Land Cost: Both parties agreed that the cost of land need not be included for service tax calculation. The Tribunal acknowledged the appellant's willingness to provide evidence of the amount transferred to the sister company for land sale. However, the Revenue raised objections due to the lack of details on the actual amount involved in land sale. The Tribunal rejected the Revenue's argument that the sale deeds between the sister company and members implied no sale of land by the appellant. The Tribunal highlighted the possibility of the appellant collecting money for land and subsequently transferring it to the seller, emphasizing the need for factual analysis.

3. Remand for Verification: The Tribunal addressed the disagreement between the parties regarding the production of sale deeds and the actual amount transferred for land. While the appellant insisted on following the earlier order, the Tribunal emphasized the importance of fairness and justice. The Tribunal suggested a method for verification, requiring the appellant to provide member names with land for random selection and production of sale deeds and account extracts for verification by the Commissioner. The Tribunal emphasized the need for factual verification and remanded the matter to the original adjudicating authority for verification of the land cost claim.

4. Conclusion: The Tribunal remanded the matter for verifying the correctness of the land cost claim by following the suggested verification method. It clarified its agreement with the earlier decision but proposed modifications for factual verification. The Tribunal emphasized the need for fairness and factual analysis in determining the service tax liability on the amount collected and transferred for land cost.