2018 (12) TMI 1777 - AT - Service Tax

100% EOU - Classification of services - Health Club and Fitness Centre services or not - business of development of software as a 100% EOU operating under the STPI scheme - HELD THAT - The Trust has been constituted for the welfare of the employees in 1994 much before the period of dispute impugned herein. Both Trust and the appellant company cannot be said to be one and the same entity inasmuch as both are separately assessed to Income Tax and both have been granted separate service tax registrations which is a fact on record. Both the authorities below have taken note of the fact that subject service (for gym health centre etc) has actually been rendered by the Trust and it is only the premises where gym is located belongs to the company which should not be the mere criterion for ascertaining the service provider - In fact the entire contribution made by the members on which the instant demand has been raised has been received by the Trust and not the Company. As per Section 65(7) of the Finance Act 1994 the term assessee has been defined to mean the person liable to service tax and includes its agent. As per the Rules the person liable to pay service tax is the person who has provided the taxable services i.e. the service provider. It is not disputed that the service has actually been provided by the Trust who subsequently got registered with the department and started discharging service tax liability which fact has been noted by the Ld. Asst Commissioner in his order dated 28.11.2008 based on which the demand on appellant company has been dropped. The demand of service tax interest and penalty by allowing the instant appeal with consequential relief - appeal allowed - decided in favor of appellant.

Summary

Issues:
Appeal against demand of service tax under 'Health Club and Fitness Centre services' for the period from 16.08.2002 to 31.01.2007.

Analysis:
The appellant, a software development company, had a Trust for employees' welfare providing sports and recreational facilities. The dispute arose when the tax department alleged the company provided 'Health Club and Fitness Centre services' to employees, demanding service tax. The company contested, stating the Trust, a separate legal entity, provided the services and was liable for tax. The department, however, upheld the demand. The company argued that the Trust, assessed separately for tax, rendered the services, not the company. The Commissioner observed that had the Trust paid tax initially, the company's arguments could have been accepted.

The appellant contended that the demand was wrongly raised on the company, emphasizing the Trust's separate tax assessment and classification under 'Club or Association Services.' The department argued that as the Trust paid tax for a subsequent period, the demand on the company was justified. The Tribunal noted that the Trust, established in 1994, and the company were distinct entities with separate tax registrations. The services were provided by the Trust, not the company, as evidenced by financial statements and registrations. The Tribunal highlighted that under the Finance Act, the person liable for tax is the service provider, which, in this case, was the Trust. Upholding the demand on the company solely because the Trust did not pay tax was deemed erroneous.

In conclusion, the Tribunal set aside the service tax demand, interest, and penalty, recognizing the Trust as the service provider and holding the company not liable for the tax on services provided by the Trust.