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2020 (1) TMI 1216 - AT - Service TaxClub Membership and Associations services - validity of section 65(105)(zzze) of the Finance Act, 1994 - period prior to 01 July, 2012 - HELD THAT - The matter is no longer res integra as section 65(105)(zzze) of the Finance Act, has already been held ultra vires by the Gujarat High Court in SPORTS CLUB OF GUJARAT LTD VERSUS UNION OF INDIA 3 2013 (7) TMI 510 - GUJARAT HIGH COURT where it was declared that Section 65(25a), Section 65(105)(zzze) and Section 66 of the Finance (No. 2) Act, 1994 as incorporated/amended by the Finance Act, 2005 to the extent that the said provisions purport to levy service tax in respect of services purportedly provided by the petitioner club to its members, to be ultra vires. Appeal allowed - decided in favor of appellant.
Issues Involved:
1. Validity of Section 65(105)(zzze) of the Finance Act, 1994. 2. Applicability of service tax on the appellant's activities. 3. Nature of contributions received by the appellant. 4. Invocation of the extended period for service tax demand. 5. Imposition of interest and penalties. Detailed Analysis: 1. Validity of Section 65(105)(zzze) of the Finance Act, 1994: The appellant argued that Section 65(105)(zzze) had been declared ultra vires by the Gujarat High Court in "Sports Club of Gujarat Limited vs. Union of India," thus invalidating the service tax demand for the period prior to July 1, 2012. The Tribunal acknowledged this argument by referencing the judgment, which declared the section unconstitutional to the extent it levied service tax on services provided by clubs to their members. The Tribunal noted that the Gujarat High Court's decision was persuasive and had been followed by other courts, including the Supreme Court in "State of West Bengal vs. Calcutta Club Ltd." 2. Applicability of Service Tax on the Appellant's Activities: The appellant contended that its activities were excluded from the scope of "club or association service" as defined under Section 65(25a) of the Finance Act, 1994. The appellant emphasized that it was a non-profit organization engaged in promoting the non-alcoholic beverage industry, and its activities were for general public utility. The Tribunal found merit in this argument, citing the CESTAT decision in "Federation of Indian Chambers of Commerce and Industry vs. Commissioner," which supported the exclusion of non-profit organizations from the service tax net. 3. Nature of Contributions Received by the Appellant: The appellant argued that the contributions received from its members were voluntary and intended to cover deficits in finances, not for any specific services rendered. The Tribunal agreed, noting that there was no quid pro quo for the contributions, which were in the nature of donations rather than consideration for services. The Tribunal cited the Supreme Court's judgment in "State of West Bengal vs. Calcutta Club Ltd.," which held that contributions without a direct benefit to the payer could not be subjected to service tax. 4. Invocation of the Extended Period for Service Tax Demand: The appellant challenged the invocation of the extended period for service tax demand, arguing that it had acted in good faith and disclosed all relevant information to the Department. The Tribunal found that the appellant had not suppressed any facts and had cooperated with the Department. The Tribunal held that the extended period could not be invoked merely due to non-payment of tax or non-filing of returns, especially when the matter involved interpretation of law. 5. Imposition of Interest and Penalties: Given the Tribunal's findings on the invalidity of the service tax demand and the non-applicability of the extended period, it concluded that the imposition of interest and penalties was unwarranted. The Tribunal set aside the Order-in-Appeal, which had confirmed the service tax demand along with proportionate penalties and interest. Conclusion: The Tribunal held that the impugned Order-in-Appeal could not be sustained, setting it aside and allowing the appeal. The decision was based on the invalidity of Section 65(105)(zzze) of the Finance Act, 1994, the non-applicability of service tax on the appellant's activities, the nature of contributions received, and the improper invocation of the extended period for service tax demand. The Tribunal's order was pronounced in the court.
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