2019 (5) TMI 1862 - AT - Service Tax

Levy of service tax - Club or Association Service and Restaurant Service - service tax on donation received from members as well as non-members - HELD THAT - It was stated in the show cause notice that appellant was receiving said donation from new members and was not discharging service tax on the same. It is also noted that the appellants have submitted before the learned Commissioner (Appeals) that the said amount collected was not a consideration for rendering of any service. It is also noted from the show cause notice that revenue also did not bring on record as to which service was being provided to the appellant out of the said amount collected as donation. When there was no quid pro quo vis- -vis donation by way of providing any service to such donors then such amounts do not in any way come within the ambit of amounts received against provision of Service and therefore, they were held to be not liable to be payment of service tax - Appeal allowed - decided in favor of appellant.

Summary

Issues: Liability of service tax on donations received by the appellant.

In the case at hand, the appeal was directed against an Order-in-Appeal passed by the Commissioner of Central Goods & Service Tax, Noida. The appellant, registered with the Service Tax Department, faced a demand of around ?43 lakhs for service tax for the period from 2011-12 to 2015-16. The dispute arose from amounts received by the appellant from new members, categorized as Admission Fee, Security, and Donation. The appellant contended that the donation amount was not a consideration for any service rendered and, therefore, not liable for service tax. The Original Adjudicating Authority confirmed the demand and penalty, leading to the appeal before the Commissioner (Appeals), who upheld the original order. The appellant then approached the Tribunal challenging the decision.

Upon hearing arguments from both sides, the Tribunal noted that the revenue did not establish which service, if any, was provided in exchange for the donation amount. Citing a precedent decision by a Coordinate Bench in the case of M/s Cosmopolitan Club, the Tribunal emphasized the absence of quid pro quo in the donations received. The Coordinate Bench had held that donations received without a promise or condition for any service in return do not fall within the scope of service tax liability under the Finance Act, 1994. Consequently, the Tribunal set aside the impugned order and allowed the appeal, following the precedent decision.

Therefore, the Tribunal's judgment revolved around the interpretation of service tax liability on donations received by the appellant. The decision highlighted the necessity of a reciprocal arrangement or benefit in exchange for donations to trigger service tax obligations, as established in the precedent case law. Ultimately, the Tribunal ruled in favor of the appellant, emphasizing the absence of a service element associated with the donations, leading to the dismissal of the service tax demand.