2008 (5) TMI 190 - AT - Service Tax

Main dispute is what is called club or association service covered u/s 65(25a) - Prima facie, each holiday resort run by the appellants answers the definition of club or association given under Section 65(25a) ibid - appellants cannot be said to have made out a prima facie case against the impugned demand of Service tax on merits - In view of financial hardship pleaded and ground on limitation it is held that the appellants should pre-deposit only a part of the amount of Service tax

Summary

Issues:
Challenge against demand of Service tax under Section 73(1) of the Finance Act, 1994 and penalties imposed. Interpretation of "club or association" service under Section 65(25a) of the Act. Appellants collecting amounts from time-sharers for holiday resorts. Appellants challenging the demand of Service tax on merits and limitation. Whether TRUMP CERTIFICATE qualifies as "goods" or deed of conveyance of right to reside in immovable property. Financial hardships claimed by the appellants. Period of limitation for demand notice for Service tax. Pre-deposit amount directed by the Tribunal.

Analysis:
The judgment dealt with a challenge against the demand of Service tax and penalties imposed on the appellants under the proviso to Section 73(1) of the Finance Act, 1994. The main issue revolved around the interpretation of "club or association" service under Section 65(25a) of the Act. The appellants collected amounts from individuals/partnership firms/companies admitted as "time-sharers" into holiday resorts. The demand was based on the total amount collected from these time-sharers for the period of 16-6-2005 to 30-9-2006. The appellants contested the demand on both merit and limitation grounds.

The Senior Advocate representing the appellants argued that the TRUMP CERTIFICATE issued to time-sharers should be considered as "goods" under the Sale of Goods Act, qualifying for exemption under Notification No. 12/2003-ST. Additionally, it was contended that the TRUMP CERTIFICATE could be seen as a deed of conveyance of a right to reside in immovable property, making the amount collected not exigible to Service tax before 1-7-2007. The appellants also pleaded financial hardships as a defense against the demand.

The Tribunal considered the submissions and examined whether the TRUMP CERTIFICATES could be classified as "goods" or immovable property. It was noted that certain decisions of the Supreme Court supported the appellants' argument regarding the nature of the certificates. However, the Tribunal found that the statutory definition of "club or association" under Section 65(25a) encompassed the holiday resorts run by the appellants, making the demand of Service tax prima facie valid. The Tribunal also analyzed the period of limitation for the demand notice and directed the appellants to pre-deposit a specific amount within a stipulated time frame.

In conclusion, the Tribunal upheld the demand of Service tax covered by Annexure-I to the impugned order but found in favor of the appellants regarding the demand covered by Annexure-II based on the limitation grounds. The judgment provided a detailed analysis of the legal arguments presented by both sides and made a specific directive for pre-deposit by the appellants.