2016 (10) TMI 622 - AT - Service Tax

Taxability of club membership fees - Society registered under Society Registration Act, 1860 - service rendered by club to its members - Held that - the decision in the case of Ranchi Club Ltde vs Chief Commissioner of Central Excise 2012 (6) TMI 636 - Jharkhand High Court relied upon where it was held that in view of the mutuality and in view of the activities of the club, if club provides any service to its members may be in any form including as mandap keeper, then it is not a service by one to another in the light of the decisions referred above as foundational facts of existence of two legal entities in such transaction is missing. On perusal of the the Memorandum of Association of the Indian Port Association it is found that the membership of the Association shall be open to all major ports in India. It is also emerging from the Memorandum that the objectives of the Association are to carry out various activities to help the members i.e. various major ports in India. Hence, there is mutuality of interest between the Association and its Members, inasmuch as the society is comprising of all the major ports in India and any activity even if in the nature of service, is rendered to its members. Demand not sustainable - appeal allowed - decided in favor of appellant.

Summary

Issues:
1. Whether the services provided by the appellant to its members are liable to service tax under the category of club or association service?
2. Whether the appellant, a Society registered under the Society Registration Act, 1860, formed to represent major ports in India before various forums, is required to pay service tax on membership fees received from its members?
3. Whether the appellant's services fall under the category of public service and are not taxable under the club or association service?

Issue 1:
The appellant challenged the demand of service tax amounting to ?3.36 crores, arguing that the services provided are not taxable under the category of club or association service but are in the nature of public service. They contended that the primary requirement of having separate service provider and service recipient is not satisfied in their case, thus no demand of service tax should be imposed. The Tribunal analyzed various case laws, including CCE Surat vs. Surat Tennis Club and Sports Club of Gujarat Ltd. vs. Union of India, which supported the appellant's argument. The Tribunal found that there is mutuality of interest between the Association and its members, as the society comprises all major ports in India, and any service rendered, even if in the nature of service, is provided to its members. Therefore, the Tribunal held in favor of the appellant, setting aside the impugned order and allowing the appeal.

Issue 2:
The Tribunal examined the Memorandum of Association of the Indian Port Association and noted that the membership of the Association is open to all major ports in India, with objectives to carry out activities to assist its members, the major ports in India. The Tribunal observed that there is a mutual interest between the Association and its members, indicating that any service provided, even if categorized as a service, is rendered to its members. The Tribunal referred to the definition of "club or association" as per section 65(25aa) and concluded that the services provided by the appellant to its members do not fall under the taxable category of club or association service. The Tribunal referred to the case of Ranchi Club Ltd. vs. Chief Commissioner of Central Excise, where it was held that in transactions involving club activities, the foundational facts of the existence of two legal entities are missing, leading to a conclusion that services provided by the club to its members are not considered as services by one to another.

Issue 3:
The Tribunal reviewed various judicial pronouncements, including decisions by the Hon'ble High Court of Gujarat and Tribunal cases, which supported the appellant's argument that the services provided to its members are not liable to service tax under the club or association service category. The Tribunal found that the issue had been settled in favor of the appellant by these judicial pronouncements. Consequently, the Tribunal set aside the impugned order and allowed the appeal, ruling in favor of the appellant.

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