2009 (2) TMI 123 - AT - Service Tax

Club or association - Section 65(25)(a) - The appellants are engaged in providing effluent treatment service to industrial establishments located in the area of GIDC, Vapi. The service tax amounting to more than Rs. 3.26 crores with interest as applicable has been demanded and penalty equal to the service tax demanded under Section 78 has been imposed and penalties have been imposed under Sections 76 and 77 of Finance Act, 1994 against the appellant - In view of the fact that the Hon ble High Court of Gujarat has granted unconditional stay to M/s. Green Environment Services Co-operative Society Ltd. in a similar case, tribunal allowed the stay petition unconditionally.

Summary

Issues:
- Applicability of service tax on effluent treatment service provided by the appellant
- Interpretation of exclusion clause under Section 65(25)(a) of the Finance Act, 1994
- Granting of unconditional stay against recovery of service tax

Analysis:

1. Applicability of service tax on effluent treatment service provided by the appellant:
The appellants were engaged in providing effluent treatment service to industrial establishments in a specific area. A substantial service tax amount, along with penalties, was demanded from the appellants. The advocate for the appellant argued that the company was set up as a non-profit limited company for managing hazardous solid waste and maintaining an effluent treatment plant. The contention was that the company should be excluded from service tax liability as it fell under the category of a club or association engaged in activities of public service, charity, religion, or politics. Reference was made to a previous judgment by the Hon'ble High Court of Gujarat granting a stay against the recovery of service tax for a similar society engaged in providing comparable services.

2. Interpretation of exclusion clause under Section 65(25)(a) of the Finance Act, 1994:
The advocate for the appellant relied on the exclusion clause under Section 65(25)(a) to argue that the company should be considered as falling within the category of a club or association engaged in activities of public service and charity, thus exempting them from service tax liability. On the other hand, the SDR highlighted that the Hon'ble High Court of Gujarat had suggested that the appellants should seek exemption from the Government of India, indicating that they might not be covered under the exclusion clause. The appellant's representation to the government was reportedly rejected, but the stay on recovery was continued based on this development.

3. Granting of unconditional stay against recovery of service tax:
The Tribunal considered the precedent set by the Hon'ble High Court of Gujarat in granting an unconditional stay to a similar cooperative society providing comparable services. Based on this precedent and the arguments presented by the appellant's advocate, the Tribunal decided to allow the stay petition unconditionally, effectively halting the recovery of the demanded service tax amount and associated penalties.

In conclusion, the judgment by the Appellate Tribunal CESTAT, Ahmedabad dealt with the complex issues of service tax liability for effluent treatment services, the interpretation of exclusion clauses under the Finance Act, 1994, and the granting of an unconditional stay against the recovery of service tax. The decision was influenced by legal arguments, precedents, and the specific circumstances of the case, ultimately resulting in the allowance of the stay petition in favor of the appellant.