2017 (4) TMI 35 - AT - Service Tax

Liability of service tax - Business Auxiliary Service - Manpower Recruitment or Supply Agency Service - Intellectual Property Right Service - Club or Association Service - Held that - It is by now a settled principle that the services provided by the Club or Association to its members would not amount to service provided to another - reliance placed in the case of Sports Club of Gujarat Ltd. vs. Union of India 2009 (8) TMI 667 - Gujarat HIGH COURT - the appellants are not liable to service tax under the category of Club or Association Service - demand not sustained. Business Auxiliary Service - Held that - It is clear from the arrangement, that the appellant is conducting periodical MAT examination. Interested students pay the fee and write the examinations. The grades obtained by the student, as certified by the appellant help the students to get admission in the management institute. It helps the management institute also in selecting the right students for their course. The appellant is not acting on behalf of anybody while conducting the MAT examination. We find there is no provision of service on behalf of any client. As such, we hold no service tax can be levied on the examination fee collected by the appellant from the students for MAT examination - demand not sustained. Manpower recruitment or supply agency service - Held that - the appellants are collecting charges from the organizations and there is no public service involved in conducting examination for recruitment of personnel for various organizations which included commercial public sector undertakings. As such, we are of the opinion that the services rendered by the appellants are liable to be taxed under manpower recruitment or supply agency service - however, such demand has to be confirmed only for the normal period covered by both the show cause notices. As already noted, the second show cause notice also invoked extended period which is legally unsustainable - demand sustained for normal period. Intellectual Property Right Service - It is the case of the appellant that the said contents are copy right materials and, as such, are excluded from the purview of tax entry of intellectual property right - Held that - the royalty payment is admittedly for providing contents for the journal. It is not relating to right to intangible property like trade market designs, patterns or any other similar intangible property. Admittedly, the contents of the journal are copy right materials and, as such, are excluded from the tax liability under IPR service - demand not sustained. Extended period of limitation - SCN dated 23/04/2009 was issued covering the period 10/09/2004 to 31/03/2008. Another SCN on the same issues was issued on 24/10/2011 covering the period 2008-2009 to 2010-2011. The second SCN also was issued invoking extended period of demand - Held that - repeat SCN on the same issue on similar set of facts cannot be issued invoking extended period of time. Such action is not legally sustainable - penalties set aside. Appeal allowed - decided partly in favor of assessee.

Summary

Issues Involved:
1. Club or Association Service
2. Business Auxiliary Service (BAS)
3. Manpower Recruitment or Supply Agency Service
4. Intellectual Property Right (IPR) Service
5. Extended Period for Demand
6. Penalties

Detailed Analysis of the Judgment:

Club or Association Service:
The primary issue was whether the appellant's services to its members could be taxed under the category of Club or Association Service. The Original Authority held that the subscription fee recovered by the appellant was taxable. However, the Tribunal referred to various High Court decisions, including Ranchi Club Limited, CST vs. Delhi Gymkhana Club Ltd., and others, which established that services provided by a club to its members do not constitute services to another entity. Therefore, it was concluded that the appellants are not liable to service tax under this category.

Business Auxiliary Service (BAS):
A substantial demand was made under BAS for fees collected from students for the MAT examination. The Tribunal found no evidence that the appellant received consideration from educational institutes for conducting the exams. The Original Authority's observation that the appellant acted as an agent for both students and institutes was deemed factually incorrect. The Tribunal ruled that the appellant conducted the MAT exams independently and did not provide services on behalf of any client, thus no service tax liability arises under BAS.

Manpower Recruitment or Supply Agency Service:
The appellant conducted examinations for recruitment on behalf of various organizations. The Tribunal noted that the appellant's activities fell within the definition of manpower recruitment agency as per Section 65 (68) of the Finance Act, 1994. However, it was determined that the demand should be limited to the normal period covered by the show cause notices due to the potential for a bona fide belief regarding non-liability to tax.

Intellectual Property Right (IPR) Service:
The appellant received royalties for providing content for the journal "Indian Management." It was argued that these contents were copyrighted and thus excluded from the IPR service tax category. The Tribunal agreed, noting that the royalties pertained to copyrighted materials, which are not subject to tax under IPR services.

Extended Period for Demand:
The Tribunal addressed the issue of the extended period for demand, noting that the second show cause notice invoked an extended period for the same issues and facts as the first. Citing the Supreme Court decision in Nizam Sugar Factory, the Tribunal held that repeat show cause notices invoking extended periods are not legally sustainable.

Penalties:
Given the findings on the non-liability of service tax under various categories and the unsustainability of the extended period for demand, the Tribunal set aside the penalties imposed on the appellant.

Conclusion:
The impugned order was found unsustainable for service tax liabilities under Club or Association Service, BAS, and IPR Service. The service tax liability under Manpower Recruitment or Supply Agency Service was restricted to the normal period of demand. All penalties imposed on the appellants were set aside, and the appeal was disposed of accordingly.