2009 (8) TMI 65 - HC - Service Tax

Concept of mutuality membership of club Jurisdiction of high court to accept appeal - service tax on service provided by club to its members CESTAT held that when the service is provided by a club to its members, it does not attract service tax held that - determination of any question in relation to rate of duty or to the value of goods for the purpose of assessment and when it is decided by the CESTAT, appeal there against is provided to the Supreme Court under Section 35L(b) and no such appeal is permissible to the High Court appeal dismissed on the ground of jurisdiction

Summary

Issues Involved:
1. Maintainability of the appeal under Section 35 of the Central Excise Act, 1944.
2. Application of the principle of mutuality in relation to service tax liability of a club.
3. Jurisdiction of the High Court versus the Supreme Court in appeals involving the determination of the rate of duty or value of goods for assessment purposes.

Issue-wise Detailed Analysis:

1. Maintainability of the Appeal:
The appellant, Commissioner of Service Tax, filed an appeal under Section 35 of the Central Excise Act, 1944, challenging the orders of the Custom Excise & Service Tax Appellate Tribunal (CESTAT). The appeal's maintainability was contested. The High Court examined the relevant provisions, including Sections 35, 35E, 35G, and 35L of the Central Excise Act. Section 35G allows appeals to the High Court except for orders relating to the rate of duty or value of goods for assessment purposes, which fall under Section 35L(b) and are appealable to the Supreme Court. The court concluded that the appeal pertained to the rate of duty of service tax, thus falling under Section 35L(b), making the High Court appeal not maintainable.

2. Principle of Mutuality and Service Tax Liability:
The respondent, Delhi Gymkhana Club Limited, argued that no service tax was payable as the services were provided by the club to its members, invoking the principle of mutuality. The Assistant Commissioner initially confirmed the demand for service tax and penalties. However, the Commissioner (Appeals) and subsequently the CESTAT set aside this order, relying on the Calcutta High Court judgments in Dalhousie Institute v. Asstt. Commissioner, Service Tax Cell and Saturday Club Ltd. v. Asstt. Commissioner, Service Tax Cell. These judgments held that services provided by a club to its members do not attract service tax due to the principle of mutuality, as there is no commercial transaction between two distinct entities.

3. Jurisdiction of High Court vs. Supreme Court:
The court referred to Section 35G, which excludes appeals involving the determination of the rate of duty or value of goods for assessment purposes from the High Court's jurisdiction. Instead, such matters are appealable to the Supreme Court under Section 35L(b). The Supreme Court's interpretation in Navin Chemicals Mfg. & Trading Co. Ltd. v. Collector of Customs clarified that issues related to the rate of duty or valuation directly and proximately for assessment purposes fall under the Supreme Court's jurisdiction. The High Court reiterated that the essence of the dispute was the rate of duty of service tax, thus falling within the purview of Section 35L(b).

Conclusion:
The High Court dismissed the appeals for lack of jurisdiction, directing that the appropriate remedy for the appellant was to file an appeal under Section 35L of the Act to the Supreme Court. The court emphasized that the determination of the rate of duty of service tax, even if termed differently, essentially pertains to the rate of duty, necessitating an appeal to the Supreme Court.