2017 (10) TMI 708 - AT - Service Tax

Club or Association Service - consideration received from members - Section 65(25a) read with sub-clause (zzze) of Clause (105) of Section 65 of Finance Act, 1994 - Held that - the Tribunal in the case of Federation of Indian Chambers of Commerce and Industry 2014 (5) TMI 183 CESTAT New Delhi examined almost similar set of facts and concluded that the appellants are engaged in activities having objectives which amounts to public service and are of a charitable nature and relying in the case of Sports Club of Gujarat Ltd. 2013 (7) TMI 510 - GUJARAT HIGH COURT held that the service provided by the appellant is not authorized for levy and collection of service tax under club or association service as the Hon ble High Court held the same as constitutionally invalid - demand set aside - appeal allowed - decided in favor of appellant.

Summary

Issues:
1. Whether the appellant is liable to service tax under the category of "Club or Association" service for the period 16.06.2005 to 6.7.2009.
2. Whether the principle of "mutuality" applies in determining tax liability for activities of the appellant body.
3. Applicability of previous judgments in similar cases to the present situation.

Analysis:
1. The appellant, an Apex Federation body for export promotion, collected membership fees and other considerations from its members. The Revenue asserted that the appellant is liable to service tax under the category of "Club or Association" service. The Original Authority confirmed a service tax liability of ?2,78,01,252 and imposed penalties. The appellant contested this, arguing that as a registered society under the Society Registration Act, its activities are not that of a service provider to a service recipient. The Tribunal noted previous judgments and held that the service provided by the appellant is not subject to service tax under the "Club or Association" category. The impugned order was set aside, and the appeal was allowed.

2. The appellant's counsel argued that the activities of the appellant body, being a composition of members, do not constitute a service to the self and are based on the principle of "mutuality." They cited a Tribunal decision and similar cases of export promotion bodies to support their claim. The Revenue, however, reiterated the findings of the Original Authority. The Tribunal considered the principle of mutuality and previous judgments, ultimately concluding that the appellant's activities do not fall under the taxable category of "Club or Association" service, thus rejecting the tax liability imposed.

3. The Tribunal referred to previous decisions involving similar tax liability issues. In the case of Federation of Indian Chambers of Commerce and Industry, the Tribunal held that the appellant's activities were of a charitable nature and not subject to service tax under the "Club or Association" category. Additionally, in the case of Ranchi Club Ltd., the Jharkhand High Court ruled that in activities involving members of a club or association, there are no two legal persons to consider for tax liability. These precedents were crucial in determining the tax liability of the appellant in the present case. The Tribunal found that the impugned order could not be sustained based on these precedents and allowed the appeal.