2018 (1) TMI 1274 - AT - Service Tax

Renting of Immovable Property Services - Revenue felt that the appellants are providing Club or Association services for the period before 01.07.2012 and was not covered under the term public library for the period after 01.07.2012 - whether the activity engaged by the appellants falls in the category of club or association service during the period upto 31.06.2012 and whether the activities is classifiable as taxable service w.e.f 01.07.2012? Held that - Admittedly, The Browser is open to general public and accessible to all, who pay subscription amount. Further, the fact that it has no reading room or no newspaper or periodicals does not take away from the fact that public at large has right to though it is regulated by way of the prescribed fees - the library being run by the appellants is in the nature of a public library. The activity of lending and return of books is the fee based activity for which they charge subscription fees. The services are being provided not to the share holders of the company but to third parties. As per the definition under Section 65(25)(a) club or association is a body of persons which provides services to its members. Subsequently, w.e.f. .01.05.2011, the definition was changed and Section 65(25)(a) was replaced by Section 65(25)(aa) to add the word Primarily to its members. The services in question are being provided not to its share holders, who are the members of the company but to other persons who are third parties - for the period after 01.05.2011 upto 30.06.2012, the show cause notice has not made any allegation invoking Rule 65(25)(aa), which had come into effect after that date - For the period after 01.07.2012, in the negative list of services on which service tax is exempted, the services of public libraries are exempted under N/N. 25/2012-ST dated 20.06.2012. Appeal allowed - decided in favor of appellant.

Summary

Issues Involved:
1. Classification of the appellant's service as "Club or Association Services" before 01.07.2012.
2. Classification of the appellant's service as taxable service after 01.07.2012.
3. Interpretation of "public library" for service tax exemption post 01.07.2012.

Issue-wise Detailed Analysis:

1. Classification of the appellant's service as "Club or Association Services" before 01.07.2012:
The appellant, a private limited company registered under the Companies Act, operated a book store named 'The Browser' which enrolled members who could borrow books for a fee. The Revenue classified this activity under "Club or Association Services" per Section 65(25)(a) and 65(25)(aa) of the Finance Act, 1994. The appellant argued that the services were not provided to its shareholders but to third parties, and thus should not be classified as "Club or Association Services." The Tribunal noted that the definition of "Club or Association" implies services provided to members, and since the services were provided to non-members, the principle of mutuality did not apply. The Tribunal referenced the Ranchi Club case, which distinguished between income from members and non-members, supporting the appellant's stance. Consequently, the Tribunal held that the demand for the period up to 30.06.2012 was not sustainable.

2. Classification of the appellant's service as taxable service after 01.07.2012:
For the period after 01.07.2012, the definition of taxable service under Section 65(105)(zzze) included services provided by any club or association to its members or any other person. The Tribunal noted that the show cause notice did not invoke Section 65(25)(aa), which came into effect after 01.05.2011, and thus, the demand for the period after 01.05.2011 up to 30.06.2012 could not be sustained. The Tribunal cited the case of M/s Federation of India Chambers of Commerce and Industry, which held that services provided to non-members fall outside the scope of "Club or Association Services" prior to 01.05.2011 and that the show cause notice must explicitly allege liability based on amended provisions.

3. Interpretation of "public library" for service tax exemption post 01.07.2012:
Post 01.07.2012, services of public libraries were exempt under Notification No. 25/2012-ST dated 20.06.2012. The Revenue argued that a public library must be funded or aided by the Government. The appellant contended that 'public' means accessible to the general public, irrespective of government funding. The Tribunal agreed with the appellant, referencing the Supreme Court's definition in Gaurav Jain v. Union of India, which stated that a public place is accessible to the public, even if it is private property. The Tribunal also cited the United India Insurance Co. Ltd. v. Parvathi Devi case, which supported a broad interpretation of 'public place.' The Tribunal concluded that 'The Browser' was a public library as it was open to the general public upon payment of a subscription fee.

Conclusion:
The Tribunal found no merit in the Commissioner (Appeals)'s order and set it aside. The appeal was allowed, and the operative part was pronounced in open court.