2018 (6) TMI 657 - AT - Service Tax

Club or association service - Demand is raised on the interest received by the appellant association from the bank - Held that - Such interest cannot be considered as a consideration received for any service rendered by it to its members. It is stated by the appellant that they are not collecting any subscription from the members of the association and the money deposited is a corpus fund in the bank earns interest out of which the association is providing maintenance activities in the farms/estates. The accrued interest received from the bank on an amount deposited cannot be treated as subscription - demand do not sustain - appeal allowed - decided in favor of appellant.

Summary

Issues:
1. Whether the appellant association is liable to discharge service tax on the interest earned from the corpus deposit?
2. Whether the interest received by the appellant from the bank can be categorized as consideration for services rendered under 'Club or Association service'?

Analysis:

1. The appellant, registered under the Societies Registration Act, was engaged in agricultural activities and maintenance of estate infrastructure. The department alleged liability for service tax on interest earned from corpus deposits. After due process, the original authority confirmed the demand, interest, and penalties. The appellants, aggrieved by the decision, appealed before the Commissioner (Appeals), who upheld the decision. The Tribunal was approached subsequently.

2. The appellant argued that they did not collect subscriptions from members but received fixed amounts as corpus funds from estate owners. The interest earned from these deposits was utilized for maintenance activities. It was contended that this interest did not constitute consideration for services under 'Club or Association service'. The Tribunal, after considering submissions, held that the interest received from the bank on corpus funds was not akin to subscription fees. As the association did not collect subscriptions and the interest was utilized for maintenance, the demand for service tax on this interest was unsustainable. Citing precedent and the specific nature of the funds, the Tribunal set aside the demand and allowed the appeal with consequential reliefs as per law.

This judgment clarifies the distinction between interest earned on corpus funds and consideration for services in the context of service tax liability for associations engaged in specific activities.