2018 (8) TMI 240 - AT - Service Tax

Club or association service - appellant, the Indian Medical Association, is held to have been rendering/ receiving services in lieu of membership of club or association service - Held that - The appellant has been charged under the category of Club & Association Service which stands held as ultra vires by the High Court of Gujarat in the case of Sports Club of India 2013 (7) TMI 510 - GUJARAT HIGH COURT as also by the High Court of Jharkhand in the case of Ranchi Club 2012 (6) TMI 636 - JHARKHAND HIGH COURT - the demand for service tax on the appellant under the category of Club or Association Service, rendered to its members is set aside. Reverse charge mechanism - Levy on the account of appellant having been paid subscription in foreign currency for obtaining membership of World Medical Association under reverse charge mechanism - Held that - We are unable to see clearly what is the nature of service received by the appellant from WMA - the demand of service tax on such amounts paid to WMA set aside and matter remanded to the original authority to examine whether any service has been received by the appellant from WMA which is liable for payment of service tax and pass denovo Orders on the subject - matter on remand. Appeal allowed in part and part matter on remand.

Summary

Issues:
1. Whether the Indian Medical Association is liable to pay service tax for providing/receiving club or association services.
2. Whether the exemption claimed by the Indian Medical Association as a charitable trust is valid.
3. Whether the membership fee paid by the Indian Medical Association to the World Medical Association is subject to service tax under reverse charge mechanism.

Analysis:

Issue 1: Liability for Club or Association Services
The Indian Medical Association (IMA) was found to be providing and receiving club or association services without discharging the service tax liability. The Department issued a show cause notice demanding the levy, which was confirmed by the Order under challenge. The IMA argued that its objectives were for the betterment of the public and thus covered under the exemption clause of the Finance Act, 1994. It also contended that as a member of the World Medical Association (WMA), it did not receive any services from WMA. The Department, however, maintained that the services provided by IMA fell under the service tax liability category. The Tribunal, citing previous decisions, set aside the demand for service tax on the IMA under the category of Club or Association Service.

Issue 2: Exemption Claim as a Charitable Trust
The IMA claimed exemption as a charitable trust under Section 65(25 a) of the Act. It argued that its objectives were aligned with public welfare and charitable work, thus exempting it from tax liability. However, the Department contended that the IMA did not qualify for the exemption. The Tribunal did not directly address this issue in its judgment.

Issue 3: Service Tax on Membership Fee to World Medical Association
Regarding the membership fee paid by the IMA to the World Medical Association (WMA) under reverse charge mechanism, the Tribunal observed that the nature of services received by the IMA from WMA was not clearly established. The Tribunal noted that the objectives of WMA aligned with public service activities similar to UNICEF and WHO. It set aside the demand for service tax on the amounts paid to WMA and remanded the matter to the original authority for further examination on whether any taxable services were received. The Tribunal upheld the decision to set aside the demand for service tax on consideration received from doctors across the country.

In conclusion, the Tribunal ruled in favor of the Indian Medical Association on the issue of Club or Association Service but remanded the decision on the service tax liability related to the membership fee paid to the World Medical Association for further examination.