2018 (12) TMI 945 - AT - Service Tax

Classification of services - Club or Association Membership Service or not? - services provided to independent customers and not the members - appellants are engaged in providing various club facilities to their members - Held that - The appellant is a private limited company which is engaged in operating and managing Palm Meadows club and the Members of the said club are not the members in the strict sense but they are customers of the appellant - the Members of the private limited company are different from the customers. The activities carried out by the appellant does not fall in the definition of Club or Association Membership Service as provided in Section 65(25a) of the Finance Act, 1994 - Further, the scope of Club or Association Membership Service have been discussed and clarified vide Board Letter MD(DR) F No. B1/6/2005-TRU dated 27.7.2005. It is clarified vide the said Circular that any service provided or to be provided to its Members by any Club or Association in relation to provision of services, facilities or advantages for a subscription or any other amount are liable for service tax. In the present case, the service recipients are totally independent person and they are only the customers who avail services of the appellant independently under the scheme formulated by the appellant. Further, the appellants are not paying the service tax on the entrance fee and are paying service tax with regard to all other services provided by them and it has been admitted by the Manager of the Company in its statement recorded during the investigation. The activities carried out on by the appellant does not fall in the definition of Club or Association service - appeal allowed - decided in favor of appellant.

Summary

Issues:
- Confirmation of demand under Section 73(2) of the Finance Act for 'Club or Association Membership Service'
- Imposition of interest and penalty under Sections 76, 77, and 78
- Applicability of service tax on services provided by the appellant
- Interpretation of the term 'Club or Association Membership Service'

Analysis:
The appeal challenged an order confirming a demand of ?62,75,575 under Section 73(2) of the Finance Act for 'Club or Association Membership Service' for the period 16.6.2005 to 31.12.2006, along with interest, penalties, and appropriation of a partial payment. The appellant, engaged in providing club facilities, argued that the impugned order was based on assumptions and incorrect inferences. The appellant contended that the nature of their activity did not fall under 'Club or Association Membership Service' as the individuals named as members were customers, not true members. The appellant highlighted that the service receivers were independent persons, not members, and the fee collected was from customers, not members.

The Tribunal examined the definition of 'Club or Association Membership Service' under Section 65(25a) of the Finance Act and a relevant circular clarifying the scope of this service. It was noted that the appellant, a private limited company managing a club, did not fit the definition of a 'Club or Association' as provided in the Act. The Tribunal observed that the service recipients were customers, not members, and the appellant was not collecting service tax on entrance fees. Even if considered a 'Club or Association,' the entrance fee charged was not liable to service tax, as per previous legal decisions cited.

Based on the analysis, the Tribunal concluded that the activities of the appellant did not align with the definition of 'Club or Association Membership Service.' Therefore, the demand confirmed under this category was deemed unsustainable in law. Consequently, the impugned order was set aside, allowing the appeal of the appellant with any consequential relief. The judgment was pronounced in open court on 04-12-2018.