2019 (1) TMI 1178 - AT - Service Tax

Valuation - Club or association service - principles of mutuality - inclusion of advance enrolment fee, subscription charges and other sums in assessable value - time limitation - Held that - The issue is no longer res integra in view of the decision of Gujarat High Court in the case of Sports Club of Gujarat Ltd. 2013 (7) TMI 510 - GUJARAT HIGH COURT and that of Jharkhand High Court in the case of Ranchi Club Ltd. 2012 (6) TMI 636 - JHARKHAND HIGH COURT - It has been categorically held that in view of the mutuality of interest and in view of the activities of the club, if the club provides services to its Members that would not constitute service to others. In fact, Gujarat High Court has held the levy itself to be ultra vires of the constitution - various judgments have held that entry fees are subscription fees, mandap charges, charges for common effluent treatment, etc., have been held to be excluded from the purview of taxation. Charges collected from guests and non-members - Held that - The appellant contended that the services rendered to non-members have come to be charged with effect from 5.1.2011 only. However, it is found that it was held by Jharkhand High Court in the case of Ranchi Club Ltd. that so far as services by club to other than members are chargeable as submitted by the petitioner therein. Therefore, in the instant case also, the charges like golf set hire charges and tournament surplus are collected from non-members - The above judgment was rendered in respect of the period prior to 5.1.2011. Therefore, the contentions of the appellants that charges collected from non-members are taxable only from 5.1.2011 are not acceptable. It cannot be said that principle of mutuality of interest is applicable in respect of non-members. For the sake of computation of such charges collected from non-members and the tax payable on the same, the issue requires to go back to the original authority - appeal allowed by way of remand.

Summary

Issues:
1. Taxability of services provided by a club to its members.
2. Application of the principle of mutuality in determining tax liability.
3. Validity of the service tax levy on various charges collected by the club.
4. Time limitation for invoking extended period for demand.
5. Dispute regarding taxability of charges collected from non-members.

Analysis:

Issue 1: Taxability of services provided by a club to its members
The Appellant, a golf club, contested the tax liability on services provided to its members, arguing that the principle of mutuality applies, and no service can be deemed rendered by the club to its members. The Tribunal referred to various court decisions, including the Gujarat High Court's ruling that services provided by a club to its members do not constitute services to others. The Tribunal held that certain charges collected from guests and non-members are taxable, as per the Jharkhand High Court's decision. The judgment emphasized that charges directly attributable to an identified activity are taxable, and the demand should be limited accordingly.

Issue 2: Application of the principle of mutuality
The Appellant relied on the mutuality principle to argue against tax liability on various charges, such as cover charges and staff welfare collections. The Tribunal acknowledged the principle but clarified that charges collected from non-members for specific services are taxable. It emphasized the need to assess each category of fee or charge separately to determine taxability based on identified services provided.

Issue 3: Validity of the service tax levy on various charges
The Appellant challenged the service tax levy on charges like advance enrolment fees and subscription amounts, citing court decisions supporting their position. The Tribunal noted conflicting decisions but ultimately held that certain charges collected from non-members are taxable, and the demand should be restricted accordingly.

Issue 4: Time limitation for invoking extended period for demand
The Appellant argued that the demand was time-barred as all relevant information was available to the revenue department, and the extended period should not have been invoked. The Tribunal did not find merit in this argument, focusing instead on the taxability of specific charges based on identified services provided.

Issue 5: Dispute regarding taxability of charges collected from non-members
The Tribunal addressed the dispute over the taxability of charges collected from non-members, emphasizing that charges directly related to specific services provided are taxable. It remanded the case to the original authority to determine the tax liability on charges recovered from non-members for services provided.

In conclusion, the Tribunal allowed the appeal by remanding the case to the original authority with a direction to restrict the demand to charges recovered from non-members for services provided, based on the taxability of identified activities.