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2019 (5) TMI 1434 - AT - Service TaxClub or Association Service - membership fee/subscription fee - mutuality of interest - whether the Federation of Andhra Pradesh Chamber of Commerce Industry (FAPCCI) is liable to pay service tax on membership fee/subscription fee collected by them from their members during the period 01.10.2005 to 30.09.2008? HELD THAT - The Federation of Andhra Pradesh Chamber of Commerce Industry is a not for profit company registered under Section 25 of the Companies Act, 1956 - The case is similar to the cases of SPORTS CLUB OF GUJARAT LTD VERSUS UNION OF INDIA 3 2013 (7) TMI 510 - GUJARAT HIGH COURT or RANCHI CLUB LTD. VERSUS CHIEF COMMISSIONER OF CENTRAL EXCISE SERVICE TAX 2012 (6) TMI 636 - JHARKHAND HIGH COURT inasmuch as the organisation is formed out of mutuality of interest and services are rendered by the appellant to its members and the members pay subscription fees. The appellant is not liable to pay service tax for the entire period in dispute - demand of interest and imposition of penalties also do not sustain - appeal allowed - decided in favor of appellant.
Issues:
Whether the Federation of Andhra Pradesh Chamber of Commerce & Industry is liable to pay service tax on membership fee/subscription fee collected from members during a specific period. Analysis: Issue 1: Liability to pay service tax on membership fee/subscription fee The issue in this case revolved around the liability of the Federation of Andhra Pradesh Chamber of Commerce & Industry (FAPCCI) to pay service tax on the membership fee/subscription fee collected from its members between 01.10.2005 to 30.09.2008. The Revenue contended that the amount collected was chargeable to service tax under the category of "Club or Association Service" as per Section 65(25a) read with Section 65(105)(zzze) of the Finance Act, 1994. A show cause notice was issued to the appellant demanding service tax along with interest and penalties. The lower authority confirmed the demand, interest, and penalties. The appellant appealed to the first appellate authority, which set aside the penalty under section 78 but upheld the order of the lower authority. The Revenue was aggrieved by the setting aside of the penalty under section 78, while the appellant was unhappy with the confirmation of duty, interest, and penalties under sections 76 & 77. Issue 2: Retrospective amendment and legal precedents The appellant's counsel argued that a retrospective amendment through the insertion of Section 96J in the Finance Act, 1994, exempted the service tax on membership fee collected by clubs or associations representing industry or commerce between 16th June 2005 to 31st March 2008. The counsel contended that this amendment covered the disputed period up to 31.03.2008, necessitating the setting aside of the demand, interest, and penalties for that period. Additionally, legal precedents from the High Courts of Jharkhand and Gujarat were cited, emphasizing that service tax could not be levied on amounts paid by members to clubs or associations due to the nature of mutuality of interest and self-service within such organizations. The Tribunal, considering these arguments and legal precedents, held that FAPCCI, being a not-for-profit company formed out of mutuality of interest, was not liable to pay service tax for the entire disputed period. Consequently, the demand, interest, and penalties were deemed unsustainable. In conclusion, the Tribunal allowed the appeal of the assessee in Appeal No. ST/337/2010, granting consequential benefits, and rejected the Department's appeal No. ST/345/2010.
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