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2020 (1) TMI 198 - HC - Service TaxClub and association service - principles of mutuality - collects subscription and usage charges from its members - levy of service tax - Since levy of service tax on service provided by club/association was introduced in the Finance Act 1994 it was the view of the Service Tax Department that clubs/associations in the country were liable to pay the service tax for the services rendered by them to their members - clubs contented that there was no provision of service by applying principle of mutuality. HELD THAT - The present writ petition can be disposed in the light of the latest decision of the Hon ble Supreme Court rendered in State of West Bengal and Others vs Calcutta Club Ltd and in Chief Commissioner of Central Excise and Service Tax and Another vs Ranchi Club Ltd 2019 (10) TMI 160 - SUPREME COURT - At the time when said counter was prepared by the respondent the final order of the Hon ble Supreme Court in the above cited case had not been pronounced. The Supreme Court has pronounced the above judgment only on 03.10.2019. It is therefore not necessary to deal with the counter filed by the respondent. The Hon ble Supreme Court has considered the provisions of the Finance Act 1994 as it stood prior to and after passing of the Finance Act 2005 and after 2012 after the advent of negative list with the introduction of the definition of service in section 65B (44) of the Finance Act 1994 vide Finance Act 2012 w.e.f. 01.07.2012 Following the above decision of the Hon ble Supreme Court in the above case the present Writ Petition deserves to be allowed - Petition allowed - decided in favor of petitioner.
Issues Involved:
1. Legality of service tax demand on services provided by clubs/associations to their members. 2. Applicability of the principle of mutuality. 3. Validity of the impugned order in light of recent Supreme Court judgments. Issue-wise Detailed Analysis: 1. Legality of Service Tax Demand on Services Provided by Clubs/Associations to Their Members: The petitioner, a registered company under Section 25 of the Indian Companies Act, 1956, was issued two Show Cause Notices (SCNs) demanding service tax for services provided to its members. The first SCN (SL.No.33/2014-ST(JC)) dated 21.04.2014 covered the period from 01.10.2008 to 31.01.2014, demanding ?30,86,565. The second SCN (SL.No.88/2015-ADC) dated 16.10.2015 covered the period from 01.02.2014 to 31.03.2015, demanding ?17,04,205. The total demand was ?47,90,770. The impugned Order-in-Original No.4/2016 dated 07.01.2016 confirmed these demands. However, the petitioner confined the writ petition to the first SCN only. 2. Applicability of the Principle of Mutuality: The petitioner argued that no service tax was payable on services provided to its members based on the principle of mutuality, as held by the Gujarat High Court in Sports Club of Gujarat Ltd vs Union of India, 2013 (31) STR 645, and the Jharkhand High Court in Ranchi Club Ltd vs Chief CCE and ST, 2012 (26) STR 401. These decisions declared that no service tax was payable for services rendered by clubs/associations to their members. 3. Validity of the Impugned Order in Light of Recent Supreme Court Judgments: The petitioner relied on the recent Supreme Court decision in State of West Bengal and Others vs Calcutta Club Ltd and Chief Commissioner of Central Excise and Service Tax and Another vs Ranchi Club Ltd, 2019 SCC OnLine SC 1291. The Supreme Court held that incorporated clubs or associations were not liable to pay service tax on services provided to their members, applying the principle of mutuality. The Court examined the Finance Act provisions before and after the 2012 amendments and concluded that members' clubs in incorporated form were not included in the service tax net. Judgment: The High Court, following the Supreme Court's decision, quashed the impugned order concerning the first SCN (SL.No.33/2014-ST(JC)) dated 21.04.2014. The Court allowed the writ petition, stating that the demand confirmed against the first SCN was void and of no effect in law. The petitioner was given liberty to seek remedy against the demand confirmed in the second SCN (SL.No.88/2015-ADC) dated 16.10.2015 in accordance with the law. The writ petition was allowed with no cost, and the connected Miscellaneous Petition was closed.
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