2020 (3) TMI 1003 - HC - Service Tax

Clubs or association service - doctrine of mutuality - scope and exclusions from the definition of club or association or not - HELD THAT - The issue decided in the case of STATE OF WEST BENGAL ORS. VERSUS CALCUTTA CLUB LIMITED AND CHIEF COMMISSIONER OF CENTRAL EXCISE AND SERVICE ORS. VERSUS M/S. RANCHI CLUB LTD. 2019 (10) TMI 160 - SUPREME COURT where it was held that from 2005 onwards, the Finance Act of 1994 does not purport to levy service tax on members clubs in the incorporated form. It is evident that the proposed demand in the impugned show cause notice can no longer be sustained - petition allowed - decided in favor of petitioner.

Summary

Issues:
Challenge to show cause notice alleging service tax liability on a petitioner providing services as a "club or association" under the Finance Act, 1994.

Analysis:
The petitioner challenged a show cause notice alleging service tax liability for services provided as a "club or association" under the Finance Act, 1994. The notice demanded a substantial sum as service tax, education cess, and penalties for a specific period. Both parties acknowledged that the issue was settled by the recent Supreme Court decision in the case of State of West Bengal Vs. Calcutta Club Ltd. The respondent argued that the petitioner should respond to the show cause notice and seek relief based on the Supreme Court decision. The respondent contended that the writ petition against the notice was not maintainable, citing a Supreme Court decision. The court noted that typically, a writ challenging a show cause notice should not be entertained initially, and the petitioner should have replied to the notice first.

The court acknowledged that an interim injunction had prevented the adjudication of the show cause notice. The Supreme Court's decision in the State of West Bengal Vs. Calcutta Club Ltd. case had settled the legal question. The Supreme Court's observations emphasized that an entity "established or constituted" under any law could be excluded from the definition of a "club or association." The court highlighted that the term "body of persons" did not include incorporated companies or cooperative societies. The expression "unincorporated associations" encompassed individuals joining together for a common purpose. The court concluded that the Finance Act did not intend to levy service tax on members' clubs in incorporated form from 2005 onwards. Consequently, the court allowed the writ petition, setting aside the impugned order and closing the connected matters without costs.