2020 (3) TMI 1156 - AT - Service Tax

Club or Association Service - Mutuality of Interest - distinct entities or not - providing various facilities and advantages only to its members and collects amounts from them in the form of subscriptions, tennis fee, billiards fee, games fee, gym fee, building fund, rent for roof garden etc. - relevant period 16.06.2005 to 31.03.2009 - HELD THAT - There is no doubt that the service has been rendered and amounts have been received for the service from the members - This specific question of law was decided by the Hon ble High Court of Jharkhand in the case of RANCHI CLUB LTD. VERSUS CHIEF COMMISSIONER OF CENTRAL EXCISE SERVICE TAX 2012 (6) TMI 636 - JHARKHAND HIGH COURT ) and it was held that club is formed on the principle of mutuality and therefore if the club provides services to its members, it is not a service by one legal entity to another and is not liable to service tax. Appeal allowed - decided in favor of appellant.

Summary

Issues:
Whether the activities of a club providing services to its members are liable to service tax under the category of "club or association service."

Analysis:
The appellant, a society registered under the Andhra Pradesh Public Societies Registration Act, collected various amounts from its members for services provided, leading to a demand of service tax. The appellant argued that as per legal precedents like the State of West Bengal vs Calcutta Club Ltd, there is no service tax liability when a club provides services to its members due to the absence of a service provider and recipient relationship. They cited similar decisions from various High Courts and the Apex Court supporting this stance.

The Tribunal examined whether the club and its members are distinct entities, thereby determining if the services provided should be taxable. Referring to the judgment of the Hon'ble High Court of Jharkhand in the case of Ranchi Club Ltd, it was held that clubs operate on the principle of mutuality, and services provided to members do not constitute a taxable service due to the absence of a service provider and recipient relationship. The Tribunal cited specific paragraphs from the Jharkhand High Court judgment emphasizing the principle of mutuality and how it applies to club activities.

The Tribunal further referenced a Larger Bench decision of the Supreme Court in the case of State of West Bengal vs Calcutta Club Ltd, affirming the non-levy of service tax on members' clubs in incorporated form from 2005 onwards. Following this precedent, the Tribunal held that the demand for service tax in the impugned order was unsustainable and set it aside, allowing the appeal with consequential relief, if any. The judgment aligns with the principle of mutuality and the legal position established by the higher courts regarding the taxation of services provided by clubs to their members.

In conclusion, the Tribunal's decision was based on the interpretation of the mutuality principle and established legal precedents, ultimately leading to the setting aside of the service tax demand on the appellant. The judgment provides clarity on the taxability of services rendered by clubs to their members, emphasizing the absence of a service provider and recipient relationship in such transactions.