2020 (5) TMI 1 - AT - Service Tax

Club and association Service - co-operative society - provision of service from one to person to another, or not - mutuality of interest - suppression of facts or not - time limitation - HELD THAT - The issue that whether the club, association or cooperative society are liable for service tax on services provided by these entities to their members was under litigation before various courts and judgments given by various High Courts in favour of the assessee that whenever there is service from such entities to its members, since the principle of mutuality is involved, it cannot be said that there is a provision of services. Time Limitation - HELD THAT - Subsequently, the issue has been decided by the larger bench of Supreme Court. In this background, it cannot be said that the appellant had any malafide intention to evade the service tax. It is also submitted by the appellant that they are the registered cooperative society and all the necessary books are maintained. Therefore, the bonafide belief of the appellant is established - the entire demand is under extended period, the same will not sustain on the time bar itself. Appeal allowed - decided in favor of appellant.

Summary

Issues:
Whether a registered cooperative society providing services to its members is liable for service tax under the head of Commercial Construction.

Analysis:
The appellant, a registered cooperative society for constructing industrial sheds, contested the demand proposed in the Show Cause notice under Commercial Construction. The Adjudicating Authority initially dropped the demand, but the Revenue appealed before the Commissioner (Appeals), who ruled in their favor. The appellant argued that as a cooperative society formed by members for mutual interest, the services provided were not subject to service tax. They cited a Supreme Court case supporting this position. The demand covered the period from April 2011 to September 2014, with the Show Cause Notice issued in March 2016 invoking the extended limitation period. The appellant emphasized the principle of mutuality of interest and cited supportive judgments from various High Courts. They claimed a genuine belief that their activities were not taxable, especially given the Supreme Court's involvement in the matter. The Revenue representative reiterated the findings of the impugned order.

Upon review, the Tribunal noted the ongoing litigation on whether entities like clubs, associations, or cooperative societies were liable for service tax when providing services to members. Various High Court judgments favored the assessee due to the principle of mutuality. The issue was ultimately decided by a larger Supreme Court bench. Considering this legal background, the Tribunal found no malafide intention on the appellant's part to evade service tax. The appellant's status as a registered cooperative society with proper record-keeping further supported their bona fide belief. Consequently, the Tribunal held that the demand, falling under the extended limitation period, could not be sustained on time bar grounds. As the decision was based on the limitation issue, the Tribunal did not delve into the merits of the case. Therefore, the impugned order was set aside, and the appeal was allowed solely on the basis of time bar. The Miscellaneous Application was also disposed of accordingly.