2020 (6) TMI 686 - HC - Service Tax

Levy of Service Tax - Club or Association Service - business of time share -principles of mutuality - HELD THAT - This Court is of the view that there is no requirement for the respondents to levy service tax on the petitioner, with respect to the services provided to its members - Petition allowed.

Summary

Issues:
1. Liability to pay service tax on contracts for time share services rendered by a club or association.
2. Clarification on the rate of service tax on entrance fees collected in installments.
3. Applicability of service tax on contracts entered before and after a specific date.

Analysis:
1. The petitioner, a club incorporated in 1996 for time share services, was asked to furnish details for service tax by the third respondent. The first respondent clarified that all services provided after 16.06.2005 are taxable, including time share services to members. The petitioner contested the tax on entrance fees collected post-16.06.2005 for contracts pre-dating that date. The petitioner filed two writ petitions seeking prohibition on levying service tax on pre-16.06.2005 contracts and on entrance fees exceeding 10.2%. The High Court noted the issue was covered by a Supreme Court decision regarding unincorporated associations and held in favor of the petitioner, disallowing the service tax levied on the services provided to its members.

2. The High Court referenced the Supreme Court decision, stating that incorporated members' clubs were not subject to service tax post-2005. Following this interpretation, the court found no basis for the respondents to levy service tax on the petitioner for the services provided to its members. The court allowed the writ petitions, ruling in favor of the petitioner and concluding that no costs were to be imposed. The connected miscellaneous petitions were closed accordingly.