2020 (9) TMI 433 - AT - Service Tax

Club and Association Service - Meaning of club or association - Body of Persons - demand of service tax under the category of club or association services and business exhibition service on various heads of income broadly categorized under sponsorship from members for seminars and workshops, sale of publications, grants received from Government and European Commission and miscellaneous receipts - periods involved in the two show cause notices are from April, 2007 to March, 2012 and April 2012 to March, 2013 - HELD THAT - The taxable service under section 65(105) (zzze) of the Act has also been amended by adding the expression or any other person after the expression to its members thus widening the tax net to include non-members of club or association as well - With effect from July 1, 2012, service has been defined under section 65B (44) of the Act and service tax is leviable on all services as defined except the negative list of services set out in section 66D of the Act. The club or association was earlier defined under section 65(25a) and 65(25aa) to mean any person or body or persons providing service. The expression body of persons cannot be possibly include persons who are incorporated entities, as such entities have been expressly excluded under sections 65(25a)(i) and 65(25aa)(i) as any body established or constituted by or under any law for the time being in force . Body of persons , therefore, would not include a body constituted under any law for the time being in force. Thus, companies and cooperative societies, prior to July 1, 2012, which were registered under respective Acts, would be constituted under those Acts. Incorporated clubs or associations, therefore, prior to July 1, 2012 which were registered under Acts, would be constituted under those Acts. Incorporated clubs or associations, therefore, prior to July 1, 2012 were not included in the service tax net. After July 1, 2012, also the situation does not change for the reason that Explanation 3 uses the same expression. It is not in dispute that in the present case the respondent has been incorporated under the provisions of the Societies Registration Act. Thus, even if the receipts under club or association services rendered by the Respondent are counted as income of the Respondent, even then the same cannot be taxed and the Appeal is liable to be dismissed on this ground alone. Appeal dismissed - decided against Revenue.

Issues Involved
1. Classification of services under 'business auxiliary service' vs. 'membership of club or association service'.
2. Taxability of income from AGM sponsorships, workshops, and hiring consultants.
3. Taxability of grants received from the Government and European Commission.
4. Applicability of service tax on sales of publications.

Issue-wise Detailed Analysis

1. Classification of Services
The Department contended that the Adjudicating Authority incorrectly classified a portion of the demand under 'business auxiliary service' instead of 'membership of club or association service'. The Tribunal noted that the definition of 'club or association' under Section 65(25a) of the Finance Act, 1994, and its amendments, excluded bodies established or constituted by law from the service tax net. The Supreme Court's decision in Calcutta Club Ltd. clarified that incorporated entities, such as societies registered under the Societies Registration Act, are not subject to service tax under 'club or association services'. Therefore, the Tribunal upheld the classification under 'business auxiliary service' for the income from directory-related activities.

2. Taxability of Income from Sponsorships and Workshops
The Department argued that the Adjudicating Authority did not provide reasons for accepting the respondent's claim that income from 'AGM Sponsorship', 'Sponsorship from Members and Workshop', and 'Sponsorship from Members for Hiring Consultants' fell under 'sponsorship service' and not 'membership of club or association service'. The Tribunal referenced the Supreme Court's interpretation that services provided by incorporated entities to their members are not taxable under 'club or association services' due to the principle of mutuality. Consequently, the Tribunal found no basis to overturn the Adjudicating Authority's decision on this issue.

3. Taxability of Government and European Commission Grants
The Department contended that the Adjudicating Authority dropped the demand for service tax on grants received from the Government and European Commission without sufficient reasoning. The Tribunal reiterated that receipts from government and non-government grants were not in the nature of consideration for providing any service to the grantors. As such, these receipts were not subject to service tax.

4. Applicability of Service Tax on Sales of Publications
The Adjudicating Authority had dropped the demand for service tax on the sale of publications, considering it a sale transaction. The Tribunal upheld this view, noting that sales transactions are not susceptible to service tax. The Tribunal also emphasized that service tax cannot be levied on every income reflected in the financial statements without satisfying the conditions mentioned in Section 65B(44) of the Finance Act, 1994.

Conclusion
The Tribunal dismissed the Department's appeal, affirming that the respondent, being an incorporated entity under the Societies Registration Act, is not liable for service tax under 'club or association services'. The Tribunal upheld the Adjudicating Authority's classification and decisions regarding the taxability of various incomes, including sponsorships, grants, and sales of publications. The appeal was dismissed on the grounds that the Finance Act does not levy service tax on members' clubs in the incorporated form.

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