2022 (12) TMI 1147 - AT - Service Tax

Levy of service tax - Club or Association Service - Intellectual Property Rights Service - Transport of Goods by Road Service - Development and Supply of Contents Service. Club or Association Service - appellant received contributions from its members which are relatable to various privileges which the members enjoy - HELD THAT - In 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 , the Supreme Court held that companies and co-operative societies which are registered under the respective Acts can be said to have been constituted under those laws and therefore, get excluded from the definition of club or association under section 65(25a) and consequently, any service rendered by them will not be exigible to service tax under section 65(105)(zzze) - In this case, it is undisputed that the appellant is registered as a trust under the Indian Trusts Act. Therefore, the ratio of Calcutta Club Ltd. squarely applies to this case. Hence, the demand under this head cannot be sustained. Intellectual Property Rights Service - it is submitted that the demands under this head on the appellants pertain to the period 1.4.2007 to 31.3.2010 when intellectual property rights service was taxable but copyrights were specifically excluded from the purview of IPR by law - HELD THAT - On perusal of the agreements in question, we find that the appellants gave the service recipients the right to print or telecast or make copies of the Yoga programmes which they produced. In one agreement, the programmes were also being translated into Russian and telecast to Russia and CIS countries (countries which were part of the former Soviet Union). Evidently, the appellants allowed their copyrighted materials to be used for a consideration. The demand of duty is under the head IPR services chargeable under section 65(105)(zzr) - an intellectual property service will be rendered if the IPR is either transferred temporarily or its use or enjoyment is permitted. The scope of the IPR in the service tax law specifically excludes copyrights. Therefore, the amounts earned under the agreements by the appellants are clearly excluded from the scope of the taxing statute for IPR service. The demands under this head cannot, therefore, be sustained. Transport of goods by road service - amounts paid as freight invoking Rule 2(1) (d) of the Service Tax Rules under reverse charge - HELD THAT - Charging sections of taxing statutes must be strictly interpreted. Section 65(50b) clearly defines goods transport agency as one who renders any service in relation to transportation of the goods and issues consignment notes. It is a well settled law that if no consignment notes are issued, the service provider is not covered by section 65(50b) and consequently, any services rendered by such a service provider are not exigible to service tax. Learned counsel for the appellants submits that no consignment notes were issued in their case. We find no evidence on record to the effect that consignment notes have been issued - the demand under this head is not sustainable and needs to be set aside. Development and Supply of Content Service - amount received from M/s. Rajashri Media Pvt. Ltd. for grant of exclusive rights to all audio, visual, audio-visual and text materials of Divya Yog Mandir Trust - HELD THAT - Evidently, as per the agreement between the appellant and Rajashri, the appellant provided material which was developed into audio and video content by the latter and it was also commercially exploited. Part of the Revenue earned was shared by Rajashri with the appellant. Thus, the relationship between the appellant and Rajashri is not one of service provider-service recipient but one of partners in a joint venture in which each contributed something to the project and shared the Revenue earned. In the absence of any service provider-service recipient relationship, there can be no service tax because service tax is chargeable on taxable services provided. There must be a service, it must be taxable, there must be a service provider and a service recipient and a consideration to levy service tax. There is no charge of service tax on sharing of revenues in any joint venture between two entities or persons. Levy of penalties u/s 76, 77 and 78 of FA - HELD THAT - We do not find any evidence to substantiate the elements required to levy penalty under section 78. Therefore, only Section 76 would apply. Except for small amounts of service tax under two heads, we have also found that the demands themselves are not sustainable. Therefore, we find this a fit case to invoke section 80 and set aside the penalties under section 76 and 77 - the impugned order needs to be set aside to the extent it levies service tax on the appellant under the heads Club and Association Service, Intellectual property Rights service, Transport of goods by road service, and Development and supply of content service. The demand under the heads Renting of immovable property service and Health club and Fitness service is upheld along with applicable interest. All penalties are set aside by invoking section 80 of the Finance Act, 1994. Appeal allowed in part.

Summary

Issues Involved:
1. Club or Association Service
2. Intellectual Property Rights Service
3. Transport of Goods by Road Service
4. Development and Supply of Content Service
5. Renting of Immovable Property Service
6. Health Club and Fitness Centre Service
7. Penalties under sections 76, 77, and 78 of the Finance Act, 1994

Detailed Analysis:

1. Club or Association Service:
The demand under this head was made against Divya Yog Mandir Trust. The appellant received contributions from its members for various privileges. The Revenue argued these contributions were chargeable to service tax under Section 65(105)(zzze) read with Section 65(25aa). The appellant contended that services rendered by a club to its members are self-service and not taxable, relying on the Supreme Court judgment in State of West Bengal vs. Calcutta Club Ltd. The Tribunal found that since the appellant is registered as a trust under the Indian Trusts Act, it falls under the exclusion provided in Section 65(25a), and thus, the demand under this head cannot be sustained.

2. Intellectual Property Rights Service:
Demands were confirmed against Divya Yog Mandir Trust, Divya Yog Sadhna, and Divya Yog Sandesh for amounts received under various agreements. The appellants argued that during the period in question (1.4.2007 to 31.3.2010), copyrights were excluded from the definition of intellectual property rights under section 65(55a). The Tribunal agreed, noting that the agreements pertained to copyrighted material, which was outside the scope of IPR services as defined. Consequently, the demands under this head were set aside.

3. Transport of Goods by Road Service:
Demands were made against all appellants for amounts paid as freight under reverse charge. The appellants argued that no consignment notes were issued, a requirement under Section 65(50b) to qualify as a goods transport agency. The Tribunal found no evidence of consignment notes being issued and thus ruled that the service was not taxable under this head, setting aside the demands.

4. Development and Supply of Content Service:
The demand was made against Divya Yog Mandir Trust for amounts received from an agreement with Rajashri Media Pvt. Ltd. The appellant argued that it did not develop any content but provided raw material, which Rajashri Media developed and commercially exploited, sharing the revenue. The Tribunal found no service provider-service recipient relationship, ruling that revenue sharing in a joint venture is not taxable. Thus, the demand under this head was set aside.

5. Renting of Immovable Property Service:
The appellants did not contest this demand and had paid the entire amount along with interest. Therefore, the Tribunal upheld the demand under this head.

6. Health Club and Fitness Centre Service:
The appellants did not contest this demand either. The Tribunal upheld the demand under this head.

7. Penalties:
Penalties were imposed under sections 76, 77, and 78 of the Finance Act, 1994. The Tribunal found no evidence of fraud, collusion, or willful misstatement to justify penalties under section 78. Given that most of the demands were not sustainable, the Tribunal invoked section 80 to set aside penalties under sections 76 and 77 as well.

Conclusion:
The Tribunal set aside the demands under the heads of 'Club and Association Service,' 'Intellectual Property Rights Service,' 'Transport of Goods by Road Service,' and 'Development and Supply of Content Service.' The demands under 'Renting of Immovable Property Service' and 'Health Club and Fitness Centre Service' were upheld along with applicable interest. All penalties were set aside by invoking section 80 of the Finance Act, 1994. The appeals by Divya Yog Mandir Trust, Yog Sandesh, Divya Yog Sadhna, and Divya Prakashan were allowed with consequential relief, except for the upheld demands.