2024 (4) TMI 683 - AT - Service Tax

Scope of SCN - Classification of service - Club or Association services or not - services of licencing the copyrights in musical works to its members who had only paid subscription fee of meager amount and licensing of copyright in musical work - HELD THAT - The Show-cause cum demand notice lacks clarity about the recipient of the service and the nature of services provided to it allegedly by the appellant. The nature of service provided by the appellant was stated to be administration of copyrights owned by its members and it is in the nature of facilities or advantages extended to its members. However, going by the factual background, it is noticed that appellant is a company and not a Society registered under Society Registration Act but it collects monthly subscription fee from its members. Apart from this amount no other consideration flows from the members/ copyright owners to the appellant and there is no denial of the fact that entire collection from the membership had never exceeded the threshold prescribed for registration of a Company under Service Tax. Clause 29A of Article 366 of Constitution of India defines all services associated with sale of goods or lease of the kind as deemed sale and as because Intellectual Property, which in the present case is copyright and other related rights in the nature of performance, play etc. that is not in tangible form, the same may not be included under the definition of services under Section 65B (44 read with Section 66E) but the very fact that Section 65 (55b) that defines Intellectual Property Services expressly excludes copyright from the category of Intellectual Property services and there is also no demand against such licence fee/ royalty collected by the appellant from the customers/ users, the order of the Commissioner is unsustainable in both law and facts. Further demand being confirmed against administrative expenditure that was deducted from the membership fee and royalty/ licence fee by a non-profit organization namely assesse, consideration should also be treated as Nil for the purpose of taxation. The order passed by the Commissioner of Service Tax-VI, Mumbai is hereby set aside - Appeal allowed.

Summary

Issues Involved:
Conformation of duty demand u/s 65 (105) (zzze) for Club or Association services for the period from 01.04.2010 to 31.03.2014.

Issue 1: Nature of Services Provided by Appellant
The Appellant, a Non-Profit Organization, licensed copyrights in musical works to various organizations for use, earning royalties. The Respondent viewed these activities as 'Club or Association services' and raised demands. The Tribunal, in a previous order, found no service provided by the Appellant to its members for the period in question.

Issue 2: Taxability of Services
The Appellant argued that the licensing of copyrights was exempted under the Mega Exemption Notification No. 25/2012-ST. They contended that the membership fees collected were below the turnover threshold for Service Tax registration. Citing legal precedents, the Appellant claimed that no Service Tax was payable due to the doctrine of mutuality.

Issue 3: Principle of Mutuality
The Respondent argued against the applicability of the principle of mutuality, relying on a previous Tribunal decision. They contended that commercial activities of a Trust representing a fund would not fall under the principle of mutuality.

Judgment:
The Tribunal found that the Show-cause cum demand notice lacked clarity on the nature of services provided by the Appellant. It noted that the transactions involving copyrights were akin to sale of goods or lease, not falling under taxable services. The order of the Commissioner was deemed unsustainable in law and facts. Consequently, the appeal was allowed, setting aside the Commissioner's order.

This summary captures the main issues involved in the legal judgment and provides a detailed overview of the Tribunal's decision on each issue.