2009 (8) TMI 667 - HC - Service Tax

Mandap Keeper Service - Whether the petitioners, who are basically engaged in promoting different sports, are liable to pay service tax on the services rendered by it to its members? Petitioners are members club and not prietary club. Held that- service tax cannot be imposed twice by demanding from person carrying out business of Mandap Keeper and from members club for using space for construction or using it as Mandap. Question of imposition of service tax not arise when transfer of property absent. Both member and club are same entity. Use of premises by members of club not means letting out. Member club not covered under Mandap Keeper Service. Demand set aside.

Issues Involved:
1. Liability of the petitioners to pay service tax as "mandap keepers."
2. Definition and applicability of "mandap" and "mandap keeper" under the Finance Act, 1994.
3. Principle of mutuality and its impact on service tax liability.
4. Interpretation of the term "client" in the context of club members.
5. Double taxation concerns.
6. Applicability of service tax to members' clubs.
7. Estoppel and acquiescence in tax matters.
8. Consistency in interpretation of all-India tax statutes.

Detailed Analysis:

1. Liability of the petitioners to pay service tax as "mandap keepers":
The petitioners, clubs registered under the Companies Act, 1956, were served notices by the Commissioner of Central Excise & Customs, Service Tax Cell, to register under the Service Tax Act, 1997, and pay service tax for services rendered as "mandap keepers." The petitioners contested this liability, arguing that their services to members did not constitute a trading activity and thus should not attract service tax.

2. Definition and applicability of "mandap" and "mandap keeper" under the Finance Act, 1994:
The Finance Act, 1994, defines "mandap" as any immoveable property let out for consideration for organizing official, social, or business functions. A "mandap keeper" is one who allows temporary occupation of such property for consideration. The court examined whether the petitioners' activities fell within these definitions.

3. Principle of mutuality and its impact on service tax liability:
The court emphasized the principle of mutuality, noting that transactions between the club and its members do not involve two separate entities. Members and the club are considered the same entity, with no element of commerciality or trading. Hence, the services provided by the club to its members do not attract service tax.

4. Interpretation of the term "client" in the context of club members:
The term "client" implies an element of agency and a commercial relationship. The court referred to various dictionary definitions and concluded that club members are not clients of the club. Therefore, the services provided by the club to its members do not fall under the taxable services defined in the Finance Act, 1994.

5. Double taxation concerns:
The court highlighted the issue of double taxation, noting that if service tax were imposed on the club for allowing members to use its premises, it would result in double taxation, as the club might already be paying service tax to third-party "mandap keepers" for similar services.

6. Applicability of service tax to members' clubs:
The court noted that members' clubs operate on the principle of mutuality, where members collectively own and enjoy the facilities. The clubs do not let out their premises to third parties for consideration, and any use by members does not constitute a commercial transaction. Hence, service tax is not applicable to the petitioners.

7. Estoppel and acquiescence in tax matters:
The court stated that the principle of estoppel cannot be applied against the provisions of law. If a statute is not applicable to a person, any action taken by mistake cannot operate as estoppel. Therefore, the proceedings against the clubs for service tax applicability were quashed.

8. Consistency in interpretation of all-India tax statutes:
The court emphasized the importance of uniformity in interpreting all-India tax statutes. It referred to previous decisions by the Calcutta High Court, which held that services provided by clubs to their members do not attract service tax. The court agreed with these decisions to maintain consistency and avoid discrimination in tax matters.

Conclusion:
The petitions were allowed, and the proceedings initiated against the petitioners regarding service tax applicability were quashed. Any recovery made from the petitioners was ordered to be refunded. The court upheld the principle of mutuality, stating that club members and the club are the same entity, and transactions between them do not attract service tax. The decision aligns with previous judgments to ensure uniformity in the application of tax laws.

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