2009 (9) TMI 561 - HC - Service Tax

Mandap Keeper Service The petitioners are companies registered under the provisions of the Companies Act, 1956. The main object of the petitioners is to encourage and promote the game of cricket and other different games and sports in the State of Gujarat and to provide facilities and infrastructure in connection with such games, sports and for other purpose. The petitioner club is having open lawn (space) and the said lawn of the club is provided for marriage ceremonies and other social functions to the members on charges. The service tax has been imposed upon the service rendered by the Mandap Keeper to its clients. Held that petitioners are members club and not proprietary club. Club not become Mandap Keeper if club space occupied by members or his family. Service tax cannot be imposed twice by demanding from person carrying business of Mandap Keeper and from members-club for using space as Mandap.

Issues Involved:
1. Liability of the petitioners to pay service tax as 'Mandap Keeper'.
2. Definition and applicability of 'Mandap' and 'Mandap Keeper' under the Finance Act, 1994.
3. The principle of mutuality in the context of club members and service tax.
4. Interpretation of the term 'client' in the context of club members.
5. Double taxation concerns.
6. Applicability of the principle of estoppel in taxation matters.
7. Uniformity and consistency in the interpretation of taxing statutes.

Detailed Analysis:

1. Liability of the Petitioners to Pay Service Tax as 'Mandap Keeper':
The main issue is whether the petitioners, who promote sports and provide facilities to their members, are liable to pay service tax on services rendered to their members. The petitioners argue that they are a mutual undertaking without any profit motive, and thus, should not be classified as 'Mandap Keeper' under the Finance Act, 1994.

2. Definition and Applicability of 'Mandap' and 'Mandap Keeper' under the Finance Act, 1994:
The Finance Act, 1994 defines 'Mandap' as any immovable property let out for consideration for organizing official, social, or business functions, and 'Mandap Keeper' as a person who allows temporary occupation of a mandap for consideration. The court examined whether the petitioners' activities fall under these definitions. It was held that the services provided by the petitioners to their members do not constitute letting out of property for consideration in a commercial sense, and thus, they do not qualify as 'Mandap Keeper'.

3. The Principle of Mutuality in the Context of Club Members and Service Tax:
The court emphasized the principle of mutuality, stating that transactions between the club and its members are not commercial but mutual. The members and the club are the same entity, and any services provided within this mutual framework do not attract service tax. The court relied on the principle that mutual transactions do not constitute income, sale, or service.

4. Interpretation of the Term 'Client' in the Context of Club Members:
The court analyzed the term 'client' and concluded that a member of a club is not a client of the club. The relationship between the club and its members lacks the element of agency and commerciality that defines a client-service provider relationship. Therefore, services provided by the club to its members cannot be classified as services to a client.

5. Double Taxation Concerns:
The court noted that imposing service tax on the club for allowing its members to use its premises would result in double taxation. If a third-party mandap keeper is hired, they would charge service tax, which the club, acting as an agent for its members, would pay. Imposing service tax again on the club for the same activity would be unjust.

6. Applicability of the Principle of Estoppel in Taxation Matters:
The court held that the principle of estoppel cannot be applied against the provisions of law. If a statute does not apply to a person, any action taken by mistake cannot operate as estoppel. The court quashed the proceedings against the petitioners, stating that the respondents' understanding of the petitioners' dealings was incorrect.

7. Uniformity and Consistency in the Interpretation of Taxing Statutes:
The court emphasized the importance of uniformity in the interpretation of all-India statutes. It agreed with the Calcutta High Court's decisions in similar cases, which held that club members are not clients and the services provided by clubs to their members do not attract service tax. The court noted that these decisions have been followed by several tribunals and have not been stayed.

Conclusion:
The petition was allowed, and the proceedings against the petitioners regarding the applicability of service tax were quashed. The court directed that any application for recovery of service tax by the petitioners should be decided within three months, considering this judgment and principles of unjust enrichment, if applicable. The rule was made absolute with no order as to costs.

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