2014 (6) TMI 34 - AT - Service Tax

Club or Association service - principle of mutuality - Held that - In light of the judgment of Jharkhand High Court in Ranchi Club Ltd. vs. CCE & ST, Ranchi Zone reported in 2012 (6) TMI 636 - Jharkhand High Court and of the Gujarat High Court in Sports Club of Gujarat Ltd. vs. Union of India reported in 2013 (7) TMI 510 - GUJARAT HIGH COURT , both of which had followed the judgment of the Supreme Court in Joint Commercial Tax Officer, Harbour Division, II - Madras vs. The Young Men s Indian Association reported in 1970 (2) TMI 87 - SUPREME COURT OF INDIA , the position is no longer res-integra. The services provided by a club to its members is covered by the principle of mutuality and would not amount of rendition of service by one person to another and therefore would not amount to a taxable service - Decided in favour of assessee.

Summary

Issues:
1. Whether the appellant is liable to pay service tax for providing 'Club or Association' services to its members.
2. Whether the principle of mutuality applies to the services provided by the appellant to its members, thereby exempting it from service tax liability.

Analysis:
Issue 1:
The appeal was filed against an adjudication order confirming a service tax demand for providing 'Club or Association' services as per the Finance Act, 1994. The appellant had received membership fees during specific periods, and proceedings were initiated based on a show cause notice alleging failure to comply with registration, filing returns, and remitting service tax. The appellant contested the proceedings, arguing that the services provided to members fall under the principle of mutuality and hence are not subject to service tax. However, the contention was rejected in the adjudication order.

Issue 2:
The judgment referred to decisions by various High Courts and the Supreme Court, establishing that the principle of mutuality applies to services provided by clubs to their members. Citing judgments from Jharkhand High Court, Gujarat High Court, and the Supreme Court, it was concluded that services provided by a club to its members do not amount to a taxable service as they fall under the principle of mutuality. Therefore, the impugned adjudication order confirming the service tax demand was deemed unsustainable and quashed. The appeal was allowed, with no costs imposed.

In conclusion, the judgment clarified that the principle of mutuality exempts clubs providing services to their members from service tax liability. The decision was based on established legal precedents and interpretations of relevant provisions of the Finance Act, 1994.