2014 (8) TMI 56 - AT - Service Tax

Classification of service - club or association service or Management Consultancy service - revenue contends that assessee provides Management Consultancy service to cooperative sugar mills constituting the federation - penalties were imposed under Section 75A, 76 and 77 - Held that - Appellant is a Federation of the Cooperative Sugar Mills of Punjab and in terms of the charter of its functions, it is required to monitor the functioning of its Member Sugar Mills and provide guidance to them from time to time for improving their efficiency. In view of this, the activity of the appellant have to be treated as club or association service as defined under Section 65 (25a) of the Finance Act, 1994 and hence in view of the judgment of the Tribunal in the case of Federation of Indian Chambers of Commerce and Industry vs. CST, Delhi and M/s Electronic and Computer Software Export Promotion Council vs. CST, Delhi reported in 2014 (5) TMI 183 - CESTAT NEW DELHI , which is based on the judgment of Hon ble Jharkhand High Court in the case of Ranchi Club Limited vs. CCE & ST reported in 2012 (6) TMI 636 - Jharkhand High Court , and of Hon ble Gujarat High Court in case of Sports Club of Gujarat Ltd. vs. Union of India Ltd. reported in 2013 (7) TMI 510 - GUJARAT HIGH COURT , no service tax would be chargeable on the amount being received by the appellant from its Member Sugar Mills - Decided in favour of assessee.

Summary

Issues:
- Whether the appellant, as the apex body of cooperative sugar mills, is liable to pay service tax on the amount received from the sugar mills for providing management consultancy services.

Analysis:
The appellant, a Federation of Cooperative Sugar Mills in Punjab, was issued a show cause notice for demand of service tax on the amount received from member sugar mills. The Assistant Commissioner confirmed the service tax demand along with interest and imposed penalties. The Commissioner (Appeals) confirmed the service tax demands but set aside the penalty under Section 76, upholding penalties under other sections. The appellant contended that their activity cannot be classified as Management Consultancy Service and should be treated as 'club or association service.' The appellant argued that no service was provided to the member sugar mills, citing relevant judgments. The Department defended the impugned order, claiming the activity falls under Management Consultancy Service.

Upon considering the submissions and perusing the records, it was acknowledged that the appellant's role is to monitor and guide member sugar mills for improving efficiency, thus falling under 'club or association service.' Citing precedents, including judgments from various high courts, it was concluded that no service tax would be chargeable on the amount received by the appellant from its member sugar mills. As a result, the impugned order was deemed unsustainable and set aside, allowing the appeals in favor of the appellant.