2015 (1) TMI 1146 - AT - Service Tax

Club and Association service - Chariable service - Service provided to members - Held that - In view of the decision in Ranchi Club Limited (2012 (6) TMI 636 - Jharkhand High Court), on application of the principle of mutuality, services provided by the appellants to their respective members would not fall within the ambit of the taxable club or association service nor the consideration whether by way of subscription/ fee or otherwise received therefor be exigible to service tax. In view of the decision of the Gujarat High Court in Sports Club of Gujarat Limited 2013 (7) TMI 510 - GUJARAT HIGH COURT , as the relevant provisions (namely Section 65(25a), Section 65(105)(zzze) and Section 66 of the Act), to the extent these provisions purport to levy service tax in respect of services provided by a club or association to its members is declared ultra vires, we hold that there are no operative legislative provisions of the Act legitimizing the levy and collection of service tax from the appellants, for providing club or association service, in so far as these relate to any services provided to members of these appellants. Services provided to non members fall outside the ambit of club or association service prior to 01.05.2011 and subsequent to this date there is no specific allegation that the services provided to non-members fall within the expanded scope of this taxable service qua provisions of the Finance Act, 2011 - Following decision of M/s Federation of Indian Chambers of Commerce and Industry, M/s Electronic and Computer Software Export Promotion Council Versus CST, Delhi 2014 (5) TMI 183 - CESTAT NEW DELHI - Decided in favour of assessee.

Summary

Issues:
1. Whether the appellants, including a gymkhana, a cooperative housing society, and a premises cooperative society, are liable to pay service tax for the services provided to their members.
2. Whether the exclusion clause under Section 65(25a) of the Finance Act, 1994 applies to the appellants, thereby exempting them from service tax.
3. Whether the refund claims filed by the cooperative housing societies for service tax paid should be accepted.
4. Whether the judgments cited by the appellants in support of their case are applicable in the present scenario.

Analysis:

Issue 1:
The first appellant, a gymkhana, argued that their activities were charitable and fell outside the purview of taxable services under Section 65(25a) of the Finance Act, 1994. However, the Revenue contended that the gymkhana's activities were not charitable and thus were subject to service tax. The demand for service tax was upheld by the Revenue, leading to penalties and interest being imposed on the gymkhana.

Issue 2:
The second and third appellants, cooperative housing societies, also claimed exemption from service tax under the exclusion clause of Section 65(25a). They collected charges from members for maintenance, repair, and other services. The Revenue rejected their refund claims, arguing that the exclusion clause applied only to bodies established under a statute, not those formed and registered under a statute.

Issue 3:
The appellants relied on judgments such as Ranchi Club, Sports Club of Gujarat, and Federation of Indian Chambers of Commerce & Industry to support their case. These judgments highlighted the principle of mutuality and declared certain provisions of the Finance Act, 1994 as ultra vires in relation to levying service tax on services provided by clubs or associations to their members. The judgments emphasized that services provided to members were not taxable under the relevant provisions.

Issue 4:
Considering the precedents and legal principles established in the cited judgments, the Tribunal found that the issue at hand was no longer res integra. The Tribunal set aside the impugned orders and allowed the appeals, providing consequential relief in accordance with the law. The judgments provided clear guidance on the applicability of service tax to services provided by clubs or associations to their members, ultimately leading to a favorable outcome for the appellants in this case.