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2015 (10) TMI 1857 - AT - Service TaxClub membership service - co-operative society - service tax liability on the various fees collected by them from the members in respect of the functioning of the Society - activit of accepting deposits and giving loans to members - Levy of Penalty Held That - the appellant assessee is functioning as a co-operative Society for their members and welfare of their members only. They do not extend any loan or accept any deposits from public at large. The services rendered by the appellant assessee, if any, is to their own members is undisputed. - Reliance placed in the case of Green Environment Services Co-op. Soc. Ltd. 2014 (12) TMI 1097 - GUJARAT HIGH COURT was correct Section 65(25a), Section 65(105)(zzze) and Section 66 of the Finance (No. 2) Act, 1994 as incorporated/amended by the Finance Act, 2005 to the extent that the said provisions purport to levy Service Tax in respect of services purportedly provided by the petitioner club to its members, to be ultra vires. Rule is made absolute with no order as to costs - Appeal of revenue rejected and that of assessee is accepted Decided in favour of assessee.
Issues:
1. Service tax liability on charges collected by a Co-operative Society. 2. Applicability of Section 65(25a) and 65(105)(zzze) of the Finance Act, 1994. 3. Constitutional validity of provisions pertaining to levy of Service Tax. 4. Interpretation of the term "club or association services" under the Finance Act, 1994. Analysis: Issue 1: Service tax liability on charges collected by a Co-operative Society The case involves appeals against Orders-in-Appeal where the appellant, a Co-operative Society, was found to have not discharged service tax liability on fees collected from members. The adjudicating authority confirmed the demands, but the first appellate authority reworked the tax liability while upholding penalties. The appellant contested the liability, arguing that as a society for members' welfare, no service tax should apply. The Tribunal considered the society's activities, including accepting deposits and providing loans to members, concluding that the service tax liability did not arise as the services were for members only. Issue 2: Applicability of Section 65(25a) and 65(105)(zzze) of the Finance Act, 1994 The appellant relied on the judgment of the High Court of Gujarat in a similar case, where tax liability on services provided by a society to its members was struck down as unconstitutional. The Tribunal examined the provisions challenged by the petitioners and found that the services provided by the society to its members could not be taxed as they were essentially internal transactions within the society for mutual benefit. Issue 3: Constitutional validity of provisions pertaining to levy of Service Tax The Tribunal considered the constitutional validity of Section 65(25a) and 65(105)(zzze) challenged by the petitioners, emphasizing that services provided by the society to its members did not involve commercial transactions but mutual benefits. Relying on previous judgments declaring similar provisions unconstitutional, the Tribunal set aside the tax demand and penalties imposed, emphasizing the non-commercial nature of the services provided by the society to its members. Issue 4: Interpretation of the term "club or association services" under the Finance Act, 1994 The Tribunal analyzed the term "club or association services" under the Finance Act, 1994, considering the nature of services provided by the society to its members. It referenced previous judgments highlighting the distinction between commercial services and services provided within a society for mutual benefit. The Tribunal concluded that the impugned order confirming the service tax demand was not sustainable, given the non-commercial nature of the services provided by the society to its members. In conclusion, the Tribunal allowed the appeals filed by the appellant Co-operative Society, setting aside the impugned order and rejecting the appeal filed by the revenue. The decision was based on the non-applicability of service tax on internal transactions within the society for the welfare of its members, in line with previous judicial pronouncements on the constitutional validity of similar provisions.
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