2016 (12) TMI 99 - AT - Service Tax

Taxability - club and association service - at the time of issue of notice and at time of receipt of payment for the services, the relevant service was not a taxable service. The liability to pay has been created on or after 16.06.2005 - whether the demand on the ground that one-time fee collected by the club from their lifetime, permanent and corporate members were for the service to be provided in the future and the value of the same is taxable in terms of Section 67 of that of the Finance Act, is justified? - Held that - It is seen that the show cause notice has been issued for service tax liability on the one-time fee recovered from the members prior to 16.06.2005 under the category of club and association service which became taxable w.e.f. 16.06.2005. The issue of liability of service tax on the club and association service is no longer res integra. It has been held in numerous authoritative judicial pronouncements that an association or club is not providing services to its own members and hence no service tax is imposable. In this regard, reliance is placed on the High Court Judgment in the case of Ranchi Club Vs. Chief Commissioner of Central Excise & Service Tax, Ranchi 2012 (6) TMI 636 - Jharkhand High Court . Since the liability of service tax on club and association service has itself been quashed, there is no question of levying the same for the period before 16.06.2005 - appeal rejected - decided against appellant-Revenue.

Summary

Issues:
1. Liability of service tax on one-time fee collected by a club from its members prior to 16.06.2005 under the category of club and association service.
2. Applicability of service tax on the one-time fee collected for services to be provided in the future.

Analysis:
The appeal before the Appellate Tribunal CESTAT MUMBAI involved the question of liability of service tax on a one-time fee collected by a club from its members before 16.06.2005 under the category of club and association service. The case pertained to M/s Royal Connaught Boat Club, which was issued a show cause notice for not paying service tax on the one-time fee received against lifetime membership, permanent membership, and corporate membership. The demand, along with interest and penalty, was confirmed by the adjudicating authority. However, in the appellate proceedings, the Commissioner (Appeals) dropped the demand, stating that the relevant service was not taxable at the time of receipt, and the liability to pay tax was created after 16.06.2005.

The Revenue, in its appeal, contended that the one-time fee collected by the club from its members was for services to be provided in the future and hence taxable under Section 67 of the Finance Act. The Tribunal noted that the issue of liability of service tax on club and association service had been settled in various judicial pronouncements. It was established through authoritative judgments, including Ranchi Club Vs. Chief Commissioner of Central Excise & Service Tax, Ranchi and Sports Club of Gujarat Vs. Union of India, that clubs or associations providing services to their own members were not liable to pay service tax.

Furthermore, the Tribunal cited its own decisions in cases like Indian Banks Association Vs Commissioner of Service Tax-I, Mumbai and Matunga Gymkhana Vs. CST, Mumbai, where it had held a similar view regarding the non-imposition of service tax on club and association services provided to their members. Given the consistent legal precedent and the established position that clubs do not provide taxable services to their members, the Tribunal concluded that there was no basis for levying service tax on the one-time fee collected by the club before 16.06.2005.

Therefore, the appeal filed by the Revenue was rejected by the Tribunal, and the cross objections were also disposed of accordingly. The judgment reaffirmed the non-applicability of service tax on the one-time fee collected by the club from its members for services that were to be provided in the future, prior to the specified date.