2018 (4) TMI 1101 - AT - Service Tax

Short-payment of service tax - Club or Association Services - case of the department is that the respondents are liable to pay service tax on the subscription amount collected from its members - Held that - Hon ble High Court of Jharkand in the case of M/s. Ranchi Club Ltd. 2012 (6) TMI 636 - Jharkhand High Court had analysed the issue and held that the club is formed on the principle of mutuality and, therefore, any transaction of the club with its members is not a transaction between two parties and, therefore, not subject to levy of service tax - demand set aside - appeal dismissed - decided against Revenue.

Summary

Issues:
Whether the subscription collected from the members is subject to levy of service tax under the category of "Club or Association Services."

Analysis:

The appeal was filed by the department against the order passed by the Commissioner (Appeals), who had set aside the demand, interest, and penalties. The Revenue argued that the respondents collected lump sum amounts towards subscription from their members under various categories of membership but did not discharge service tax on the amounts collected. The original authority confirmed the demand of tax, interest, and imposed penalties. The Commissioner (Appeals) held that the services provided were not taxable, based on the definition of "Club or Association" under section 65 of the Finance Act, 1994. The Revenue contended that the respondents fell within the category of club or association service and that the Commissioner (Appeals) erred in setting aside the demand.

In response, the counsel for the respondent cited decisions from the Hon'ble High Courts of Jharkhand and Gujarat, which had settled the issue of whether the subscription collected from members could be subject to levy of service tax under "Club or Association Services." The Hon'ble High Court of Jharkhand in the case of M/s. Ranchi Club Ltd. and the Hon'ble High Court of Gujarat in the case of M/s. Sports Club of Gujarat Ltd. had both ruled in favor of the respondents.

After hearing both sides, the Tribunal noted that the issue had been analyzed by the Hon'ble High Court of Jharkhand, which held that transactions between a club and its members are not subject to service tax due to the principle of mutuality. The Tribunal also referenced decisions in favor of the respondents from other High Courts. Consequently, the Tribunal upheld the Commissioner (Appeals) decision to set aside the demand, interest, and penalties. The appeal filed by the Revenue was dismissed, as there were no grounds to interfere with the order passed by the Commissioner (Appeals).