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2019 (1) TMI 435 - AT - Service TaxClub or Association Service - Admission Fee, Membership Fee, Establishment Expenses, collected by the appellant from its members - amount retained for earning carbon credits - doctrine of mutuality - service by an association to its own members - service or not? - liability of service tax - Held that - The Division Bench of CESTAT Chennai in a recent decision, in M/S. COSMOPOLITAN CLUB VERSUS CCE & ST, MADURAI 2018 (2) TMI 1052 - CESTAT CHENNAI has held that if a Club provides any service to its members may be in any form, then it is not a service by one to another in the light of decisions as foundational facts of existence of two legal entities in such transactions is missing The appellants were an organization and hence the service provided to its own members cannot come within the scope of taxable services for the purpose of Finance Act, 1994. The demand of service tax in respect of membership fee, admission fee, establishment expenses, membership renewal fee etc. as also amount retained in connection with service provided by appellants to its members for earning carbon credits will not be liable to service tax - demand set aside. Appeal allowed - decided in favor of appellant.
Issues involved:
1. Service tax liability under 'Club or Association Service' (CAS) for membership fees and establishment expenses. 2. Service tax liability under 'Business Auxiliary Service' (BAS) for carbon credits earned. 3. Applicability of the doctrine of mutuality on the demand under CAS. 4. Export of service in the case of BAS. 5. Assailing the demand on limitation grounds. Analysis: Issue 1: Service tax liability under 'Club or Association Service' (CAS) for membership fees and establishment expenses: The appellants argued that the demand under CAS was unsustainable due to the doctrine of mutuality, citing precedents like Ranchi Club Ltd. and Sports Club of Gujarat. They contended that as a registered trade union, the demands for subsequent periods were set aside by the Commissioner of Central Excise. The tribunal agreed, noting that providing services to its own members did not fall under taxable services, as established in various tribunal decisions and high court rulings. Therefore, the demand for service tax on membership fees and establishment expenses was set aside. Issue 2: Service tax liability under 'Business Auxiliary Service' (BAS) for carbon credits earned: The appellants argued that the transaction involving carbon credits was a purchase and sale activity, not a service under BAS. They claimed that the service provided to members was rightly classifiable under CAS, not BAS, as per Section 65A of the Act. The tribunal concurred, stating that if an activity was not liable to service tax under CAS, it could not be taxed under any other service category. The tribunal also recognized the consideration received in foreign exchange as an export of service, further supporting the appellants' position. Issue 3: Applicability of the doctrine of mutuality on the demand under CAS: The tribunal reiterated that providing services to its own members did not constitute taxable services, as established in previous decisions. The doctrine of mutuality was a key argument in challenging the demand under CAS, ultimately leading to the demand being set aside. Issue 4: Export of service in the case of BAS: The tribunal acknowledged the consideration received in foreign exchange for services provided in connection with carbon credits as an export of service. This aspect further supported the appellants' position that the activity was not taxable under BAS. Issue 5: Assailing the demand on limitation grounds: While the demand was also challenged on limitation grounds, the tribunal did not delve into this aspect in detail in the judgment. The focus was primarily on the substantive legal issues surrounding the service tax liabilities under CAS and BAS, leading to the demand being set aside. In conclusion, the tribunal allowed the appeal, setting aside the demand for service tax on the activities of the appellants related to membership fees, establishment expenses, and carbon credits earned, based on the established legal principles and precedents cited during the proceedings.
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