2020 (2) TMI 1116 - AT - Service Tax

Levy of service tax - Club or Association service - principles of mutuality - appellant were providing services, facilities and advantages to their members and collected amounts under various heads - distinct legal status of club from its members or not - case of appellant is that since they have been providing services to members as well as non-members they do not qualify to be called as a club - HELD THAT - It is not in dispute that the amounts have been collected by the appellant from their own members as can be seen from the impugned order itself. They might be rendering same services to non-members as well and may also be generating a surplus. However, these factors do not change the character of the appellant as that of a club or association. As decided by the STATE OF WEST BENGAL ORS. VERSUS CALCUTTA CLUB LIMITED AND CHIEF COMMISSIONER OF CENTRAL EXCISE AND SERVICE ORS. VERSUS M/S. RANCHI CLUB LTD. 2019 (10) TMI 160 - SUPREME COURT and several previous judgments, no service tax can be levied on a club or association on the amounts collected by them from their own members either towards subscription or towards some other services because the club is held to be not a different legal entity but the same as that of the members. As there is no distinction between the identity of the members and the identity of the club, there is no service provider service recipient relationship in such transactions. Therefore, no service tax can be levied upon the appellant. Appeal allowed - decided in favor of appellant.

Summary

Issues Involved:
1. Taxability of services provided by a Club or Association to its members under the Finance Act, 1994.

Analysis:

Issue 1: Taxability of services provided by a Club or Association to its members under the Finance Act, 1994:
The case involved an appeal against an Order-in-Original concerning demands for service tax, education cess, interest, and penalties on services provided by a Club in Hyderabad to its members. The Anti-Evasion Wing found that the Club collected various amounts from its members under different heads, which were deemed taxable under the Finance Act, 1994. The appellant contested the demands, arguing that as a Club or Association, any service provided to its own members amounted to self-service and was not chargeable to service tax. The appellant relied on judgments, including the Ranchi Club Ltd case, to support this argument.

The adjudicating authority, however, held that the appellant did not qualify the tests to establish mutuality, stating that the Club lacked a common identity among its members and engaged in activities beyond the scope of a members club. The authority confirmed the demands and imposed penalties. The appellant further argued that the identity of a Club or Association was not altered by generating surplus or providing services to non-members, citing the State of West Bengal vs Calcutta Club Ltd case. The appellant contended that the surplus generated did not change its identity as a Club or Association, and therefore, no service tax should be levied on amounts collected from members.

The Appellate Tribunal, referencing the Calcutta Club Ltd case and previous judgments, agreed with the appellant's argument. It emphasized that the identity of the Club was not distinct from its members, leading to no service provider-service recipient relationship in transactions with members. Consequently, the Tribunal found the impugned order unsustainable, setting it aside and allowing the appeal with consequential relief.

In conclusion, the Tribunal ruled in favor of the appellant, holding that no service tax could be levied on the amounts collected from members by the Club, as it did not qualify as a separate legal entity from its members, in line with established legal principles and precedents.