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2020 (5) TMI 224 - HC - Service TaxClub or Association Service - principles of mutuality - services provided by a club to its members - HELD THAT - The entire case papers as well as the judgment rendered by the Apex Court in the case of 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 , we have no hesitation to arrive at the conclusion that questions of law raised in these appeals is an issue, which is no more res integra in the light of finding recorded by the Apex Court which held that In the light of the authoritative pronouncement of Hon ble Apex Court in Calcutta Club Ltd. holding that the companies and co-operative societies which are registered under the respective Acts can be said to be constituted under those Acts and the clubs or associations incorporated prior to 1.7.2012 were not included in the service tax net, necessarily, we have to answer the substantial questionsof law against the revenue and in favour of the respondent-assessee and accordingly, it is ordered - Appeals are dismissed by answering the substantial questions of law in favour of respondent-assessee and against appellant-revenue.
Issues:
1. Applicability of the principle of mutuality to services provided by a club to its members for the levy of service tax. 2. Interpretation of statutory provisions in relation to the taxability of services provided by a club to its members. 3. Determination of whether the activities of a club amount to a service provided to its members and are liable for service tax. Analysis: The High Court of Karnataka considered two appeals filed by the revenue against orders passed by the CESTAT, South Zone Bench, Bengaluru. The appeals raised substantial questions of law regarding the taxability of services provided by a club to its members. The main issue was whether the principle of mutuality applied to such services and if they should be considered taxable under the Finance Act, 1994. The respondent, engaged in construction services, was alleged to be liable for service tax under the category of "Club or Association Service." The Adjudicating Authority confirmed the demand for service tax, which was challenged by the respondent before the CESTAT. The CESTAT, in its orders dated 6.1.2015 and 11.2.2015, allowed the appeals based on precedents from Jharkhand and Gujarat High Courts, stating that services provided by a club to its members were not taxable under the principle of mutuality. The appellant argued that clubs, as separate legal entities, should be subject to service tax irrespective of the principle of mutuality. On the other hand, the respondent relied on a judgment of the Supreme Court in a related matter to support the position that clubs incorporated before July 1, 2012, were not included in the service tax net. After examining the arguments and relevant legal provisions, the High Court concurred with the Supreme Court's interpretation that clubs or associations incorporated under specific laws were not subject to service tax. The Court held that companies and cooperative societies registered under the respective Acts could be considered as constituted under those Acts and were exempt from service tax. Consequently, the substantial questions of law were answered in favor of the respondent, and the appeals were dismissed. The orders of the CESTAT confirming non-taxability of services provided by the club to its members were affirmed, with no costs imposed on either party.
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