2023 (6) TMI 370 - AT - Service Tax

Classification of services - services provided to customers / members for effluent treatment and disposal of waste - club and association service or not - mutuality of services - HELD THAT - It is found from the facts of the case the appellant is having its independent processing unit for effluent treatment of industrial waste. The appellant has set up the unit with his sole capital investment. The customer for which the appellant is carrying out the effluent treatment of the waste have no legal say in the independent activity of appellant company. The appellant charge to their industrial customer for the treatment and disposal of the waste on quantitative basis. From the above invoice it can be seen that the appellant are carrying out activity of treatment and disposal of sewage waste water for individual customer and depending upon the quantum of waste treatment they are raising the bill and collected the charges against the same. Other then this there is no subscription involved unlike the subscription between club and association and its member. The commercial dealing between the appellant and its customer is purely on principle-to-principal basis - there is no iota of doubt that there is no relationship of club and association between the appellant and its customers. Therefore, the demand raised under club or association cannot be sustained. Even though the contention of the Revenue is accepted, the demand under club or association service shall not sustain in the light of Hon ble Supreme Court judgment in the case of State of West Bengal vs. Calcutta Club Limited 2019 (10) TMI 160 - SUPREME COURT wherein the Hon ble supreme court expressed view that since there is mutuality of interest between the club or association and its members and club or association being made of its members the concept of service provider and service recipient is absent hence the service to self cannot be taxed. With this view the Apex court held that the payments received from the members of the club by club or association is not taxable for this reason also the demand is not sustainable. The impugned order is not sustainable - Appeal allowed.

Summary

Issues involved:
The issue involves classification of services provided for sewage treatment under club and association service for the purpose of service tax, and whether the demand under club or association service is sustainable.

Summary:
The Appellate Tribunal CESTAT Ahmedabad considered a case where services for sewage treatment were provided to customers, and the revenue contended that these services should be classified under club and association service for the purpose of service tax. The Adjudicating Authority had confirmed the demand of service tax and imposed penalties, which led to the appellant filing an appeal before the Commissioner (Appeals) and subsequently before the Tribunal.

Appellant's Submission:
The appellant argued that they are not an association of members but an independent commercial company, and the effluent treatment of industrial waste is part of their commercial business. They emphasized the lack of mutuality of interest between the appellant and its customers, citing relevant case law to support their position.

Revenue's Submission:
The Revenue reiterated the findings of the impugned order, supporting the classification of services under club and association service.

Tribunal's Finding:
Upon careful consideration of the submissions and records, the Tribunal observed that the appellant operated an independent processing unit for effluent treatment, with customers having no legal say in the company's activities. The invoices showed that charges were based on the quantity of waste treated, without any subscription involved. The Tribunal noted that the commercial dealings were on a principle-to-principal basis, indicating the absence of mutuality of interest between the appellant and its customers. Therefore, the demand under club or association service was deemed unsustainable.

Legal Precedent:
Furthermore, even if the Revenue's contention was accepted, the Tribunal referred to a Supreme Court judgment emphasizing the absence of mutuality of interest between a club or association and its members, leading to the conclusion that services to oneself cannot be taxed. This legal principle rendered the demand under club or association service unsustainable.

Conclusion:
Based on the above analysis, the Tribunal held that the impugned order was not sustainable and set it aside, allowing the appeal in favor of the appellant.