2023 (9) TMI 815 - AT - Service Tax

Classification of services - membership fee collected by the appellants is exigible to service tax under Club or Association Service or not - demand raised under the wrong Head can be confirmed for the reason that it is taxable to duty under one Head or the other or not - demand confirmed on the basis of difference in the figures between ST-3 Returns and balance sheets. Whether the membership fee collected by the appellants is exigible to service tax under Club or Association Service ? - HELD THAT - The issue is no longer res integra having been decided by a number of judgments. Hon ble Apex Court laid down the principle 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 and re-affirmed the same in the case of M/S RAJASTHAN CO-OPERATIVE DAIRY FEDERATION LIMITED VERSUS COMMISSIONER, CENTRAL EXCISE, JAIPUR 2022 (5) TMI 482 - CESTAT NEW DELHI . It was held in the Calcutta Club that The expression body of persons may subsume within it persons who come together for a common purpose, but cannot possibly include a company or a registered cooperative society. Thus, Explanation 3(a) to Section 65B(44) does not apply to members clubs which are incorporated. Whether a demand raised under the wrong Head can be confirmed for the reason that it is taxable to duty under one Head or the other? - HELD THAT - In the facts of the case, the demand was made on account of services provided by the assessee in respect of the supply of third-party software, software developed in house or customised software/ The assessee had temporarily transferred the right to use the said software to their clients. Thus, prior to 16th May 2008, such service was classifiable under the category of Intellectual Property Service and with effect from 16th May, 2008, it was classifiable under the category of Information Technology Software . In fact, the management, maintenance and repair services of computer hardware as well as software under the annual maintenance contract was covered by the category of Management, Maintenance or Repair services which was defined under Section 65(64) of the Finance Act. Thus, the classification mentioned in the first show cause notice was completely erroneous - the demand made on the basis of the first show cause notice was illegal. Therefore, there is no merit in the appeal preferred by Revenue. Whether a demand confirmed on the basis of difference in the figures between ST-3 Returns and balance sheets? - HELD THAT - It is a settled principle of law that service tax can be levied only when there is a clear identification of service provider, service recipient and consideration paid for the same. In the absence of any such evidence of the service recipient and the service provided, service tax cannot be demanded and confirmed. For this reason, it is not open for the Department to raise demands on the basis of other statutory returns like Income Tax Returns or balance sheets without proving that such service has been rendered by the assessee and consideration thereof has been received. Similarly, no service tax demand can be raised and confirmed on the basis of notional income. The impugned order cannot be sustained and is liable to be set aside - Appeal allowed.

Summary

Issues Involved:
1. Whether membership fees collected are liable to service tax under "Club or Association Service".
2. Whether demand raised under one Head can be confirmed under a different Head.
3. Whether a demand can be sustained on the basis of differences between figures in ST-3 Returns and balance sheets.

Summary:
The case involved M/s Indian Machine Tools Manufacturers Association (IMTMA) appealing against a show-cause notice demanding service tax under various heads. The appellants contested the demand, arguing that membership fees are not taxable under service tax laws, citing relevant case laws. They also challenged the demand on income from organizing events, stating it should be classified differently. Furthermore, they disputed demands related to business exhibition services, notional income, and differences in financial figures. The Department defended the demand, asserting that the Adjudicating Authority had considered all issues raised. The Tribunal considered the issues and relevant legal principles extensively.

Regarding the first issue of membership fees, the Tribunal referred to past judgments, including the case of Calcutta Club, to establish that incorporated clubs are not liable to service tax. On the second issue of confirming demands under different heads, the Tribunal emphasized the importance of the classification stated in the show-cause notice, following the precedent set by the case of M/s 3i Infotech Ltd. In addressing the final issue of demands based on discrepancies in financial figures, the Tribunal reiterated that service tax can only be levied when there is clear evidence of services provided, recipient identification, and consideration received, as per established legal principles and previous rulings.

Ultimately, the Tribunal found in favor of the appellants, setting aside the impugned order and allowing the appeal. The judgment was pronounced on 18/09/2023.